*POTENTIAL ADVANTAGES OF 1031 TICs
Generally, 1031 exchanges and TICs are attractive in that they allow:
1. Institutional-Grade Properties – With multiple investors pooling their money, TIC investors can often buy quality assets than they could otherwise afford on their own.
2. Tenants – Quality properties can usually attract and retain potentially stronger tenants.
3. Fewer Headaches – Although it cannot be guaranteed, with professional sponsors taking over asset and property management responsibilities, TIC investments may provide simplicity by eliminating active management headaches.
4. Cash Flow – Although it cannot be guaranteed, the objective of owning properties of this type is to potentially provide stable monthly income. Cash flow is partially tax-sheltered via depreciation pass-through and interest deductions (in many cases a portion of the investor's net income is tax sheltered).
5. Appreciation – A TIC investor may potentially experience appreciation over the time a property is held.
6. Diversification – One large property can be exchanged into many smaller properties, offering additional asset and geographical diversification.
7. Greater Investment – Because capital gains taxes are deferred, the investor has a higher adjusted basis, creating greater leverage than if the tax liability was paid on a current basis. This may increases the investor’s available equity for reinvestment.
8. Compounding Effect – An investor may perform 1031 exchange after exchange, creating a compounding effect of reinvesting the deferred capital gains taxes on each subsequent exchange.
9. Property Life – An investor can exchange property that has reached a plateau for one that is on an upswing; an unproductive property can be exchanged for an income-producing property; a property that has been depreciated can be exchanged for a more expensive property which has more room for appreciation.
* It is not realistic to identify all of the potential advantages or risks that an individual investor may encounter in a particular 1031 TIC.
