Using a Tenants in Common Structure in Your 1031 Exchange

By:  Shannon Kinnard, VP Exchange Officer at Genesis Bank

Tenants in common (also known as tenancy in common or TIC) is a type of ownership agreement that allows multiple investors to jointly purchase a single property. Each investor owns an undivided interest in the property and typically receives proportionate interest in income and growth.

Much like Delaware Statutory Trusts (which we covered here), TIC structures give investors the opportunity to expand and diversify their portfolios with less capital outlay and risk. They can lower the barrier to entry to many different real estate types, like multifamily, industrial, and hotels, and enable investments in various locations.

Here’s an example: You sell a California single-family residence for $1,000,000. You would like to acquire a medical office building in Florida, but you may not qualify with the amount from your sale. Using a TIC structure, you can use your proceeds to acquire an undivided 10% interest in the medical office building and satisfy the debt and equity requirements for your 1031 exchange. Other investors can provide the remaining funds required to close the deal.

Using a TIC structure as part of a 1031 transaction requires careful planning and coordination. Contact the Genesis Bank Exchange team today to learn more.