Buying an LA TIC — Everything you need to know about TIC ownership
It’s here. It’s finally happened. TIC is becoming a ‘thing’ here in Los Angeles.
SPOILER: Want to see TICs for sale in LA right now → TIC Listings
FREE TIC Brochure → TIC Brochure
What is a TIC in Real Estate?
TIC stands for Tenants in Common. Tenants in common is a form of ownership- some other common ways to hold title are Sole Proprietorship, Joint Tenants, and community property. TICs are the best form of ownership for a group of unrelated owners or investors because it allows ownership interests in the TIC to be sold separately, ownership interest can be divided in any way, and there is no right of survivorship. Think of TICs like fractional ownership of a small apartment building conversions (usually 2–8 units). In the case of a TIC building in Los Angeles, we are not referring to the form of ownership so much but rather the tic property type.
What are the benefits of owning a TIC?
Affordability: The number one reason to buy a tic is affordability. Entry level pricing in LA is 500K- 600K right now. TICs typically sell for 10% to 20% less than comparable entry level condos in the market so if you have been priced out of the market, TICs offer you a way to get in. I see TICs in the $400K to 500K price range. How can you use this affordability to your advantage? TIC homes in Silver Lake and Echo Park are comparable to the price of what you can buy a condo in Koreatown! That means you can use TICs affordability to get access to a better neighborhood also! TIC offers new ownership opportunities for Millennials trying to start a new life or those trying to break into Real Estate market.
Homeownership: Unlike renting- TICS offer homeowners all the tax benefits and appreciation of owning an asset at a comparable cost to renting, which begs the question why rent?
Smaller Communities: For Buyers who like living in condos but don’t want a large association, TICs offer a great alternative because they have smaller associations and less neighbors.
Investment Income Potential: when you are ready to move up, you don’t have to sell your TIC, you can keep it as a rental and gain passive income.
What are the disadvantages of a TIC?
Difficulty to finance: There are only a handful of lenders who are experienced loaning against TICs. I expect as TICs become more common for this to improve, but for the time being you don’t have a lot of options.
Weak Association: Since TICs are smaller communities, they don’t have the budget that larger HOAs due for Professional Property Management or setting aside money for reserves. This means that each individual owner has more responsibility than you will find with 20+ Home owners associations.
Is buying a TIC safe?
Yes. Buying a TIC is perfectly safe. Hundreds of TICs are bough and sold each year in Los Angeles, several I have sold myself. San Fran has been utilizing and marketing the TIC lifestyle for years now. Mostly because of the Tech Boom in SF, housing prices have sky-rocked! Enter TICs. Because of the low development cost and shared ownership home buyers can purchase an ownership interest in a TIC Building for a fraction of the cost of traditional forms of real estate.
Owning A TIC
How does maintenance work in a tic?
Owners of a TIC are responsible for the common area in the percentage of their ownership. For instance, Owner A and Owner B each own a 25 percent interest of the building, and owner C owns 50 percent of the property. Let’s say the roof needs replacement and costs $50,000. Tenant A would be responsible for $12,500, Tenant B $12,500 and Tenant C $25,000. This is also the same with HOA fees. The tenants that have the larger portions of a property will pay higher HOA fees as well as taxes proportional to their property sales. The first year of most TIC communities HOA fees include a financial manager to help run the community financials.
What to deep dive in to the nitty-gritty of TICs and how they are created and managed? Check out my other blogs on specific topics on TICs and TIC homeownership. Download my FREE TIC Brochure here → TIC Brochure
Want to know what TICs you can buy right now in Los Angeles?
Details and Legalities
While you should always do your own due diligence, there are several helpful articles and videos to get you up-to-snuff with the TIC trend and legalities.
A fantastic and detailed article about TICs in a seasoned market, San Francisco — > https://medium.com/silicon-valley-real-estate-review/tics-in-san-francisco-9af423c6f842
Looking for TICs for sale in LA right now? — > TICs for sale HERE!
If you have further questions about escalator clauses, TICs or anything real estate email firstname.lastname@example.org for more info. #RealEstateRevolution
Lauren @laurenglasses (find me on social media ;)