Tenancy in Common

A parcel of real estate may be owned by two or more people in what is known as a tenancy in common. There are two important characteristics of a tenancy in common. First, the ownership interest of a tenant in common is an undivided interest; there is a unity of possession among the co-owners. This means that although a tenant in common may hold, for example, a one-half or one-third interest in a property, it is impossible to distinguish, physically, which specific half or third of the property the tenant in common owns. The deed creating a tenancy in common may or may not state the fractional interest held by each co-owner; if no fractions are stated, the tenants are presumed to hold equal shares. For example, if five people hold title, each would own an undivided on-fifth interest.

The second important characteristic of a tenancy in common is that each owner holds his or her undivided interest in severalty (separately) and can sell, convey, mortgage or transfer that interest through the right of partition. On the death of a co-owner, that tenant's undivided interest passes to his or her heirs through a probate proceeding. The interest of a deceased tenant in common does not pass to another tenant in common unless the surviving co-owner is an heir or a purchaser.

What is a Tenants in Common Real Estate Investment?

In 2002, the IRS issued guidelines (Revenue Procedure 2002-22) governing the structure of Tenant In Common (TIC) property investments. These guidelines dictate that a Tenants In Common, also known as co-ownership of real estate (CORE), should have no more than 35 investors. The typical structure includes from 12 to 20 TIC/CORE investors in a property.

Tenants In Common investments vary from property to property. The minimum equity amount varies depending on the property, the amount of equity being placed, and the number of co-owners. Generally, loans range from 5-10 years and coordinate with the specific business plan set forth for buying the investment property. The typical stated minimum investments range from $100K to $650K, though some of the larger investment properties will have much higher stated minimums.

Each Tenant In Common investor receives monthly cash flow checks. Overall annual returns (including cash flow, appreciation, and principal reduction of the non-recourse financing) vary from property to property.

An investor's TIC/CORE interest can be purchased, sold, gifted, bequeathed by will, or inherited, and is subject to property taxes, gift tax, estate and inheritance taxes in the same manner as a sole ownership property.