FAQs
TIC FAQ
Q. What investment amounts are ordinarily required for TIC?
A. The minimum cash investment ranges from about $100,000 to $1,500,000. Although it’s possible to own TIC without debt, most investors need debt to achieve full deferral of taxes; therefore most investments provide for 50-70% of the investment to be assumption of debt.
Q. What liability exposure is associated with a TIC property investment?
A. In most cases loans on the property are non-recourse (i.e. not personally guaranteed) so TIC owners are not liable personally; the lenders have recourse only against the property in the event of default. Normal risks of real estate ownership are mitigated with insurance. Most lenders require that investors use a single owner LLC and it also limits liability exposure.
Q. Are TIC investments for accredited investors only?
A. In most cases TIC investments are offered only to accredited investors which are those who have a minimum net worth of $1 million or annual income of $200,000; however, we can assist non-accredited TIC investors as well.
Q. How long is the holding period for the most TIC investments?
A. Most planned holding periods are from 4-8 years. Investors are informed of the planned holding period prior to the investment. However, changes in market conditions could accelerate or defer the planned sale date.
Q. Can I sell my TIC ownership?
A. As long as the lender permits your transfer of ownership there is ordinarily no prohibition against selling your TIC real estate ownership to the public in the same manner as any other real estate.
Q. What happens to my ownership in the event of my death?
A. Your ownership interest will pass to your heirs pursuant to your Will just like any other asset. They will also receive a “stepped up” tax basis (to fair market value). The income taxes which were deferred because of your 1031 exchange are forgiven forever.
1031 FAQ:
Q. Do all 1031 exchanges involve swapping or trading with other property owners?
A. No, there’s no such requirement to swap your own property with someone else’s property, in order to complete an IRS approved exchange. The rules have been refined and ratified to the point that the current process is much more indicative of your qualifying intent, rather than the logistics of the Real Estate property closings.
Q. Is it required that all types of 1031 exchanges must close simultaneously
A. No, there was a time when all types of exchanges had to be closed on a simultaneous (same day) basis, now they (1031) are rarely completed in this type of format any longer. As a matter of fact, a majority of the exchanges executed are closed now as delayed exchanges.
Q Does “Like-kind” means purchasing the exact same type of property which was sold.
A. No, Often the definition of “like-kind” has been misinterpreted or misunderstood to mean the requirement of the acquisition of property to be utilized in the same form as the exchange property. There are currently only 2 types of properties that qualify as a ‘like-kind’ property held for investment and/or property held for a productive use, as in a trade or business.
Q. Do 1031 Exchanges have to be limited to 1 exchange property and 1 replacement property.
A. Not at all, exchanging out of several properties into one replacement property or the selling of one property and acquiring several other properties, are perfectly acceptable strategies and uses of a 1031 and fit well with a TIC.
