1031 Exchange – Benefits of the Tenancy in Common

Tenant in Common

In 2002, the IRS issued guidelines (Revenue Procedure 2002-22) governing the structure of Tenant In Common (TIC) property investments. According to these guidelines, a Tenants In Common, also known as co-ownership of real estate (CORE), should have no more than 35 investors. The typical structure includes from 12 to 20 Tenants in Common investors in a property.

In simple language, a tenant in common is a property owned by two or more persons at the same time. The Tenants In Common investors possess undivided interests in the property or designated interests of differing sizes. Each owner retains the right to sell his or her share in the property as he or she sees fit. Upon death, the decedent’ s interest passes to his/her heirs named in the will who then become new tenants in common with the surviving tenants in common.

As tenants in common you share the income, tax benefits, and appreciation of the property on a pro rata basis depending on your share of the property.

The Tenant in Common Benefit

Scope for Investment in larger properties: Purchasing investment properties as tenants in common allows you to invest in larger, institutional grade properties like shopping centers, ware house, industrial property etc that costs a few million dollars. Diversify your Real Estate Investment: Tenants in Common gives you the opportunity to diversify your real estate investment as it allows you to invest in larger properties also, along with the smaller properties in which anybody would invest. This is highly effective in increasing the value and security of your real estate investment.

Potential Increase in Your Net Cash Flow: Ownership as Tenants in Common gives you the chance to increase your potential cash flow, provide you with tax write-offs and property appreciation benefits. You can get all these without the time commitment of active property management that would otherwise be required if you are having the sole ownership of a property.

Help from Nation’s Leading real Estate Companies: Some of the leading real estate companies source investment properties and garner fixed rate, non-recourse financing with institutional terms for Tenants In Common owners.

Extensive Due Diligence: The real estate company, the lender and the security company conducts extensive due diligence on investment properties offered to Tenants in Common.

This document/post/article is not to be considered as legal advice. Content and information contained herein is subject to changes, modifications, and may contain inaccuracies or out-of-date information. As with any legal matter or other matters of importance, consultation with an attorney or professional is the best course of action.