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The Biggest TIC: Cash Flow Risk

Jul 24, 2008
TIC, or Tenants in Common, is basically a way of sharing ownership of property among two or more people, and is one of the most popular investments in the world of real estate today. With this investment, each of the tenants involved holds an interest in the specific property, and tenants in this ownership may be established in many different ways.

There are many benefits that come from owning property as TIC, but it is also important to be aware of the risks that are involved, such as the TIC: cash flow risk.

TIC: Cash Flow Risk

There are a few different issues that need to be understood when it comes to the topic of TIC: cash flow risk. For one, the qualified intermediary cannot distribute the tax-deferred like-kind exchange funds if the disbursement would violate any early release provisions. As a result, there may not be much profit, and possibly even a loss.

There is also the fact of the higher minimum investment amount which is required here, and because of this investors may lack sufficient equity to purchase multiple properties. Only with multiple properties can you really ever make a significant profit, and so this can definitely be a risk.

Because of the TIC: cash flow risk that is present, there are certain things that investors should do to control the risk as much as possible.

Advantages

It is also important to understand the advantages of the TIC, because there are many, and in most cases the benefits far outweigh the possible TIC: cash flow risk issues.

TICs offer investors an easy way to diversify their real estate holdings, and also, because most TIC properties are investments in Class A or Class B buildings and are often located in central business districts or other important and busy areas, an investor may realize a higher quality investment through an improved tenant profile.

The cash flow is generally paid monthly which is obviously nice, and as well because the minimum equity requirements can be as low as $100,000, and this means that the investor can invest in multiple high quality, institutional grade properties.

The TIC ownership is an extremely popular choice among real estate investors around the world, and definitely one that you should consider if you are a real estate investor yourself. TIC investments enable you to replace your exact amount of equity and debt from your relinquished property for your 1031 exchange and so this can definitely be one of the most profitable investments you ever make.
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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