Tenant-in-Common (TIC) Investments: A 1031 Exchange Option Worth Considering
For many real estate investors, one of the biggest challenges in a 1031 Exchange isn’t selling the property — it’s finding the right replacement within the strict IRS timelines. With only 45 days to identify and 180 days to close, the pressure often leads investors to settle for properties that don’t align with their long-term goals.
That’s where Tenant-in-Common (TIC) investments come in. By offering fractional ownership in larger properties, TICs provide another avenue for investors to meet IRS requirements without sacrificing portfolio quality.
What Exactly Is a TIC?
A Tenant-in-Common structure allows multiple investors to co-own a single property. Instead of buying an entire building outright, you purchase a fractional share of the asset alongside other investors. Each TIC owner holds an undivided interest, meaning you legally own part of the property and share in its income, appreciation, and tax benefits.
This structure can open doors to larger, more stable properties that might otherwise be out of reach for individual investors. It can also serve as a diversification tool if you participate in several TICs across different markets or asset types.
TICs and the IRS: The 2002 Guidelines
TICs rose in popularity after the IRS issued Revenue Procedure 2002-22, which outlined how TIC ownership could qualify as like-kind property for 1031 Exchange purposes. While these guidelines didn’t provide a “safe harbor,” they gave TIC sponsors and brokers a framework to structure offerings in a way that aligned with IRS expectations.
Because TICs fall under securities regulations, most opportunities are offered through TIC sponsors and marketed by TIC brokers, who can help investors review options and determine if the structure is a good fit for their exchange.
Why Investors Consider TICs
TICs may appeal to investors who:
Need to meet a 1031 deadline but can’t find a suitable whole property.
Want access to institutional-grade real estate that would be too costly to purchase alone.
Prefer diversification by spreading capital across multiple properties rather than one.
Like the idea of passive ownership, with property management handled by professionals.
Is a TIC Right for You?
Tenant-in-Common investments can be a useful tool for meeting 1031 Exchange requirements while accessing larger, higher-quality properties. However, they aren’t one-size-fits-all. The right choice depends on your investment goals, timeline, and risk tolerance.
As with any 1031 replacement property, it’s wise to consult with legal, tax, and financial advisors before committing — and to carefully review all offering documents provided by TIC sponsors.
