There have been an increasing number of Tenancy in Common (TIC) properties for sale in San Francisco and other parts of California, such as Oakland/Berkeley. TICs offer both buyers and multi-unit sellers some great opportunities in a very competitive market.
Read on below to learn more.
What is a TIC?
A TIC offers two or more buyers an opportunity to co-own a building. When you buy a TIC, you do not own the unit. Instead, you have a percentage stake in the entire building along with other people who bought the other TIC units in the building. For example, if you own a TIC in a 4 unit multi-family building, you will likely own close to 25% of the entire building’s title, not the unit itself.
Within the TIC agreement, co-owners are allocated interest in specific areas like their unit, parking, the yard, common areas and amenities. They also share in group expenses for the building, including building insurance, property taxes, maintenance, improvements to common areas, and shared utilities like water and trash.
Key Buyer Benefits
Since not a lot of people know about TICs, they become great opportunities for a knowledgeable buyer to purchase one at a lower price - anywhere from 5-10% less than a condo in San Francisco - with less competition. This allows new buyers into a highly-competitive market.
The hidden value of owning a TIC is that it can be converted into a condo, which increases your home’s value and yields a higher market appreciation. Specifically, if you buy into a 2-unit TIC property and each co-owner owner-occupies their unit for 1-year, it may qualify for a fast-track condo conversion.
Key Seller Benefits
Some property owners with 2-4 unit buildings could sell quicker and at a higher price if they sell each unit as a TIC versus trying to sell their whole building to one person. This makes each unit more desirable and affordable for more buyers. Not as many buyers can afford the entire 2-3 unit property.
For example, one of my clients owned a two-unit property. One was a Victorian in front and the second a bungalow in back of their property. The property as a whole did not sell for 3 months at the market price. As their new realtor, I strategized to split the property into 2 TICs and ended up selling each of them within 14 days at over asking price.
Getting a Mortgage for a TIC
I’d say that the #1 caveat for buyers is finding the right lender. Because TICs aren’t available everywhere, the number of lenders are limited as well. TIC lenders offer “fractional” mortgages, which allow co-owners to have individual mortgages - substantially decreasing the risk of co-ownership. The interest rate for a TIC loan is typically a quarter to a half a percentage higher than the market rate.
The important thing is to work with a realtor who has years of experience and understands the nuances of TICs. He/She should be able to find the right lender, and there are some great ones out there.
Definitely consider that next beautiful TIC you come across. Connect with me to further explore the benefits of a TIC ownership. I’ll get to know your needs and wants, update you on the San Francisco real estate market, and direct you to the right lender. My job is to get you ready to make the winning offer.