What is a TIC sale and how does it work?
Home prices in California has reached record levels, and housing availability is critically low. Through this extreme housing environment, a new phenomenon was born - the TIC sale. TIC is short for "tenants in common", which is basically a way owners hold title on a property with multiple owners. Through a TIC sale, a landlord can sell individual units to his tenants or other buyers by deeding fractional ownership on his property. New TIC owners will have fractional ownership of the entire property, but with exclusive rights to his unit.
Although TIC transfers has been around for decades, few used this type of transfer because there were no lenders willing to loan on fractional ownership. But now, there exist a few lenders that provide financing on TIC transfers, creating an entirely new market for lending. Now that this major road block has been lifted, individuals can get a loan to purchase units just as they would when they buy a condominium. And a new market is born - the TIC sale!
TIC sales can help alleviate the housing crisis by adding new inventory to the tight housing market. There are over 4.7 million units in apartment and multi-family dwellings in California. This provides an opportunity for buyers to acquire this new inventory of housing and get it at a discount compared to condominiums. With lending rates at low levels, mortgage payments would be comparable with their existing rent payments. TIC purchases provides a unique opportunity for tenants to be owners.
It also solves multiple landlord problems:
First, landlords that want to sell units individually no longer have to deal with condo-conversions. Converting an apartment or multi-family into a condominium is a painstaking process which requires a lot of time and resources to complete. TIC transfers forgoes that process entirely, and provides the landlord with a quick and manageable solution to sell his units.
Second, TIC sales can help landlords by providing them a vehicle to cash out equity from their property without selling the entire property. A landlord can continue to hold on to some units and collect rents, while selling other units that are available.
Third, landlords can get a higher price by selling individual units rather than selling the property in its entirety. Since multi-family valuations are heavily based on rents, low rents can negatively affect the valuation of the property. However, by selling the individual TIC units, the valuation of each unit will be based on comparable condominium and TIC units in the area - not based on existing rents!
At TIC Source, we provide a complete suite of services to assist landlords prepare and sell their units to existing tenants or other interested buyers. From TIC consulting, TIC sales, TIC loan services, escrow and title coordination, HOA preparation, and 1031 exchanges, TIC Source will navigate you through the entire TIC sale transfer process. Contact us now and set up a consultation. We look forward to helping you with your TIC sale.