Since the IRS released Revenue Procedure 2002-22 in March of 2002, real estate investors can now safely realize the power of combining a 1031 tax deferred exchange with a tenants-in-common investment.

Enjoy truly passive investment from triple net leases

TIC investment eliminates the headaches and time consuming burdens of active property management. They are a perfect solution for those with rental properties that wish to retire from the daily burdens and liabilities that come with being a landlord.

The TIC program is also perfect for professionals who are dedicated to their career but who also desire to build a well diversified real estate portfolio with current income and strong appreciation potential. Through the 1031 exchange process the portfolio can grow tax deferred through the course of the investor's career similar to investments in a qualified pension plan.

The investor enjoys the service of large national professional real estate management companies that structure the TIC property acquisition (i.e. identify and locate, evaluate, arrange financing, etc.), manage the property (i.e. maintain, lease, collect rent, service mortgage), and eventually sell the TIC properties. These management companies have a vested interest in the performance of the property and have excellent historical track records with many other properties.

Profit from net cash flow and cash-on-cash return

TIC properties typically enjoy significant cash-on-cash returns. The cash flow can be paid monthly or quarterly and is tax-sheltered due to depreciation pass through and interest deductions (typically greater 50% to 60% of the net income is sheltered from federal and state income tax) and investors also participate in the appreciation of the property when sold.

Shelter cash flow from current income taxes through depreciation and operating expenses

For an investor that has held a real estate property for so long that the depreciation deductions have either run out or will be soon, a Section 1031 exchange offers the opportunity to restore these deductions through a replacement property. In fact, because tenants-in-common properties are often leveraged with 50% to 75% non recourse debt financing, the investor's basis is often increased in the replacement property and depreciation deductions are higher than with the relinquished property.

For an investor who takes their real estate investments to the grave, the deferred tax liability is wiped out since the heirs get a stepped-up basis in the inherited property.

Gain access to an institutional grade investment property

A 1031- TIC syndication also presents the opportunity for an individual to join together with other high net worth investors to own institutional quality real estate that none of the investors could own individually.

Minimum equity requirements as low as $100,000 allows the investor access to high quality, institutional grade properties with large, financially secure, often publicly traded, credit-worthy tenants with long-term triple net leases. Thus, providing secure cash flow income for the life of the investment.

Defer capital gains tax and depreciation recapture via section 1031 exchanges

A 1031-TIC syndication also represents an easy Section 1031 exchange transaction. Instead of running ragged trying to identify and close the purchase of a replacement property within the strict time parameters set forth by the IRS (45-day identification period, acquire within 180 days), an investor can pick and choose from the numerous 1031- TIC syndications available, all of which come with pre-arranged financing. The ability to keep the earning power of the money that otherwise would have been taxed away working in another investment is a key benefit of these transactions.