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Tenancy in Common

Tenancy in Common

What is Tenancy in Common? Chances are that you have not heard of its advantages for real estate investors. In certain circumstances, Tenancy in Common offers smaller real estate investors an innovative way to structure their investment activities.

Tenancy in Common is a partnership in which different owners can own stated portions of a property; if multiple properties are owned, one part­ner can own only certain properties that are held in common. Here are some examples:

• In a ten-unit apartment building, one partner owns three units, and the other partner owns seven.

• In a partnership that owns ten buildings, each partner owns five buildings.(see Real estate partnership).

REMEMBER!

Tenancy in Common offers many of the same advantages — and disadvantages —  of simple partnerships.        On the plus side, they can afford a cost-effective way    to get started small in real estate investing.

 

Each partner can sell his or her holdings at any time, and manage them as he or she desires. Tenancy in Common offers many of the same advantages and disadvantages of simple partnerships. On the plus side, they are a cost-effective way to get started in real estate investing. You could, for example, buy three apartments in a larger building and establish a Tenancy in Common agreement with the owner of the building. Those apartments will be yours to manage, and the profits from them will be yours. On the negative side, you will also have to live with many of the disadvantages of partnerships. If you or your partner decides to sell holdings, (see Real estate Corporations) for example, negotiations between you can become quite sticky. As in all partnership agreements, discuss your plans and priorities in detail ahead of time.

What about taxes? Income is reported on the individual partners’ tax returns.  Be sure to consult your attorney and tax advisor before entering into a Tenancy in Common partnership.

 

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