It’s one thing, as a homeowner, being responsible for maintaining a residence; it’s another thing as a residential rental property owner having to maintain rental properties. Each tenant that occupies the investment brings problems such as wear and tear to the unit, fiscal responsibility for rent and the most annoying of all problems: finding the renter in the first place. Over time these problems simply become more complicated and overwhelming; consequently, they force the owner of the property to consider selling. That’s where a 1031 exchange, tenant in common, investment comes in.
IRS Code 1031 allows investors to defer paying both federal and state capital gains and depreciation recapture when they sell an investment property and buy another of like kind. What this means is a residential rental property owner can sell their investment without concern over capital gains if they purchase another rental property. One might ask; why would an investor want to sell one problem property and purchase another problem property? This is where a tenant in common investment comes in handy. Instead of being forced to purchase another residential property a tenant in common transaction gives the investor the ability to purchase a commercial real estate property. A tenant in common investment, also known as a TIC, is a form of holding title to real estate, common among unrelated parties. As a TIC owner you have your own deed and complete control of your interest. You can sell your investment at your convenience. There are many advantages to a tenant in common 1031 exchange transaction.
The hassles of owning residential real estate property are many and well known. The more frustrating aspects are the maintenance of the property, acquisition of tenants, paying property taxes and of course dealing with tenants themselves. A TIC allows you to enjoy the income from the investment while enjoying the services of profession property management. That means, the maintenance of the property, acquisition of tenants and paying any applicable taxes related to the property become the responsibility of the manager hired to oversee the property.
Very often the income from your commercial property will be higher than what you were receiving from the original property. The substantial cash flow you earn can be up to 60% sheltered by the depreciation of the new investment.
Residential real estate property can be rewarding and can also increase your cash flow but the hassles of owning that property can easily outweigh the benefits. A TIC can provide an investor with a solid property and little maintenance. Other benefits include less risk and greater cash flow; so why not sell your residential property and get into a tenant in common investment? More information is available about 1031 exchange property (tenant in common) on http://www.1031interview.com.
About 1031 Interview: 1031 Interview is a non-profit website dedicated to increasing knowledge and promoting the value of 1031 exchange properties nationally. Our purpose is to provide a foundation of knowledge to investors interested in like-kind property exchanges more commonly known as a 1031 exchange property or Tenant in Common transactions.
