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TIC Refinancing Problems In Plain English . Well, As Plain As We Can Get

Jul 24, 2008
Hear that? TIC tock the sound of money being made in real estate and sometimes money being lost. TIC stands for "tenancy in common", which is a fancy term for "part investor of a really big chunk of real estate". Ever since an IRS ruling made TIC taxes easier, the investment floodgates have opened for TIC investing (also called 1029 investing). One of the bumps along this financial path is TIC refinancing problems.

Get A Loan, Little Doggy

Financing such purchases like an apartment complex or a strip mall generally requires honking big bank loans (not unless you just happen to have a few million in loose change in your couch cushions). One of the inevitable things that eventually happens to a TIC partnership on a big piece of property is having to refinance this honking big loan. In principle, refinancing a TIC loan is the same as refinancing a car loan or a mortgage.

Blinded By Interest Rates

One of the most common TIC refinancing problems by newcomers and investment pros alike is to be so focused on getting the best interest rate possible, they lose sight of everything else. You need to look at things like market risk and any exit strategies that may go along with the loan. Also, you need to have a loan flexible enough so that if one partner has to pull out, that partner won't take down the whole TIC partnership.

You Are Responsible

When you are in a TIC partnership, you have to be vigilant about making your share of payments. This is another common TIC refinancing problem. If everyone doesn't pull their weight, that can hurt everyone else. Any lender views TIC loans as far riskier than nearly any other kind of loan and protects itself with things like prepayment penalties and very large down payments required.

Another TIC refinancing problem is one that can't be solved with a broker or a banker. Interpersonal problems between members can bust a TIC partnership or it can make trying to get a refinance loan that much more difficult. There has to be trust and mutual respect among all the members. Ideally, you should conduct background checks on anyone who wants into your partnership. This can avoid a lot of TIC refinancing problems in the future, even if it looks a little rude.

Equity Over Time

Another TIC refinancing problems is being able to wait long enough until the time is right to get a loan. Ideally, you need to wait until you and your group has built up enough equity to make any refined loan save you any money.
About the Author
Kathryn R. Landry is a business writer for TIC Advisors, Inc . A company that can give you the most complete information on a 1031 exchange or TIC properties nationwide.
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