Tenant-in-Common (TIC) Investment
TIC investments are high-risk speculative real estate investments that can allow sellers of real estate to defer gain under Section 1031 of the Internal Revenue Code. By selling one property in exchange for a fractional ownership interest in a second property, sellers are able to defer capital gains from the sale of the first property. Such investments became popular in recent years, often being sold by brokerage firms as alternative investment vehicles.
Why Investigate TIC Investments?
Without significant investment experience and substantial reserves of wealth, investors can be convinced to purchase TIC properties with disastrous consequences. Issues with TIC investments often result in major losses for investors. The high commissions that brokers receive when selling TIC properties promote unsuitable investment advice and frequently drive the purchase. The following are some of the major issues that easily categorize TIC investments as unsuitable for most investors:
- TIC properties are overpriced, sometimes by millions of dollars, meaning they cannot be resold for profit, unless their value increases.
- TIC properties often cannot produce income for owners even with 80-90% occupancy.
- Tax savings from the 1031 exchange can be outweighed by unusually high broker commissions and fees; such costs may equal 20-30% of your cash investment
- TIC properties often cannot withstand normal market fluctuations because they are heavily mortgaged.
- TIC investments frequently result in overconcentration of investors’ portfolios in real estate.
- TIC investments are illiquid, which means that investors cannot get their money from the property for years, often until it is sold.
Many Issues, a Few Frequent Offenders
Some problematic practices we have seen related to the sale of TIC Investments include:
How to Recover Losses
At Goodman & Nekvasil we have years of experience recovering losses from TIC investments. If you believe you may have been misled when purchasing your real estate securities investments, contact us for a free consultation. A limited amount of time can exist during which you can seek compensation for a lost investment, so acting immediately can be important.