Disadvantages of TIC
Disadvantages to consider regarding TIC ownership include:
- Shared financial obligation such as a common group loan, property taxes, and homeowners insurance. The common group loan in particular can be a significant disadvantage as these loans generally require mutual responsibility among the owners. That is, if one person defaults the other owners are still obligated to pay the full loan. For this reason many TIC owners will have detailed language in their TIC agreements that specify how loan payments will be handled in the event one owner experiences financial difficulty. Also, most TIC arrangements require that reserve payments be paid in advance as a buffer against one person falling behind.
- Shared responsibility and decision making for common area maintenance and repair.
- TIC ownership generally means that the process of reselling a building/unit or refinancing a loan will be more complex and expensive than the same processes for a condo or single family home.
- Your neighbors are your investment partners. If ever there is a discrepancy or dispute regarding ownership, financial obligation, or responsibility, TIC owners have to settle the dispute with people they likely interact with frequently, if not daily.