Can TIC Survive In The Existing Real Estate Market?
In this dynamic Thailand Real Estate market, TIC investors (ordinary tenants) have suffered from market weakness. In particular, real estate investors who have participated in TIC investments over the past four years have found that in some places, high unemployment and rental rate collapses reduce their cash flow and ability to pay for their expenses. Mortgage.
Who bought a TIC investment?
As the baby boomer ages, they want to shift their assets to investments that don’t take too much time and don’t involve everyday attention. These investors want to avoid large investments from management and buy Thailand Real Estate investments to ensure a “safe and consistent” return.
They usually sell other investments and use the 1031 exchange to convert them to TIC, which seems to be a safe bet with other investors. Unfortunately, many TIC investments (not all) are organized by trade unions that buy property at a certain price and then mark the property as resold to investors. In many cases, they use short-term “interest-only” loans to get a pencil quote.
Due to the large number of investors in the same stock (TIC Alliance, Real Estate Investment Trust, etc.), asset prices have risen the most, thus reducing the return on investment. It is not uncommon for CAP rates as low as five and a half years, and loan creators from CMBS and other financial institutions are willing to lend to TIC unions and their non-recourse investors.
The Thailand Real Estate market is not as strong as expected.
There was no market appreciation and rental increases. In most US markets, most home vacancy rates have increased, making it difficult for TIC to have enough funds to cover their expenses. In many cases, these properties work best, but when refinancing, the rules change and lenders want to see more equity per investment. Tight lenders have shifted their investors’ capital needs from 25% to 40% or even 50%.
This has forced many investors in the TIC industry to substantially increase their cash investments in buildings to save on existing capital and to try to secure new financing for their business to replace “only” existing benefits. These new capital requirements have increased the resources of TIC investors.
In the past two years, the two major TIC unions, DBSI and Sunwest Management, have been dissolved and filed for bankruptcy. As these cases progressed in the courts, there was a question about the future of TIC product sales. Real estate information and communication technologies sold by real estate agents seem likely to disappear and may be replaced by securitized information and communication technologies for small investments in large investment and real estate associations. (TIC can be sold as a real estate investment or a securities, but real estate TIC will not maintain the same level of disclosure as securities investment).
This trend can be explained by the change of the Common Tenant Association (TICA) to the Thailand Real Estate Investment Securities Association (REISA). Last year, REISA recommended that all TICs be structured into values. Some TIC alliances are still active, such as RealtyNet Advisors. Realtynet’s consultants only invest in capital by focusing on information-communication technologies without debt, and in other words, they do not require loans to implement the agreement. They found enough investors to bring in the total sales price.
The future of TIC investment will be driven by market recovery; at the same time, by investing in real estate to find other ways to make money. Other options include buying foreclosure properties, buying a large down payment real estate company (50%) or purchasing a promissory note from a bank that is eager to increase cash flow.