TIC Investment Risks to Consider

Before purchasing a tenants in common (TIC) interest, you should consider the following items: 

• TIC investments are suitable only for accredited investors;
  
  
• Investors should understand the typical costs, fees, loads, and items associated with a TIC purchase;
  
  
• There is no established secondary market for resale of a TIC investment;
  
  
• TIC investments are typically not suitable for investors who are looking to place their cash temporarily in a parking-type transaction;
  
  
• Pass-through rental income from the underlying TIC property is subject to economic risks in the community for which such property is situated and that tenant defaults can adversely affect the rental distributions and return on investment;
  
  
• Higher than expected operating expenses can potentially affect the investor’s cash distributions.  Consider age of the building, potential for upcoming maintenance issues and management costs, among other potential expense items;
  
  
• Cash flows and returns are generally not guaranteed and may be lower than anticipated;
  
  
• Although some TIC sponsors are offering programs designed to provide TIC investors with a fixed rate of return on their invested capital, such guarantees are ultimately dependant upon the economic performance of the property and the creditworthiness of the program sponsor and master tenant;
  
  
• The attendant risks of an investment in a particular TIC property is located in the Private Placement Memorandum (“PPM”), and investors should read the PPM carefully prior to investing;
  
  
• In view of the long-term holding period often required for TIC investments, investors should be careful not to place too high of a concentration of their wealth in these investments;
  
  
• Tax qualification of the underlying TIC property as a bona fide 1031 replacement property is set forth in Rev. Proc. 2002-22, and investors should either consult with their own tax counsel or carefully consider the conclusions of  the tax opinion provided to the broker-deal;
  
  
• Fundamental decisions relating to borrowing, leasing, the hiring of property managers and selling of the underlying TIC property are shared with up to 35 co-owners; and
  
  
• The property manager will ultimately be responsible for making day-to-day business decisions regarding the operations of the TIC property.