Louisville Real Estate News

Tenant-in-Common Investments Attract Rich, Hopeful

( February 10, 2006) –   The latest strategy for investors in Louisville commercial property eager to avoid capital gains tax is based on an old English form of ownership called tenancy in common.

Unlike a real estate investment trust or a limited partnership, a TIC is structured so that participants are direct owners of real estate, allowing them to qualify for a tax-free like-kind exchange under Internal Revenue Service section 1031. As long as the investor keeps trading property, he doesn’t owe tax.

Investors in TICs can have a piece of a major property with top-shelf tenants. It’s an investment that is usually well beyond what an individual investor could afford on his or her own. Although to have a piece of this pie, an investor must generally demonstrate that he has net assets greater than $1 million or annual income greater than $200,000.

TICs are attracting an increasing amount of interest despite downside risks that can be as great as the upside potential. “The number of sponsors who have popped up because they have dollar signs in their eyes, but they don’t have a lot of experience … that scares me,” says Patricia DelRosso, president of Inland Real Estate Exchange in Oak Brook, Ill., and president-elect of the Tenant-in-Common Association, a trade organization.

Source: BusinessWeek, Peter Coy (02/13/06)