TIC Financing
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TIC Financing
Fractional Tenants in Common (TIC) financing is a method of financing co-owned real estate, similar to traditional TIC financing, but with a slightly different approach. In a fractional TIC arrangement, multiple individuals come together to co-own a property, and they each have a fractional interest in the property. Fractional TIC financing can make it easier for co-owners to obtain financing for their share of the property while maintaining their ownership interests. Here's an overview of how fractional TIC financing works:
- Fractional Ownership: In a fractional TIC arrangement, multiple co-owners collectively purchase a property, and each co-owner has a specified percentage of ownership. For example, one co-owner may have a 25% ownership stake, another 30%, and so on.
- Individual Financing: In fractional TIC financing, each co-owner secures their own individual financing for their specific ownership share. This means that each co-owner is responsible for their own mortgage, down payment, property taxes, and insurance related to their fractional interest in the property.
- Easier Financing: Fractional TIC financing can be more straightforward for individual co-owners because they only need to secure a loan for their percentage of the property's value. This can make it more accessible for individuals to enter co-ownership arrangements, as they are not jointly liable for the entire property.
- Lender Approval: Lenders still need to approve each co-owner's loan application. They will assess the creditworthiness, income, and financial stability of each co-owner separately. The TIC agreement and ownership structure may also be reviewed by the lender.
- Exit Strategies: Just like in traditional TIC arrangements, fractional TIC co-owners should establish clear exit strategies in their TIC agreement. This can include procedures for selling a fractional share, the right of first refusal by other co-owners, or other buyout arrangements.
- Benefits: Fractional TIC financing can provide several benefits, such as making it more affordable for individuals to invest in high-value properties. It allows co-owners to enjoy the benefits of property ownership with a smaller financial commitment, and it can be more flexible than traditional TIC financing.
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