Monday, October 24, 2005

Tenants in Common Ownership

People desperate to own real estate in this growing market are looking toward Tenants in Common ownership where a group of people, friends or strangers share a mortgage on a multi-unit apartment building.

The Bank of Marin near San Francisco has been offering a “fractionalized mortgage” aimed at buyers of TIC properties. Even first time buyers (a relatively new market).

According to the LA Times, the move toward easier TIC mortgages in the San Francisco area is expected to be duplicated by lenders in other areas.

TICs like Co-Ops are becoming increasingly popular here in the Southland. There are several properties in this category just down the street from me and they’re touted as an affordable way to get a million dollar address without paying a million dollars.

With TIC or Co-op property, owners do not own a specific unit but, a percentage of the entire building. Usually the percentage is equal among the group of owners for example, suppose 10 people bought a property, each would own 1/10th of the entire building. A little bit like owning a portion of your neighbor’s house. In a TIC, you have one deed with 10 names on it. Contrasted with a Co-Op which is a little bit like owning stock in a company. The group holds title under an organization and each owner has a percentage of ownership of the organization.

The Bank of Marin’s product, so novel, kept the phones ringing off the hook according to the bank’s vice-president, Keith Zimmerman.

Here in Long Beach, we have more than 10 listings with units under $200,000. This may be an extremely affordable option for homeownership or an investor starting out.

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