Diversification with tenant in common real estate

Diversification - One Key to Risk Reduction:

Creating a diversified real estate portfolio is the single most important thing an investor can do to reduce risk in the real estate portion of an investment portfolio. Simply stated, "don't put all your eggs in one basket" to avoid excessive concentration within one property sector, in a single location or with a single tenant or class of tenants, and to spread risk. Key benefits of a well-diversified real estate portfolio include: substantial reduction of unsystemic risk (property specific risk), enhancement of risk-adjusted returns and a hedge against catastrophic losses.
Diversification makes good sense.

Use of TICs to Diversify Real Estate Holdings:

Tenant in common (TIC) interests in real property are ideally suited to a diversification strategy. A TIC is an undivided fractional interest in a "whole" property. TIC interests are priced on a percentage basis and can be sized to meet specific investor requirements. TIC interests come in smaller units, as little as $100,000, and larger units, exceeding $1 million, depending mostly on the cost of the underlying real estate. TICs make it possible for investors structuring Section 1031 exchanges to acquire a number of replacement properties. In fact, some investors assemble diversified portfolios of TIC replacement properties to seek to minimize the risks of investing in real estate.

To Conclude:

While diversification does not guarantee against loss, real estate investors may seek to minimize risk through diversification. TIC interests are ideally suited to building a diversified real estate portfolio. This combined with a 1031 exchange helps investors maximize their profit potential while deferring capital gains taxes on the sale and reducing real estate risk.