1031 Exchange and Tenancy-in-Common: Seeking the Right Advisor to Achieve TIC Investment Objectives

A lengthy-hooked up segment in the federal tax code, section 1031, lets in actual estate investors to sell belongings that has been held for funding purposes and defer capital profits and depreciation recapture taxes if they accumulate "like-kind" exchange assets of identical or more price and reinvest all in their fairness. Since the mid-Nineteen Nineties, many investors have experienced the advantage of reinvesting their fairness into funding belongings interests dependent as Tenancy-in-Common (TIC). TIC proprietors preserve an undivided fractional possession hobby in investment belongings evidenced by using a deed of trust.

TIC, also known as Co-ownership of Real Estate (CORE), enables an investor to take part within the possession of institutional-grade, professionally controlled investment residences. The investor’s fairness may be assorted amongst numerous special homes, geographic markets and real estate organizations, probably increasing both the value and protection of the actual estate funding. TIC/CORE investments are designed to provide maintenance of capital, predictable coins float and long-term appreciation in institutional-high-quality funding property assets that advantage from more economies of scale.

With its functions and benefits, TIC/CORE is an increasingly more popular 1031 exchange option for plenty actual property investors. However, 1031 exchanges and TIC/CORE transactions are very complex, with each tax and legal problems topping the listing of potential pitfalls. It is therefore crucial that buyers be informed about what to look for in a first-class consultant. Financial advisors are required by means of securities regulation to be properly licensed a good way to seek advice from clients regarding TIC/CORE transactions and other investment pastimes in real property. Financial advisors should hold each Series 7 and Series 63 securities licenses to qualify them as informed, well-rounded consultants within the funding process. It is crucial that they have enjoy in the industrial real property enterprise, similarly to an knowledge of private funding goals and patron suitability issues.

But perhaps the maximum critical issue to look for in a TIC financial marketing consultant is their intimate, depended on and deeply rooted relationships with key real property agencies. This characteristic is important to their capacity to provide the fine possibilities for their customers. There are nearly eighty real estate groups across the United

States which are either already concerned or thinking about involvement in the TIC/CORE enterprise as a real property provider. As with any industry, these 80 organizations represent various ranges of acumen, experience and satisfactory. To attain the greatest ability for a patron, a financial guide ought to have regular get entry to to the pinnacle ten percentage of these corporations as a way to provide their customer get admission to to the pleasant residences available. Obviously, a new economic marketing consultant with very little experience or industry knowledge might not have get right of entry to to the top real estate vendors, as these providers choose to paintings with skilled specialists that specialize on this precise segment of the marketplace.

Investors have to also be privy to how their monetary marketing consultant stacks up, looking for a records of efficaciously finished transactions. A lengthy and tested song document indicates that a financial marketing consultant is an experienced expert. An investor desires such an consultant of their nook asking all of the proper questions, making suitable and suitable suggestions, expertise the nuances of successfully finishing TIC/CORE transactions and imparting answers to any and all tax and legal questions.

When considering a 1031 trade or TIC/CORE investment, traders must ask the following particular questions of the economic consultant:

* What percent of your enterprise is 1031 trade and/or TIC/CORE related?
* How many buyers have you ever consulted that invested in TIC/CORE based properties this year? How many ultimate year?
* How long have 1031 exchanges and TIC/CORE been a focus of your funding pointers?
* Do you’ve got the correct licenses to complete this transaction (Series 7, Series 63 securities licenses)?
* With which real estate carriers do you figure most carefully?

As purchaser call for keeps to pressure this section of the actual estate market, the emphasis on best – pleasant consulting, excellent belongings, and fine transactions – may be more and more critical. Part of the qualitative manner is ensuring that financial advisors representing a customer make suitable suggestions for that patron primarily based on the patron’s first-class hobby and now not based on any "bias." A very last issue that needs to be addressed is that it is not unusual for "referral" reimbursement to be paid between referring parties. This practice is unlawful and a entire breach of ethics,. Therefore, if any form of reimbursement adjustments arms – disclosed or undisclosed – among economic advisors and Qualified Intermediaries, actual property companies or different unlicensed people derived from an trade transaction, a felony may have occurred.

In brief, investors have to take some time to perceive a good advisor who not best can provide suitable answers to the above questions, however who can even have the relationships necessary to manual their clients into the correct investment. It is essential to bear in mind, firms or individuals concerned in recommending, presenting or selling 1031 TIC/CORE investments have to be licensed with a broker-provider, the SEC, the NASD and the country securities regulators in every nation in which the firm or man or woman operates and in which the consumer resides. Any "unlicensed" company or person worried in recommending, supplying or selling those investments is in direct violation of federal and nation securities laws.

Co-possession is the quickest developing option for 1031 alternate traders looking for suitable alternative belongings. Properly structured and supplied, such investments can also generate new list opportunities for actual property agents at the same time as pleasurable both the IRS "like-type" investment assets requirements and the SEC and NASD securities rules. The benefits of co-ownership of institutional-grade real property are clear and compelling. When exploring co-possession, clever buyers need to seek out enterprise professionals to manual them thru the substitute assets method. It is certainly the sensible investor who’s privy to his or her lengthy-time period goals that seeks skilled guidance to chart their course, thereby turning TIC/CORE funding opportunities into realities.

(c) 2005, 1031 Exchange Options. Reprint rights granted as long as the article and with the aid of-line are reprinted intact and all links made stay. This article is neither a proposal to sell nor a proposal to buy real property or securities. There are material dangers associated with the ownership of real estate. You have to be an authorised investor. Securities presented via Sigma Financial Corporation, Member NASD/SIPC.

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