Portfolio TICs
Some investors are exchanging properties for fractional interests in Tenant in Common (TIC) properties, which include large properties such as shopping centers, office or apartment buildings, or industrial sites run by managers. With a fractional ownership in a TIC, the investor acquires his or her own deed and title policy to a property that is shared with other investors. A TIC differs from a real-estate investment trust (REIT) in that investors are actual owners of the property, whereas as in the latter case, investors only receive shares.

Investing in TICs is more expensive than buying a property on our own, but the returns may justify the effort, according to Gary Beyson, CEO of OMNI Brokerage, a commercial real estate broker in Salt Lake City. The reason: TIC investors are paying for the services of a so-called “sponsor.” Sponsors find the property, buy it or put it under contract, and arrange for the financing (on occasion, negotiating better financing than individual investors could manage themselves). They may also bring together investors who pool their money to buy a large TIC property.

The TIC fee, or load, ranges from 15 percent to 20 percent of the amount that the TIC investor is swapping. So if we are investing $1 million, about 15 percent to 20 percent of that amount will go toward the fee. Part of the fee pays the broker; another portion compensates the sponsor who has packaged the TIC prop-erty. However, an investor who buys a property swap outright pays less in commission. Since the inves-tor swaps his property for a replacement found by a real estate agent, the commission is based on the purchase price of the property. That means if we exchange a $1 million property for a $2 million one, we may pay the real estate agent about 6 percent of the $2 million, compared to the 15 percent to 20 percent paid by the TIC investor.