Are you looking for a way to get into real estate investing, but don’t have enough purchasing power to acquire a property on your own? Maybe you’d like to buy a vacation house, but can’t afford it on your own. Tenancy in common (TIC) could be for you.

Tenancy in common doesn’t refer to renting. It’s an arrangement that allows multiple parties to own shares of an undivided piece of real estate. Many people use tenancy in common to get a foothold in real estate investing, or buy a vacation home. It can be as simple as finding someone who wants to go in together on a piece of property. Here’s what you need to know.

How Tenancy in Common Works

Tenancy in common allows two or more people to own equitable shares in and privileges to the same piece of real estate. The shares don’t have to be equal – for example, Partner A could own 50 percent of the property, while Partner B owns 30 percent and Partner C owns 20 percent. Each tenant has full rights to his or her share – he or she can mortgage it separately, sell it to someone else, or die and bequeath it to a beneficiary. You can even join a tenancy in common later on, after the initial purchase, by buying someone’s full share or a fraction of their share. If a co-tenant dies, his or her share will be passed down to his or her heirs, who will then have privileges to and a share in the property.

Getting into a TIC agreement can be a great way to benefit from property appreciation and get steady rental income, or a second property to enjoy. When your investment property appreciates in value, your share of the equity will get bigger. If you rent your property out, you’ll get a share of the rent every month, commensurate with your share of the property. You’ll enjoy some of the benefits of property investment with less of the upfront capital.

Splitting a Property with Someone

Investing in real estate via a tenancy in common can be as easy as finding a friend or relative to go in on buying property with. You can agree amongst yourselves who will be entitled to which percentage of the property, and put that in the contract. You can all go in together on a mortgage, and you’ll all be equally responsible for it.

If you use a tenancy in common agreement to buy something like a vacation house or second home, all tenants will have rights to use the property unless you have set up a timesharing arrangement that assigns each tenant a slot of time in which to use the property. If you want to invest in a rental property, you can go in together with someone to buy rental units or you can buy tenants in common investments through your broker. 

Selling a TIC Property

Because a property held in a tenancy in common is jointly owned by tenants in common who each have independent rights over their property, selling the entire property can be tricky. However, it’s pretty easy to get out of a TIC investment by selling your share of the property to someone else. You can even sell part of your share to someone else to generate a little spare cash and bring them on as a co-tenant, and there’s nothing the other co-tenants can do about it. 

However, that means other co-tenants can sell their shares, too – and they might sell them to people who have different thoughts about what to do with the property. The same might happen when a co-tenant dies and leaves his or her share to heirs who may want to sell the property and split up their share of the money. It’s possible for some co-tenants to buy other co-tenants out, thereby increasing their own shares in the property. If that’s not an option and you can’t come to an agreement with your co-tenants about how you want to use the property or if you want to keep it, one tenant can force a partition action, or forced sale, in which the property is sold and the proceeds split among the co-tenants according to their share values.

Owning real estate as a tenant in common can be a good way to get on the property ladder with less money. You can pool resources with others to buy a rental property or vacation home, and you’ll earn equity as the property appreciates. Why not give it a try?