What is a Tenants In Common (TIC) Syndication?

Posted Dec 22, 2023

Picture of investors surrounding properties contemplating TIC syndication

Investors who want to 1031 exchange into a syndication will immediately encounter a few roadblocks. Doing a 1031 exchange into a syndication is not possible since the syndication (in most cases) is considered a security. The exchanger is trying to 1031 exchange from real property into a passive investment. Passive investments are securities. Trying to exchange from real property to a security does not meet the “like-kind” 1031 exchange requirement.

However, there is a route that real property investors can take to utilize the benefits of syndications while still qualifying for a 1031 exchange.

Tenants In Common Basics

A Tenants In Common (TIC) is a type of shared real property ownership structure with at least two investors. Investors in a TIC hold title to property in the TIC. Interest and income can be of unequal amounts. So, one investor may have 20% ownership while the other has 80%.

Investors in a TIC can sell their interest. New investors can 1031 exchange into it. Existing investors in the TIC don’t have to sell their interest if one investor decides to sell. Each investor has independent control over how they eventually sell their interest. Also, each owner has full use of the property.

A disadvantage of a TIC is that when an owner passes (heirs may inherit the property) or sells their interest, you may not know who the new owners will be or what their intentions are. Financing can also be limited for TICs compared to traditional real estate loan options.

How Does a TIC Syndication Work?

A syndicator finds properties, promotes them, and pools investor money together to invest in properties. The syndicator may also be the sponsor of the investment. They will usually put up a portion of the funds needed to acquire properties and then raise the remaining amount from investors.

Syndication of a TIC can be done through individual investments or a 1031 exchange. In the first scenario, individuals may purchase interest in the TIC. They then become owners of property in the TIC.

Investors who currently hold real property but want to 1031 exchange can also utilize TICs. But they need to be sure the TIC is not structured as a security since it would not be a “like-kind” exchange. As mentioned above, exchanging from real property into a security is not allowed under 1031 exchange rules.

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.

Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.

Because they are private placements, TICs are illiquid securities. There is no secondary market for TIC investments. Moreover, the form of ownership may require unanimous consent to sell a TIC interests.

Like any investment in real estate, if a TIC property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions.

TIC properties employ professional asset and property management, so while TIC co-owners vote on major issues, they do not have direct say over day-to-day property management situations.

Costs associated with a 1031 transaction may impact investor's returns and may outweigh the tax benefits. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities.

Download The Guide To Tenants-In-Common

The Investor's Guidebook to TIC's
Download eBook


The Investor's Guidebook to TIC's

Download The Guide To Tenants-In-Common

See if Tenants-In-Common Investments are right for you.

By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received.