What is TIC Ownership?

A new market is emerging in Los Angeles that allows apartment units to be bought and sold individually, like condos.

You’ve been renting in LA for years. Home prices shot up all around you, for a little less a typical condo feels sterile and comes with a hefty HOA for a gym you’ll use twice a year. Your friends are getting “rent locked” at a steep price and you just want to stay in your neighborhood. Some talk about rent to own, some talk about buying a little fixer 30 miles from the city, some friends just wish they could somehow stop paying rent and buy their own units. How do you get into ownership if values keep going up? Sound familiar?

In 2016, a client of ours introduced us to TIC ownership in San Francisco. TIC’s or “Tenants-In-Common” is kind of like a condo. It sounds like a condo, feels like a condo, but it’s not a condo. It’s better. One third of the condo inventory in SF is made up of TICs. They have a handful of lenders and the market has been going strong since the 80’s. So, if it works in San Francisco, why not LA?

And so we began our research on TICs. We saw immediately how many renters and entry level buyers in LA could benefit from a TIC market here. We met with Sterling Bank, a lender in SF who was working actively to pioneer a TIC market in LA, and many other San Francisco lenders. Since then, we have helped bring many TIC units to the market, and we have many new TIC communities coming soon. With every new TIC building that hits the market, more renters, landlords and realtors are discovering TIC sales and the TIC movement is growing. And it’s spreading rapidly in LA, largely due to the fact that we now have a lender who is offering individual loans on units. Instead of all buyers having one group loan, each buyer can now get their own fractional loan on their individual share and unit.

Other than the loan, everything else about TIC is much like a condo. The owners form an HOA and split the cost of the common utilities, such as water and gardener. Only, the HOA dues are usually significantly lower because you aren’t offsetting the cost of new construction. There is an agreement, called the “Tenants in Common Agreement” (TICA) which forms the guidelines and rules for how the TIC community and HOA will operate. It’s all very thorough, and well thought out. Want to paint the building pink? Gotta go through the HOA. Want to paint your room pink? Go nuts. And it’s been tested and proven in the San Francisco market, where TIC sales have been prevalent for nearly 40 years.

And you want to know the best thing about TIC sales? They are more affordable than condos. With generally entry-level pricing, TIC sales offer renters and entry level buyers the only possibility to get into homeownership. So instead of one investor owning four units, four renters can buy and share that equity. Say goodbye to that rent check!

And that’s a win-win for us.

Why
The Rental Girl Loves TIC

At The Rental Girl we believe all renters should have the possibility of owning property. This possibility is often never realized because the shortage of available real estate has driven up prices making renting the only option.

TIC ownership provides a solution to this problem. TIC ownership allows renters to purchase a rental unit at a low enough price that keeps the monthly mortgage payment comparable to what the rent amount would be. Mortgages can be acquired with as little as 10% down. While living in a TIC unit, the TIC owner is now making a monthly mortgage payment, building equity with each payment, and contributing to his or her future financial security. Down the road when the TIC owner is ready to move on, they can either return the unit back to the rental market and become a landlord, or they can sell the unit to the next future TIC owner – continuing the cycle and allowing another renter the opportunity to become a homeowner.

The beauty of TIC ownership is that it spreads equity more evenly among our community. Instead of one person owning multiple units and monopolizing the equity, equity will be spread among multiple people - affording those who are often excluded from this opportunity the benefits of homeownership.

Want to learn more?

Click here to download our TIC Field Guide

Find out more about why we got into TIC sales, why we believe this market is so important in LA, what TIC is, and how it works.