Tenant-In-Common FAQ's

A triple-net-lease refers to a lease arrangement wherein the landlord receives a net rent, because the tenant pays the property taxes, utilities, insurance premiums, maintenance and repairs. Most net-leases are long term (10-25 years) with cost-of-living increases built into the lease agreement. Triple net properties are among the most liquid and secure real estate investments available. Properties with triple-net-lease arrangements tend to sell very quickly, especially those with solid, credit-worthy tenants.

An alternative to sole ownership of real estate is partial ownership of a property, with others owning part of the same real estate also. This form of ownership is known as tenants-in-common (TIC) or co-tenancy. A TIC replacement property enables the average investor to participate in the ownership of institutional grade real estate without investing the full amount of the property price. Each co-owner receives their own deed and enjoys the same rights as a sole owner.

A TIC Sponsor will search for property(ies) for sale, purchase the real estate, and then "sponsor" the sale to other investors of smaller portions of that real estate. The sponsor will hire the services of a property management company to oversee collection of rent payments and payment of property taxes, and facilitate the purchase process of tenant-in-common owernship for the other investors. The TIC Sponsor may or may not retain a portion of ownership of the real estate.

A 1031 tax exchange is a method allowing real property owners to dispose of one property and acquire another without paying capital gains tax on the transaction. The tax is deferred until such point as real property is sold but the proceeds are not exchanged into other real property of like-kind, therefore payment deferral is indefinite as long as exchanges are made and/or property is held. The sale of the relinquished property and the subsequent purchase of a replacement property can qualify as a trade or exchange by means of an exchange agreement and the services of a qualified intermediary.

1. The "1031 exchanger" has property to relinquish and makes an agreement with a Qualified Intermediary to facilitate the 1031 exchange.
2. When the property is sold, proceeds from the sale are wired to the Qualified Intermediary for holding while a replacement property is identified and purchased.
3. The "1031 exchanger" identifies a RealtyNet Advisors property, and/or another property, as their replacement property(ies) within a 45 day time frame after the close of the relinquished property, as per IRS rules.
4. The "1031 exchanger" completes the purchase transaction(s) within the 180-day window required by the IRS, by closing on the RealtyNet replacement property they have previously identified.

Tenancy-in-common is a form of ownership in real property wherein multiple individuals own an undivided interest in a property. Upon the death of an owner, the interest passes to the owner’s legal heirs. Ownership in tenancies-in-common are typically divisible, and can be independently placed into a 1031 Exchange.

In 1946, the SEC brought suit against Howey and others for selling fractional interests in an orange grove in Florida. Arguing that the interests were real property, the defendants claimed that the interests were not securities. This case provides an often-quoted "test" that evaluates whether an investment is a security or simple real estate.

The 3 "prongs" of the Howey Test are:

• An investment of money in a common enterprise.
• The investment is made with the expectation of return.
• The return is based on the entrepreneurial efforts of another.

If all three "prongs" are satisfied, it is quite likely that the court or regulatory body would consider the investment a security.

In a Securitized TIC investment, all three prongs of the Howey Test are met since there is certainly an investment in a common enterprise with an expectation of return and the return is based on the entrepreneurial efforts of another.

RealtyNet TIC’s are controlled by the owner, not the sponsor of the investment, so the return is not based on the entrepreneurial efforts of another. In laymen’s terms, this means that RealtyNet doesn’t control your investment once you purchase it, so it can be sold as simple real estate, not a security, saving you thousands in brokerage commissions and fees.