Research is Key with Tenant-in-Common Investments
With tenant-in-common investments becoming a hot commodity in the commercial and multifamily real estate markets, homework is key. Many 1031 investors rush to purchase within the IRS guidelines, while other investors not involved in a 1031 purchase TICs for the promised management. The problem? High fees and low returns can wipe out any tax savings. For non-1031 investors the extra costs associated with the tax deferral isn't offset by tax savings so there may be more profitable alternatives (such as REITs).
Fees aren't cheap. In a typical deal, sponsors charge a property-acquisition fee of 2% to 6% of the equity they put into the deal. Sales commissions are 5% to 8% of equity collected, and there can be a 2% to 3% fee for organization and marketing expenses, not to mention the ordinary annual property management fees, which run from 2% to 6% of net rental income.
Getting A Slice Of The Commercial Market
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