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A Guide to TIC: Financing

Jul 24, 2008
Of all the issues relating to TIC exchanges, TIC financing is one of the most important. Individual tenant in common finance implements separate financing for each owner after all, and so it is important for each owner involved here to be aware of TIC financing issues.

TIC financing is a concept that has actually existed for many years now, and whenever there is a title held by multiple owners but only one of the owners has signed the mortgage, then the individual TIC financing is created automatically as a result.

Dos and Don'ts

If you want to make the most of your TIC investment and put yourself at the lowest possible risk, then there are a few dos and don'ts here that you are going to want to be aware of. Getting pre-approved before you buy for instance is very important and something that you want to make sure to do.

Regardless of the particular type of property that you are looking for, you will need to show the seller involved that you are going to be able to support your share of the group financing. You are going to need to provide them with adequate proof to ensure them that you will be able to be financially responsible.

It is also imperative that investors here expect to make a down payment of at least 10% towards the purchase. Lenders tend to require larger down payments for loans secured by multi unit properties than loans that are secured by a single-family home or condominium.

A few things that you do not want to do with TIC financing include not using your interest rates as your sole criteria when searching for a TIC loan. This is important because you need to consider what is going to happen when one of your TIC partners needs to sell, and not just look for the lowest rate.

It is also best to avoid putting yourself in any situation where you would need to close quickly. Also never base your purchase decision on the expectation of converting your TIC unit to a condominium. This is important because if you get the chance to do so then fantastic, but know that this is not always going to be an option for you.

These dos and don'ts will be very helpful to any potential investor, and should always be kept in mind before deciding to go through with this investment. Speaking to a financial advisor or tax consultant will also be a good idea.
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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