TIC 1031 Exchange – How to do it?

What is Tenants-in-Common?

Tenant-in-Common (TIC) is a type of ownership in which investors receive undivided fractional interest in larger properties, similar to DSTs, but with fewer limitations attached to the property. Accredited investors who want potential appreciation through an add-on asset, not caring about current income and diversification, should invest in TIC properties. The minimum investment for TIC 1031 Exchange Properties starts as low as $1M.

How Does It Work?

Many real estate agencies structure and help investors do a 1031 exchange into TIC properties. These properties are viewed as top-ups that can either substantially enhance the condition of a property following an acquisition, redevelop the asset, or work through renegotiating leases. No more than 35 investors are allowed in a TIC agreement. Generally, TIC properties differ from one another in terms of property type and investment strategy of the real estate agency handling the TIC.

Benefits of Tenants-in-Common 

By investing in TIC properties, investors get an opportunity to invest their 1031 exchange proceeds for acquiring a fractional interest in bigger properties. TIC 1031 Exchange Properties may require big investment but are surely worth considering for investors eyeing a shorter investment period, refinance opportunities, and greater appreciation. 

How To Invest In TIC Properties Using a 1031 Exchange

The first thing you need to do is decide which investment property you want to sell. List it for sale, and enter into a 1031 exchange agreement along with your Qualified Intermediary (QI). Make sure your 1031 exchange agreement meets the requirements of the Federal Tax Laws, especially the one pertaining to the proceeds. Your QI will help you with this. Close on the sale of your relinquished property and transfer the proceeds to your QI. Identify one or more TIC properties options within 45 days. Don’t exceed the 45-day timeline. Buy what you’ve identified as your 1031 Exchange replacement property within 180 days (begins the day the relinquished property is sold). At last, submit form 8824 to the IRS at the time of filing taxes along with the other required documents.