Process For Purchasing Tenant-In-Common Investments

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tenant in common investment

1031Replace.Com, LLC
(941) 366-1300
Fax (941) 366-6973

Providing tenant-in-common investments in Florida, the Southeast and throughout the US.

Process For Purchasing Tenant-In-Common Investments

Although it varies somewhat among sponsors, the tenant-in-common investment process usually follows the following format:

People contact us (1031Replace.Com) by filling out the “Contact Us” in this website, by telephone, etc. expressing an interest in TICs.
By talking to the interested person, meeting with him/her, etc., we learn about his/her situation (1031 or not, etc.), needs and goals, and we attempt to educate and counsel the person about TICs and other possible replacement properties for 1031 Exchanges (or as alternative investments if the person is not in a 1031 Exchange) and determine the state in which he/she maintains his/her domicile.
A substantive relationship is formed when we believe that the person wishes to become our customer and proceed to the next level.
If the person expresses an interest in becoming our customer and purchasing TIC, we attempt to determine his/her time frame (if we have not already done so) and, if his/her need is immediate, we begin to introduce him/her to TIC offerings currently available and request a copy of the person’s prior two year’s tax returns (be sure they are signed) and a financial statement. This is to determine if the person or the entity he/she represents has sufficient income or net worth to be an Accredited Investor and therefore qualified to purchase a TIC under Regulation D.
When we are fairly certain that the person’s timing would justify it, we try to pare down the list of available TICs in consultation with the person and, if the person so requests, we order Private Placement Memorandums (PPM’s) from the sponsors of offerings in which the person is interested (which are normally sent to us if the customer is local, or can be sent to the customer if it is not practical for the customer to come to our office in Sarasota, Florida).
We then request that the person fill out the OMNI Brokerage, Inc. customer forms necessary to open an account at OMNI Brokerage, Inc. (an account must be opened with a securities broker-dealer company in order to buy security TICs which is the only kind of TIC that 1031Replace.Com sells).
If, after review of the applicable PPM, the customer wishes to purchase a particular TIC, we check availability with the sponsor and then assist the customer to fill out the Purchaser Questionnaire and Purchase Agreement, and then submit these to the sponsor along with any deposit required (usually from the Qualified Intermediary if a 1031 Exchange, or from the person if the purchase is an alternative investment but not a 1031 Exchange replacement property). Copies of these documents and OMNI Brokerage, Inc. customer forms are sent to OMNI Brokerage, Inc.
If a 1031 Exchange, we also determine how much the Qualified Intermediary (QI) is holding in escrow and if and when we need to assist the customer to comply with the 45 day identification rule.
We monitor the sponsor’s processing of the Purchaser Questionnaire and Purchase Agreement and attempt to find out when the second set of documents will be received from the sponsor which often includes documents for the formation of the limited liability company which will be formed by the sponsor to hold the interest purchased (not applicable if the offering is in the form of a Delaware Statutory Trust), escrow instructions, W-9 form, management agreement, loan assumption documents for the portion of the non-recourse mortgage on the property that the investor will assume, etc.
The second set of documents can be sent directly to the investor for completion, but we prefer that the customer come to our office so we can assist to complete these documents (not always possible if the customer does not live nearby).
After the second set of documents is returned to the sponsor, we again monitor processing and attempt to determine when the closing will take place (at which time the balance of the purchase price will also be sent to the sponsor or the title insurance company the sponsor has retained for closings).
The third package of documents includes such things as supplemental escrow instructions and closing/settlement statement which can also be sent directly to the customer, but again we prefer to assist with proper execution and return of the documents to the sponsor or title company. Sometimes the third set of documents is actually part of the second set of documents package.
The last step is to monitor and await receipt of the recorded deed, title insurance policy and other documents which will constitute evidence that the person is the owner of the TIC.

These things also differ somewhat from state to state depending on where the property and closing agent are located. Also, IRS has recently approved Delaware Statutory Trusts (DST's) as tenant-in-common investment entities and we expect more and more TIC's to be structured as DST's in the future. DST may prove to dramatically alter and simplify the paper work described above and we hope may also lower closing costs and the time it takes to complete a closing.