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Tenants In Common Pitfalls
While TIC Advisors believes that fractionalized or Tenants-in-Common ownership may be creating a paradigm shift in the way institutional real estate is owned, we also believe that this change will not occur without some growing pains. While 1031-
tenants in common investments can be a potentially useful exchange solution for accredited investors seeking passive ownership, identifying and acquiring a suitable tenants in common exchange property does have some of the following risks:
1 Real estate prices are at historically high valuations.
2 Investor demand for 1031-tenants in common properties may be greater than the supply, which can cause investors to lose sight of core real estate fundamentals when trying to satisfy their exchange under strict IRS guidelines.
3 Excess investor demand is causing some real estate Sponsors to be more aggressive in their underwriting standards of the properties they acquire.
4 Lack of, and in many cases a complete absence of, due diligence review by the is possible.
5 Returns on these investments are generally based on the disposition of property at a specific cap rate, as well as involving a certain holding period in order to overcome the costs and expenses inherent in 1031-tenants in common. See each tenants in common property's Offering Memorandum for specific details of its costs, expenses, and fees.
6 No guarantees are made that any stated projections will be met on cash flow or return.
7 11031-tenants in common investments lack liquidity; no secondary market exists for them now.
Not all tenants in common
are created equal, and it is our belief that investing in 1031 TIC properties should be approached in a similar fashion to that which an investor would approach buying an investment property for sole ownership. TIC Advisors purchases and gathers third party market research reports, tenants' profile reports and informational mapping reports from providers of research services. Our commitment is to empower pre-qualified, accredited investors with valuable information to educate and assist them with making informed choices and decisions.
