Tenancy In Common (TIC) properties have grown in popularity over the years. One reason is the rising cost of housing in San Francisco has put the generally lesser-expensive TIC on the map. Another reason for their growing popularity, especially since 2005, is the proliferation of fractional financing. Currently, TICs account for approximately 3-4% of San Francisco’s total housing stock (per the tax assessor’s office).
So what exactly is fractional financing? In a traditional TIC, there is one loan for the entire building, essentially making you business partners with your neighbors. If one of your neighbors can’t pay their share of the loan payment, the bank will come after them and the other tenants. For this reason, neighbors scrutinize the financials and are very picky about who they let join in on an existing TIC loan (and rightfully so!). Despite the risk involved, we rarely hear of loan default being a problem in a traditional TIC.
In recent years, lenders have developed TIC lending products where tenants can now get an individual, or fractional loan, for their percentage ownership in the building. Fractional financing has definitely added fuel to the growth and desirability of TIC ownership, mitigating a huge portion of the risk of being in a traditional TIC. There are currently a handful of banks across the nation that will do fractional loans on San Francisco TIC properties (we know of about five). Here is a look at the number of TIC sales taking place within the City of San Francisco since 1995 (per MLS). Each year was capped at October 19th, so we could include the present year.
The chart shows a sharp increase in the number of TIC sales over the last 14 years. It’s impossible not to notice Read the rest of this entry ?