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To summarize, the benefits of the combination of 1031 Exchange and TIC's include the following:
- Sell your property in a seller's market for maximum profit
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Defer capital gains tax
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Buy TIC's with pre-tax dollars
- Avoid the stress of finding replacement property in a seller's market
- Invest in institutional quality property
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Possibly diversify your portfolio with more than one TIC
- Receive steady rent payment checks partially tax sheltered by depreciation
- No management headaches
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Principal preservation and often more cash flow than before
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Share in any resale profit when property is resold
- Simplify your estate
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Possibly avoid capital gains tax permanently with stepped up basis
By the way, one of the greatest advantages of TIC's is that, once you are over the minimum for that offering, most sponsors allow you to purchase exactly the amount of TIC you need to complete your exchange, sometimes right down to the penny.
What other replacement property offers this? Also, even if you buy a traditional replacement property or a Triple Net, TIC's can be used to "fill out" the exchange and absorb any left over funds that were not used for the traditional or Triple Net property, subject again to meeting the minimums of the particular TIC offering.
TICs are not for everyone.
At least the following should be considered:
• TIC interests are
only available to accredited investors
• TIC interests are
subject to the usual risks of real estate
• TIC cash flows and
projected returns are not guaranteed
• TIC interests are
illiquid (like any real estate investment)
• There is no established
resale market for TIC interests
• TIC interests involve
high fees and costs
• TIC interests
require a high level of due diligence
No accredited investor should consider purchasing a TIC
interest without thoroughly reading the Private Placement Memorandum (PPM) for
the particular property.
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