The Basics of Tenancies in Common

A Tenancy in Common (TIC) is a way for two or more individuals to have an undivided fractional ownership interest in a single piece of real property. With a #TIC, each owner has individual rights and obligations related to the property. These rights equal the proportionate share of the owner’s interest. Tenancy in Common is a popular way for individuals with shared interests outside of property ownership to continue that relationship with their joint property ownership. It is also ideal for those investors seeking a bigger, more valuable investment opportunity than they could afford on their own.

Having an ownership interest in a TIC gives an investor the right to his or her proportionate share of net income, tax benefits and appreciation. The TIC owner is treated similarly to a fee simple owner and receives an individual property deed and title insurance for his or her share of the property. A TIC owner may bequeath his or her interest to any beneficiary upon the owner’s death.

This direct interest in real estate TIC ownership also qualifies as “like-kind” real estate for 1031 exchanges, making TICs an important part of the 1031 exchange universe. The fact that the IRS allows TICs to qualify for 1031 exchange treatment means that individual investors can now graduate to ownership of bigger (and potentially more lucrative) investments than they could afford on their own.

Of course, to shield themselves from personal liability arising from holding direct title to property, most TIC investors set up Limited Liability Companies (LLCs) for the purpose of TIC ownership.

There are many property types that lend themselves to TIC ownership. One in particular is self-storage facilities. To learn more about self-storage TICs, visit our sister website.

If a #1031 exchange is in your future, visit our website to learn more about these powerful tax deferral tools and our qualified intermediary and replacement property locator services.