In working with my Buyer clients on a daily basis, I often find there is still much confusion in understanding the difference between a TIC unit and Condominiums. Though the two legal structures are often likened, there is an underlying difference between each respective property type found in San Francisco. I wanted to take a moment to outline what a TIC property is and the pros / cons:
- Tenancy in Common simply refers to a form of group ownership.
- In a condominium, the portions of the property within the dwelling unit walls are owned by individuals; whereas in a TIC the entire property is owned by the TIC group in percentage shares, and a detailed written agreement describes each TIC member’s rights and duties.
- Over the past two decades, TICs have become the primary source of entry-level housing in San Francisco.
- There are two main ways to finance a TIC interest: either through a group / property loan encumbered by all members of the TIC - OR individually / fractionally financed loans.
- Fractional loans are only offered by a couple lenders in today’s market, and come in ARM products only. As such, the interest rates are slightly higher, thereby incurring potentially greater risk. You can get more information from Henry Jeanes of Sterling Bank & Trust, who is a mortgage consultant. His number is 415.970.9889. He can offer you the latest interest rates and how fractional financing works.
- TICs generally sell at a 10% – 20% discount to condominiums given the more expensive financing involved – among other variables. Much depends on the sub-district location as well.
- The ability to Condo Convert a TIC into a condominium is a huge ‘play’ for investors and homeowners. This is another topic for another day given the nuisances present. For starters, check out www.andysirkin.com. Andy Sirkin is essentially the ‘godfather’ of TIC interests – his group drafts-up nearly every TIC Agreement for property owners.
There is much more to share in light of TICs and if they are right for you. As always, feel free to contact me to get a more intimate understanding of this sound investment opportunity.