Another Viable Alternative to Investing in Real Estate

• Learn what millions of people wish they knew before losing hundreds of thousands of dollars to United States Internal Revenue Service.

• Let 100% of your equity pay them a substantial monthly income, maintain ownership in quality real estate, receive unlimited appreciation potential, and lose all the headaches that go along with being a landlord.

Just think:

• No more worries of collecting rent
• No toilets to fix, pipes to repair, or midnight emergency calls
• No more tenants trashing your property
• No more vacancy issues
• No more maintenance, replacement, or gardener bills
• No insurance payments
• Monthly income you can count on based on total equity property appreciation with no caps
• Tax advantages of real estate ownership
• More time to enjoy life

About TIC Property Investments

Tenants-in-common (TIC) ownership is a popular choice among real estate investors seeking replacement property for their IRS Code §1031 tax-deferred exchange. A TIC is a co-ownership structure under which an investor may own an undivided fractional interest in an entire property. In our affiliate TIC firms' investment vehicles, the TIC investor is entitled to a pro-rata share of the cash flow and property depreciation. But unlike a partnership investment, the undivided, fractional property ownership of a TIC qualifies for a Code §1031 exchange and tax-deferred treatment under IRS revenue procedure 2002-22.

A TIC owner receives a separate deed and title insurance for his or her percentage interest in the property and the investor has all the same rights and privileges as a single (fee simple) owner. Our affiliated TIC firms often offer TIC properties as "turn key" prepackaged investments with management and financing in place. Each of these firms offer efficiencies of scale in the identification, acquisition, financing, closing, and operating stages of real estate ownership that you, would otherwise not have on your own. These efficiencies are especially helpful and often critical given the strict time restrictions you will confront when funding an investment through a Code §1031 exchange.



Advantages of Code §1031 TIC Investment


Since the IRS released Revenue Procedure 2002-22 in March of 2002, real estate investors can now use a Code §1031 tax deferred exchange to complete a tenants-in-common investment. A §1031 TIC allows you to access large investment grade properties that are completely handled under the TIC firms' professional management. This allows for a truly passive investment with potentially more secure annual cash-flow and significant appreciation potential. Formerly, these types of investments were only accessible to the traditional investor through REITs, limited partnerships and investment funds all without the tremendous advantage of tax deferral via a
Code §1031 exchange into or out of the investment. In addition, with minimum investment requirements as low as $50,000 the investor can now hedge risk by diversifying his or her real estate portfolio to include multiple properties in different geographic locations throughout the United States as well as in different sectors such as office buildings, retail shopping centers, residential apartment complexes, and industrial parks.
 

Tax Advantages:

TIC and Code §1031 TIC investments offer unique tax advantages. Deferred capital gains tax and depreciation recapture (25% tax rate) into and out of the investment can preserve a significant amount of wealth. Because you take the property with existing non-recourse debt financing (often with 50% to 75% loan-to-value), you can receive a step-up in basis in the TIC property that allows for additional depreciation pass through. This can shelter as much as 50% to 60% of the cash-flow rental income from income taxation. Thus, on an after tax basis, the return on a Code §1031 TIC may be comparable with returns on investments with significantly more risk. Accounting for the additional return from appreciation of the TIC property, the after-tax TIC return on investment (ROI) on an annualized basis can be even greater.



Other advantages of a TIC and
Code §1031 TIC investment include:

• Professionally-Managed Properties

• TIC investment eliminates the headaches and time consuming burdens of active property management. It is a perfect solution for an investor who wants to shed the burdens and liabilities of being a landlord.

• The TIC program is also perfect for professionals who are dedicated to their career but who also desire to build a well diversified real estate portfolio with current income and strong appreciation potential. Through the Code §1031 exchange process the investment portfolio can grow tax-deferred through the course of the investor's career similar to investments in a qualified pension plan.

• Code §1031 TIC exchange sponsors are sprouting up everywhere, everyday. Our associates have carefully investigated many of the better known TIC Exchange firms and have carefully selected those we feel comfortable recommending to clients. These well managed TIC exchange firms structure the TIC property acquisition (identify and locate, evaluate, arrange financing, etc.), manages the property (maintenance, lease, collect rent, service mortgage), and eventually sell the property.

• These select sponsors have a vested interest in the performance of the property and a track record for successfully managing other properties.

• Net cash flow and cash-on-cash return

• TIC properties can produce significant cash-on-cash returns. These select firms typically pay cash flow to investors on a quarterly basis. This income is partly tax-sheltered due to depreciation pass through and interest deductions (typically greater than 50% to 60% of the net income is sheltered from federal and state income tax) and investors also participate in the appreciation of the property when sold.

• Shelter cash flow from current income taxes through depreciation and operating expenses.

• A Code §1031 exchange can restore your lost depreciation deductions through a replacement property.  In fact, because tenants-in-common properties are often leveraged with 50% to 75% non recourse debt financing, your basis is often increased in the replacement property and depreciation deductions may be higher than with the relinquished property.

• For estate planning purposes, the deferred tax liability resulting from one or more Code §1031 exchanges is wiped out since heirs get a stepped-up basis in an inherited property.

• Gain access to an institutional grade investment property

• Both a TIC and a Code §1031 TIC present the opportunity for you to join together with other high net worth investors to own institutional-quality real estate that you might not be able to afford individually.

• Defer capital gains tax and depreciation recapture

• The ability to keep the earning power of the money that otherwise would have been taxed away working in another investment is a key benefit of these transactions.
   
  

When contemplating an exchange, you should always consult a tax and/or legal adviser to determine what is best serves your needs. Ask yourself what are your short and long-term goals and determine if an exchange will be the best strategy. For additional information on the new tax changes and how they apply to you, a tax adviser should be consulted. 


If you qualify and you are interested in either Tenant-In-Common investment opportunities and/or Code §1031 Like-Kind Tenant-In-Common Exchange opportunities, please contact us and we will discuss it in further detail and then will refer you to our affiliate team experts.