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tennets in common
Old 05-06-2006, 06:30 PM   #1
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tennets in common

Well the DW and I finally selected the property to do our 1031 exchange. We went down to Georgia to look at it. The property was in good shape low maintenance all 12 units were full it cash flowed well and had a propety mananger a mile away with a 92 unit complex that was a 98% occupancy who would manage ours at 6% and there was a lot of upside on the rents

Unfortunately a contract was placed on the property the while we were getting our act together .

Back to square 1

We have until June 11 to identify our exchange property but that seems to be approaching fast.

The agent who was showing us around in GA suggested we may want to do a TIC for six months or a year to give us more time to find a deal.

Does any one here have any experience with TIC real estate transactions?


we really would like to know the good the bad and the ugly

For someone who isn't going to make money for us

Thanks

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Re: tennets in common
Old 05-06-2006, 09:41 PM   #2
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Re: tennets in common

www.ipx1031.com
www.apexprop.com

I believe they mean tenants in common, and I'm guessing they're actually referring to you putting your cash into someone else's deal as a temporary way station to retain 1031 treatment ... but I'm not sure.

1031 details are critical ... I'm a CPA, and my wife and I used the first company above ... Investment Property Exchange Services, Inc. The second link is another large firm facilitating like-kind exchanges.

I'd recommend calling IPX, 888/350-1031, and ask for Paula Ripp ... she aided us in '03, don't know if she's still there. Consult an expert, and make sure you have your t's crossed and i's dotted. I'd recommend this over a real estate agent. This kind of advice and service is very, very cheap.

Best of luck
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Re: tennets in common
Old 05-06-2006, 10:20 PM   #3
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Re: tennets in common

Thanks Charles

Yep its tenants in common. The Idea is to buy a share of a large commercial investment like a shopping center or Apartment complex. This allows you to park your money for a while until you can find a property that you want to buy. So you save the income taxes and hopefully earn a decent return on you money.

I was just wondering if anyone here has used one?
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Re: tennets in common
Old 05-07-2006, 07:54 AM   #4
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Re: tennets in common

If you are looking at it as a temporary investment, be sure you know how you are going to get out and if there are any restrictions on transfer. Read the TIC agreement and consider showing it to a lawyer. I assume you had the property you sold in your own name. That means you will be a co-owner of commercial property also in your individual name. This makes you jointly liable for all debts of the tenants in common entity. Make sure that there is excellent liability insurance. Make sure you get notice of cancellation. Make sure that the property is financially healthy because the downside risk is huge. Along with that, do your due diligence on management.

If it weren't for the fact that you need the TIC to do an exchange, I wouldn't do a TIC unless I had an entity, like an LLC, to be the member.

This is just a few thoughts--see my standard disclaimer.
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Re: tennets in common
Old 05-07-2006, 12:18 PM   #5
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Re: tennets in common

Quote:
Originally Posted by Martha
If you are looking at it as a temporary investment, be sure you know how you are going to get out and if there are any restrictions on transfer. Read the TIC agreement and consider showing it* to a lawyer.* I assume you had the property you sold in your own name.* That means you will be a co-owner of commercial property also in your individual name.* This makes you jointly liable for all debts of the tenants in common entity.* Make sure that there is excellent liability insurance. Make sure you get notice of cancellation.* *Make sure that the property is financially healthy because the downside risk is huge.* Along with that, do your due diligence on management.
Gosh, sounds like a real no-brainer.

How much would you have to pay in cap-gains taxes if you didn't make a 1031 or a TIC in time? In other words, how much are you saving through this hassle?
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Re: tennets in common
Old 05-07-2006, 07:04 PM   #6
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Re: tennets in common

Thanks Martha

We are in the process of trying to find some professional help and not just for my mood swings and delusions but also with some long term tax planning.

Nord the deal is that we had a gain of about $100k on the house which had a sale price of $215,000. So at a minimum we have to buy a property with a value of at least 215,000 and put at least 120,000 down.

The long term capital gains tax rate is 15% but since the gain will be added to our adjusted gross income for the purposes of calculating the AMT the effective tax rate on the gain will be closer to 22% (based on what happened to us this year) plus 4% for MD capital gains tax.

So we are looking at $26,000 in additional taxes if we don't do the 1031.



If we wait until we are not working our income will be much lower and the AMT should not be an issue so just doing the TIC thing for a few years could
allow us to get a nice gain on the deffered taxes (5-7%) and save $7000 in taxes.

But I am just not sure if the TIC deals are just a pyramind scheme aimed at getting us to invest our money so they can get rich.

I was hoping someone here had some experience with the tool so could get some 1st hand feed back.
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Re: tennets in common
Old 05-08-2006, 06:35 AM   #7
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Re: tennets in common

Bearkeley-

Sounds like you missed out on a sweet deal. But, one must do due diligence on these things. You still have time to look around. I sure wouldn't want to put my money into anything iffy (like these TIC projects sound to be) this close to retirement if I were you. Would you be better off buying closer to home?

Wishing you good luck in this!

Jane

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