The TIC structure has various features that make it attractive to the real estate buyer.

Access to Preferred High Grade Properties from Reputable National Real Estate Companies - The typical investment in whole commercial building begins at $1 million, but through premium TIC ownership, the average person is able to enjoy ownership in an institutional-type property with a minimum investment. Besides reliable income and growth potential, these high quality properties are able to attract tenants with greater financial strength and stability than possible for the individual landlord.

Combined Real Estate Experience - As an alternative to sole ownership of real estate, a 1031 buyer can take ownership in a large preferred commercial property along with other unrelated buyers, not as limited partners, but as individual owners. Each of the TIC owners brings their previous real estate knowledge to the group. Thus, each decision of the TIC ownership will be backed by many years of real estate experience.

Lessee Management with up to 25 Years Experience in Real Estate - Most of the day-to-day property operations are handled by a Master Lessee. The lessee managers control or has involvement in more than $350 million in real estate assets and have extensive experience in real estate. Thus, situations that arise in day-to-day operations will be addressed quickly and efficiently, and the Premium Property TIC owner will enjoy the freedom from property management.

Simple Mailbox Management - The Premium TIC property owner avoids the time and frustration of dealing with multiple tenants. You no longer deal with "toilets, tenants and trash," and simply receive your monthly lease payment from your mailbox. Enjoy other interests, travel and time with family.

Exact Dollar Matching - In a Premium TIC property, you may be permitted to purchase any amount above the minimum. For example, if you have $152,479 of equity from the sale of a previous property you can purchase $152,479 of equity in a TIC property.

Low Minimums - Revenue Procedure 2002-22 issued by the IRS allows up to 35 TIC owners in any one property. Most TIC owners number 15-25 per property. Minimum purchase requirements are structured to meet this limitation and can range as low as $50,000 equity.

Non-recourse Financing - The mortgages on most of the Premium TIC properties offered are non-recourse. The TIC debt structure generally allows for the debt financing to assumed. Assumption usually occurs without the need for qualification or loan assumption fees.

Diversification - Due to the low minimums in Premium TIC properties, the buyer can decrease risk by diversifying into different properties in various different marketplaces.

Speed and Simplicity - Speed and simplicity are achieved due to the efforts of 1031 FEC Consultants, Associates and experienced real estate professionals. The negotiation process is complete, and survey, rent rolls, etc. are already completed and available for your review. After your review of all the due diligence used to acquire your property, and upon your approval, you are ready to close. The closing can be completed in days, not months.

No Closing Costs - Some property investments include closing costs.  Be sure of all costs in a purchase or exchange.  Absent seller default or other items outside the control of 1031 FEC, closings are generally within the agreed upon time frame. 1031 FEC does not charge the TIC owners closing costs.  Non-FEC 1031 triple-net Master Lease transactions generally result in client closing expenses.  1031 Qualified Intermediary fees are paid by the buyer/exchanger.

Deeded Interest - The Premium TIC owners buy the property and receive a deeded interest. You can transfer this interest by gift, sale, inheritance, assignment, etc. Such transfer does not need to coincide with the transfer of all TIC interests in the property. If requested to do so by the TIC owner, 1031  FEC will assist in the marketing of any TIC interest.

No Special Allocations - All the Premium TIC owners receive lease payments, sale proceeds and the depreciation tax benefits in proportion to their percentage ownership in the property.

Impasse Resolution Procedure - On a decision requiring unanimous vote, such as a sale decision, a 75% vote by the TIC owners may be sufficient to initiate the impasse resolution procedure. This procedure allows the TIC owners with 75% or more of the property to make an offer to buyout the dissenting owner with 25% or less of the property. The dissenting TIC owners can either: (1) accept this offer, (2) buy out the 75% TIC owners at the same price per percentage ownership, or (3) change their dissenting vote to a consenting vote.

Financial and Estate Planning - 1031FEC assists with your family financial and estate planning in mind that can result in wealth building using risk tolerance and diversification considerations and passing of wealth to heirs with minimum or no tax.

As a leader in locating and providing qualified managed premium §1031 Tenants-in-Common (TIC) replacement properties, 1031FEC can offer owners advantages for success. 1031FEC can assist finding the proper 1031 property for your business requirements that can defer capital gains tax and recapture of depreciation taxes. 1031FEC Consultants advise you and your CPA to assist proper IRS documentation and procedure.  Reduce stress of management or income collection with 1031FEC TIC and other qualified income properties.

Our 1031FEC Premium TIC Program provides real estate buyers with the monthly rental income advantage of a triple-net lease with scheduled increases plus single-tenant property with the appreciation advantages of a multi-tenant property. By owning TIC interests in premium multi-tenant commercial properties across a wide geographical area, real estate buyers can enjoy the diversification that is not possible if you were to buy just one single location property.

The 1031FEC Managed Premium TIC Plan is well-suited for the 1031 Real Estate Exchange Property buyer seeking monthly income that increases annually, unlimited appreciation potential, and flexible and easy closings. Current and future 1031 exchange property owners and direct purchasers now have access to the advantages of a long-term, triple-net lease without the disadvantages.

No Fee to 1031FEC 1031 Exchanger Client.  Fee paid by 1031 real estate property provider.

See Qualified Managed and Other Premium Investments   Featured Real Estate Investment Properties & state locations with minimum investment equity are at Investments.

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Does your property qualify for this tax break?  For a no fee confidential consultation and for more details contact 1031FEC.  We also can find if you qualify for a retirement tax deduction up to $100,000 for you and up to $100,000 for your spouse. We recommend your tax advisor or CPA be invited to consult and confirm details.

Other 1031FEC Exchange Advantages

• Relieves the burden of active real estate ownership or "headache" properties (mailbox management by owners with owner controls).

• An experienced 1031FEC exchange advisor to consult and assist you to choose the best preferred exchange investment for your portfolio with financial planning, estate planning, diversification and risk tolerance considerations.

• Exchange a non-cash flow or low cash flow producing property for a premium higher cash flow producing property.  Increase and earn more income.

• Access to ownership of income property in preferred, high grade quality corporate buildings, shopping centers, multi-residential and other triple net lease property in advantaged locations.

• Experienced proven and successful management plus the possibility of the advantage of the combined real estate experience of several owners.

• Diversify your real estate and investment portfolio by geography, property and investment type.  Exchange one property for two or more for a lower risk property portfolio.

• Relocate property when owner retires, changes location for work or health reasons.

• Facilitate estate planning.  Heirs receive property at the new 'stepped up' basis.  Multiple beneficiary solution transfers individual or multiple properties by a will or Trust.

• Consolidate many properties into less parcels for a single or more manageable parcels.

• Gain leverage for a larger or a more valuable property

• Access to cash with a partial exchange.

• Low minimum property investments and possible dollar matching exchanges.

• Exchange slower appreciating property for preferred property with increasing income and appreciation.

• Relieves the burden of future potential loss of value of temporarily inflated agriculture land or other inflated property values.  Maintain wealth with higher quality income property.

• Avoid tax penalties and taxation burden with 1031FEC consultants to assist and guide you through the §1031 process to help assure IRS compliance, procedure and documentation.

• Non-recourse financing.

• Retirement Plan deductions possible.

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Personal Residence to a Rental

One can avoid paying tax on more than $500,000 of gain on one's home. Many people are aware of the advantages of Internal Revenue Code Section 121, which allows a married couple to exclude up to $500,000 of gain on the sale of their personal residence ($250,000 for a single taxpayer). Although this amount of gain is generous in most areas of the country, in some states homeowners receive more than $500,000 of profit when they sell their home.  That additional profit is subject to federal and state capital gains tax and net investment income tax (Medicare tax).

 

What is much less understood in the real estate world is that a homeowner can avoid paying all of the tax on their home by converting it to a rental. Once the home is converted to a rental, the owners can sell it and use both the Section 121 exclusion of gain and the Section 1031 deferral of gain provisions to exclude some of the gain and defer paying tax on the rest.  Most tax advisors recommend renting the home for at least two years to establish it as a rental, but if you rent it for too long, you could lose the ability to benefit from the Section 121 exclusion, since that provision requires that you have lived in the home as your primary residence at least two of the past five years. 

 

For example:

Bob and Sue Smith have lived in their home for twenty years. They acquired it for $100,000 and it is now worth $1 million, so if sold, they would have $900,000 of gain. If they sell it without converting it to a rental, they would be able to exclude $500,000 of gain but would have to pay capital gains tax on the additional $400,000 of gain.

 

Bob and Sue decide, however, to convert their property to a rental. After renting it for two years, they sell it for $1 million. Since they used the home as their primary residence at least two of the past five years, they are able to exclude $500,000 of the gain. They can then use the remaining funds to acquire replacement investment property in a 1031 exchange and defer paying tax on the balance of the gain.  In order to accomplish this, they must set up the 1031 exchange prior to closing on the sale of the property. 

 

In order to completely defer the remaining gain, the traditional rule is that the investor must acquire replacement property with a fair market value equal to or greater than the relinquished property, and must invest all of the equity from the relinquished property into the replacement property. When gain has been excluded under Section 121, however, the amount of value and equity required to invest in the replacement property is reduced by the amount of gain that was excluded under Section 121. 

 

Homeowners who decide to combine a sale of their primary residence with a 1031 exchange need to comply with all of the rules of Sections 121 and 1031 in order for this to work. Revenue Procedure 2005-14 explains how the two statutes may be combined for one property. This ruling includes not only the situation mentioned above, but also a sale of a personal residence with a home office or separate guest house that is rented.

 

Some of the requirements to keep in mind are:

 

• To take advantage of the $500,000 exclusion ($250,000 for single Taxpayers), you must own and live in your home as your primary residence at least two of the past five years;

• You can only take advantage of the Section 121 exclusion once every two years;

• Section 121 doesn't allow you to exclude any gain attributable to depreciation deductions taken since May 6, 1997, but that gain can be deferred under Section 1031; and

• To take advantage of the deferral of gain under Section 1031, the property you sell and the property you acquire must at the time of the exchange be used in connection with your business or held for investment.

 

Disclaimer: The above brief descriptions are not to be construed as legal or tax advice and is qualified in its entirety by the actual closing documents. In case of any discrepancy, the actual closing documents will control.1031FEC recommends investors considering an IRS IRC §1031 tax-deferred exchange transaction  or an IRS IRC §721 exchange include and consult their accountant and/or attorney.