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Tenants in Common 1031 Exchanges Offer Investment Diversity but Beware

My hubby Michael and I can't wait for this book to come out: "The Short Sale," by Elizabeth Weintraub, coming from Archer Ellison in January 2009. Thank you, E for making this article available for a re-blog. I'm sure my readers are going to really enjoy this post.

tenants in common 1031 exchangeLooking for a different type of real estate investment? Tenants in common ownership offers benefits for investors who are tired of property management and want to use leverage by buying a fractional interest of a much larger investment vehicle.

However, as some Sacramento real estate investors have discovered, it pays to investigate the company before handing over cash to buy into a tenants in common project. Not only is checking out the company essential, but finding out whether the investment is registered as a security might save you scrutiny by the SEC.

One such company, Sacramento-based Heaven Investments Holding Corp., filed for bankruptcy in August, listing assets of $21.6 million and liabilities of $30.6 million, and it's presently being investigated by regulators.

The experts say if you're going to participate in a tenants in common 1031 exchange, make sure you're dealing with a registered representative who has a Series 7 (or Series 22) and Series 63 (or Series 66) license because such transactions, although real estate, are actually securities.

The way a tenants in common 1031 exchange works is instead of trading property A for property B, investors can exchange their equity by buying a fractional interest of a much larger, perhaps commercial, project. These investments are typically offered through a private placement memorandum. Investors are advised to select a company with a proven track record and work with a tenants in common specialist who has performed due diligence.

Some of the advantages of a Tenants in Common 1031 Exchange are:

  • Preservation of wealth
  • Diversification
  • Deferred taxes
  • Relief from property management
  • Cash flow possibilities
  • Potential appreciation

Read more about Tenants in Common 1031 Exchanges.

elizabeth weintraub sacramento real estate agent in land park

The Short Sale, by Elizabeth Weintraub, coming from Archer Ellison in January 2009.

Photo: Big Stock Photo

 

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Comment balloon 4 commentsC Tann-Starr • October 19 2008 03:14AM

Comments

It is the IRS not the SEC that would scrutinize the tic deal as part of an exchange.

Tell everyone what the commisiosn you make 12% and we bitch with a real estate agent making 3%. 

Not only that, the tics are packed with bs fees. and the numbers are manipulated to look great.

 

Everyone buy your own property own it by yourself and forget this tic bs.

Posted by Realty Man almost 10 years ago

Hi Realty Man: Just to clarify, what I said was: Not only is checking out the company essential, but finding out whether the investment is registered as a security might save you scrutiny by the SEC. This means the Securities and Exchange Commission oversees securities, and the sellers of those securities had better be licensed by the SEC. Lots of people think TIC is regulated by real estate law, and it's not.

Thanks, C, for reblogging this. I truly appreciate the support.

elizabeth weintraub sacramento real estate agent in land park

Posted by Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents, Put 40 years of experience to work for you (Lyon Real Estate) almost 10 years ago

Elizabeth, you are very welcome, and your wonderful articles make my blog posts a more diversified and interesting read for my subscriber (LOL).

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) almost 10 years ago

Realty Man, I do believe you have missed the point of the post, but I thank you for taking the time to write a comment. Enjoy your day, sir. :-)

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) almost 10 years ago

Participate