Jun 15 2008
Is real estate still a wealth builder?
I thought about it before. If only I knew then what I know now, we could have built our wealth easily when the real estate market was booming. There were many people who became wealthy because they were there at the right place and the right time. But, it’s never too late for us. We can always be on the lookout for opportunities to build wealth. There’s no telling where it can take us.
There’s a new concept called TIC investments (TIC stands for Tenant-in-Common). It was only available to the wealthy before. You have to have a lot of capital before you can even participate in this type of investment. It’s really investing in real estate but not through the traditional buy, fix-up and sell strategy. You are really investing in prime assets such as an office park, a multi-family dwelling apartment building, a shopping mall or a strip mall. In a TIC investment, each investor owns a “fractional, undivided interest” (a portion) of a real estate asset.
I know that as a family, we are always looking for investment opportunities that could help us build wealth. We can probably sell our remaining properties in the Philippines and use the money to invest in TIC investments. If you’d like to know more about TICs, let’s run down the list so you can understand.
Six Things You Should Know About TICs
1. The IRS allows 1031 Exchanges into & out of TICs. So long as a TIC investment follows IRS guidelines, the IRS has provided guidance on how they may be used in 1031 Exchanges, giving you a great investment option if performing a 1031.
2. TICs Are Securities. Since Tenant-In-Common investments are sold through private placement offerings as securities, only registered securities representatives can sell them. All aspects of the investment must be thoroughly disclosed in a Private Placement Memorandum (PPM) to the investor.
3. Only Accredited Investors can purchase TICs. Since TICs are sold as private placement securities, they may only be sold to accredited investors. By filling out the Investor Questionnaire, we’ll be able to establish you as an accredited investor. You must earn over $200,000 a year if single or $300,000 a year if married, or have over $1,000,000 in assets.
4. TICs are not liquid investments. TICs are not easily divested and there is currently no secondary market for TIC investments. A TIC investor must be willing and able to invest in a TIC project for 7 to 10 years (the average term of a TIC investment). Although technically a TIC can be resold before the asset’s term, it is not typically done.
5. TICs typically provide positive cash flow. Although there is no guarantee that a TIC will provide positive cash flow, TICS are generally structured to provide passive income through monthly cash flow disbursements.
6. If a TIC asset gains value, you profit. Since as a TIC investor you hold a deed for your percentage of the TIC investment, if the underlying asset gains in value, you share in that equity gain based on your percentage ownership stake.
Anyone interested? Just let me know and I will look further into it.
