TIC - Tenants in Common Investments
John Vanhara Tenants in Common Investments grew dramatically since 2002. To some who need to refresh how they work here is more information from Ronald L. Raitz, CCIM
There are three roles:
The Sponsor’s Role
“Sponsors’ duties include finding suitable property and successfully putting it under contract, performing the necessary due diligence, acquiring financing, entering into selling agreements with targeted broker/dealers, completing TIC interest sales, managing the property or arranging for property management services, sending monthly disbursements to TIC owners, sending annual summary statements to owners, and initiating or overseeing the property’s sale and distribution of proceeds.” Read more here.
The Broker/Dealer’s Role
If TIC sponsors package transactions as securities, they must meet certain Securities and Exchange Commission standards. To sell securities, one must be licensed as a registered representative and be affiliated with a broker/dealer. This relationship is basically that of an independent contractor except that the registered representative only can sell product that the broker/dealer approves. In addition, the broker/dealer solicits or is approached by sponsors to sell their offerings. Broker/dealers complete due diligence on the offerings to make sure that the investment is solid and not a potential liability to the company. If an offering is approved, the broker/dealer signs a selling agreement with the sponsor. To give their products the most exposure, sponsors usually sign selling agreements with multiple broker/dealers.
Accredited Investors
Securities laws are designed not only for disclosure, but also to emphasize suitability. Because real estate investments have risks and it is possible for investors to lose their money, the SEC wants to ensure the participants in these transactions have financial substance.
Securities laws require that offerings be publicly registered, but there are some exemptions. TIC interests are Regulation D Private Placement offerings and are exempt from public registration if sold only to accredited investors. To be considered accredited, an investor must have a minimum $1 million net worth or have earned $200,000 per year for the past two consecutive years if single or $300,000 per year if filing a joint tax return. ”