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1031 Exchange And Tenancy In Common Seeking The Right Advisor To Achieve TIC Investment Objectives
long-established section several different properties,
in the federal tax code, geographic markets and real
section 1031, allows real estate companies, potentially
estate investors to sell property increasing both the value and
that has been held for investment safety of the real estate
purposes and defer capital gains investment. TIC/CORE investments
and depreciation recapture taxes are designed to offer
if they acquire "like-kind" preservation of capital,
exchange property of equal or predictable cash flow and
greater value and reinvest all of long-term appreciation in
their equity. Since the institutional-quality investment
mid-1990s, many investors have property assets that benefit from
experienced the benefit of greater economies of scale.
reinvesting their equity into
investment property interests
structured as Tenancy-in-Common
(TIC). TIC owners hold an With its features and benefits,
undivided fractional ownership TIC/CORE is an increasingly
interest in investment property popular 1031 exchange option for
evidenced by a deed of trust. many real estate investors.
However, 1031 exchanges and
TIC/CORE transactions are very
complicated, with both tax and
TIC, also known as Co-ownership legal issues topping the list of
of Real Estate (CORE), enables an potential pitfalls. It is
investor to participate in the therefore essential that
ownership of institutional-grade, investors be knowledgeable about
professionally managed investment what to look for in a quality
properties. The investor's equity advisor. Financial advisors are
can be diversified amongst required by securities law to be
properly licensed in order to
consult clients regarding
TIC/CORE transactions and other
investment interests in real States that are either already
estate. Financial advisors should involved or considering
hold both Series 7 and Series 63 involvement in the TIC/CORE
securities licenses to qualify industry as a real estate
them as knowledgeable, provider. As with any industry,
well-rounded consultants in the these 80 companies represent
investment process. It is varying degrees of acumen,
essential that they have experience and quality. To
experience in the commercial real achieve the greatest potential
estate business, in addition to for a client, a financial advisor
an understanding of personal should have consistent access to
investment objectives and client the top ten percent of these
suitability issues. companies in order to provide
their client access to the best
properties available. Obviously,
a new financial advisor with
But perhaps the most important little or no experience or
component to look for in a TIC industry knowledge may not have
financial advisor is their access to the top real estate
intimate, trusted and deeply providers, as these providers
rooted relationships with key prefer to work with experienced
real estate companies. This consultants that specialize in
attribute is critical to their this unique segment of the
ability to provide the best market.
opportunities for their clients.
There are almost 80 real estate
companies across the United
Investors should also be aware of TIC/CORE related?
how their financial advisor
stacks up, looking for a history * How many investors have you
of successfully completed consulted that invested in
transactions. A long and proven TIC/CORE structured properties
track record indicates that a this year? How many last year?
financial advisor is an
experienced professional. An * How long have 1031 exchanges
investor wants such an advisor in and TIC/CORE been a focus of your
their corner asking all the right investment recommendations?
questions, making appropriate and
suitable recommendations, * Do you have the appropriate
understanding the nuances of licenses to complete this
successfully completing TIC/CORE transaction (Series 7, Series 63
transactions and providing securities licenses)?
answers to any and all tax and
legal questions. * With which real estate
providers do you work most
closely?
When considering a 1031 exchange
or TIC/CORE investment, investors
should ask the following specific As customer demand continues to
questions of the financial drive this segment of the real
advisor: estate market, the emphasis on
quality - quality consulting,
quality property, and quality
transactions - will be
* What percentage of your increasingly important. Part of
business is 1031 exchange and/or the qualitative process is
ensuring that financial advisors appropriate investment. It is
representing a client make important to remember, firms or
appropriate recommendations for individuals involved in
that client based on the client's recommending, offering or selling
best interest and not based on 1031 TIC/CORE investments must be
any "bias." A final issue that licensed with a broker-dealer,
needs to be addressed is that it the SEC, the NASD and the state
is not unusual for "referral" securities regulators in every
compensation to be paid between state in which the firm or
referring parties. This practice individual operates and in which
is illegal and a complete breach the client resides. Any
of ethics,. Therefore, if any "unlicensed" firm or individual
form of compensation changes involved in recommending,
hands - disclosed or undisclosed offering or selling these
- between financial advisors and investments is in direct
Qualified Intermediaries, real violation of federal and state
estate companies or other securities laws.
unlicensed individuals derived
from an exchange transaction, a
felony may have occurred.
Co-ownership is the fastest
growing option for 1031 exchange
investors seeking suitable
In short, investors should take replacement property. Properly
the time to identify a reputable structured and presented, such
advisor who not only can provide investments can also generate new
acceptable answers to the above listing opportunities for real
questions, but who will also have estate agents while satisfying
the relationships necessary to both the IRS "like-kind"
guide their clients into the investment property requirements
and the SEC and NASD securities her long-term goals that seeks
regulations. The advantages of experienced guidance to chart
co-ownership of their course, thereby turning
institutional-grade real estate TIC/CORE investment opportunities
are clear and compelling. When into realities.
exploring co-ownership, smart
investors need to seek out
industry experts to guide them
through the replacement property (c) 2005, 1031 Exchange Options.
process. It is indeed the wise
investor who is aware of his or
About the Author:
Cary Losson is the Founder and President of 1031 Exchange Options. A luminary in the TIC/CORE 1031 exchange marketplace, Mr. Losson is frequently quoted in journals and periodicals concerned with investment property issues and advice. For more resources to assist in your learning: http://www.1031exchangeoptions.com
Source: www.isnare.com
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