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Understanding the TIC: Closing Risk

Jul 24, 2008
A TIC investment is an investment that allows the average owner of appreciated real estate to sell their property to a third property and exchange into an undivided interest in an institutional quality asset. TIC investment replacement properties enable the average investor to participate prominently in the real estate market and potentially receive great profit as a result.

As with any investment, it is important that you be aware of the different risks that are possible with a TIC investment. The TIC: closing risk is one of the most common and detrimental risks that an investor can experience, and is therefore one of the most important to be educated on.

TIC: Closing Risk

There are a few issues surrounding TIC: closing risk that should be understood. For one, TICs are complex investments and so they are not suitable for all investors. Just because someone you know may have a TIC investment and it is working well for them, this certainly does not mean that it will be as rewarding for you.

There is also the fact that even if an investor qualifies as accredited then this investment may not be suitable based on the persons risk tolerance and as well on their investment time horizon. The TICs also come with very unique fees and expenses, which is just something else that you will want to consider.

It is very important to understand risk such as the TIC: closing risk when you are making an investment and also to assess your own risk because every investor's risk is different. The economic risks are often the most dangerous with a TIC investment, and these are the risks that are associated with economic timing.

It is here where you need to assess the extent to which the economy is growing or accelerating its pace of growth or the reverse, and then decide whether or not it is a wise time for you to make this investment. There is also the extreme market risk that investors must be concerned with, and this involves valuation, technical conditions, economic issues, as well as sentiment.

Keep in mind that too much risk can be ameliorated by doing things such as raising cash and reallocating to lower betas.

You can and should discuss all of this with a qualified tax consultant, who will be able to work together with you, explain all of the technical information and details to you, including the TIC: closing risk, and help you and your investor partners to decide whether this is going to be a wise investment for you to 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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