Tenancy in Common: Amazing Advantages that You Should Know

Tenancy in Common: Amazing Advantages that You Should Know

Tenancy in common or TIC is the umbrella term referring to different co-ownership arrangements in real estate that can involve any property. With or without assigned usage, the ownership in TICs is expressed in percentages rather than square feet. In other words, each co-owner has a separate, distinct interest in the property.

Buying a piece of TIC real estate for personal use, trade, or investment is advantageous for many reasons. Here’s why you should consider putting your money on TIC properties with the help of companies such as 1031 Exchange Place :

It Makes It Easier to Enter a Major Property Market

People living in expensive housing markets can find it easier to attain homeowners through TIC. If you lack sufficient funds to buy a detached single-family residence or condominium, sharing the burden of purchasing one with other individuals can help.

Another piece of good news is that more and more lenders are becoming open to offer fractional loans. Convincing multiple parties to agree to the conditions of a “group loan” can be difficult. However, TIC co-owners who are in the same boat are usually willing to play ball.

Again, every TIC arrangement can be tailored to the unique situations of the parties involved. For instance, newlyweds trying to buy their first house can co-own it with their parents without necessarily having to share the property with anyone else.

It Expands Property Selection

Co-owners have strength in numbers. Since you can pool your resources with others, all of you can unlock properties for sale that are otherwise out of each party’s reach individually. Based on the example above, a couple hunting for their dream home can widen their property options and consider nicer neighborhoods through TIC.

It Allows Diversification

If you’ve owned and used a property to earn income for many years, you can use the equity you’ve built on it to buy multiple different types of real estate at numerous locations. This strategy is a smart way to diversify your portfolio. For example, selling one motel to purchase interests in a vineyard, ski resort, or boutique-apartment complex can be a sound swap.

The best part is that you can take advantage of a 1031 exchange to defer depreciation recapture and capital gain taxes. This measure will work if your replacement property will match or exceed the value of your existing property.

It Doesn’t Go to Co-tenants Automatically Upon the Owner

property owner handing over keys to tenants

Any TIC arrangement doesn’t include the right of survivorship. That means co-owners won’t inherit the interest of others upon death. This concept is the complete opposite of the one observed in joint tenancy. You can choose the rightful heir to your ownership interest, or it will go through probate in case you pass away without a will.

It Can Generate Great Returns

Generally, TICs are much affordable than condo units by 10% to 20%. When ownership interest is converted into an actual condominium, you can reap up to 25% returns on value. Also, you and your co-owners can rent the property out and split the profit.

TICs might seem too good to be true, but they’re not without downsides . For as long as you consider the caveats, though, you can enjoy the many benefits of TIC along with your co-owners.

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