TIC VS CONDO
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While many people like to make comparisons between condos and TICs they have their similarities and their differences. TICs are pretty much like a condo but with these key differences:
#1. Condos are plat mapped and have community property and private property.
TIC owners own a percentage share of the interest of the entire building and have exclusive right to use their specific unit. TICs are very unlikely to have any community amenities, which keeps the operating budget low- TIC dues are less than normal HOAs too.
How does affect me if I buy a TIC Los Angeles?
Since TICs are Co-Owners in the same property, lending is more complicated to lend on a TIC Share. This is one reason tics sell at a 10% to 20% discount to entry level condos- the attractiveness of a TIC is it is the same price as renting or slightly more, whereas it is typically a 150% step up in expenses from renting to buying because of things like property taxes.
#2 Condos have stronger homeowners associations and operating budgets.
The typical board is 4 members, in a small TIC building of 4-8 units – TIC owners have more responsibility which translates into owners will have a more active role in management. Problems can arise when co-owners do not perform up to their ownership responsibilities. For TICs that can individual loan financing, other TIC owners are not liable for other members debts. If the TIC has one loan on the entire building which the home owners all pay, the maintenance dues will be higher because of this. If one owner doesn’t perform, the other owners will have to bear the burden of making them pay. There is not really a good way to enforce this, but each owner at least has something invested.
With a lower operating budget professional management company may not be feasible. That means things like accounting, dues collection, paying bills, conducting repairs and maintenance are some of the regular management tasks. Some owners don’t mind this responsibility because they get to take the responsibility of the investment into their own hands.
#3 TICs are more sensitive to economic downturns than condos
TICs are very sensitive to the lending environment because they have unconventional loans. In good times you can get an individual loan with as little as 10% down, in medium times 20% down with a variable rate, and bad times maybe 25% down and you can only finance the entire building. If you lose individual loan ability that will take a hit to the price. Being affordable, TICs to appeal to the broadest possible number of buyers. TICs are about the size of a 1 bedroom or two bedroom converted apartment unit.
Is it Better to Buy a TIC or A CONDO?
The answer depends- if you can only qualify for a TIC, then a TIC is miles better than renting. If you want a smaller building, it is very rare to find condo buildings under 6 units, TICs offer a chance to have more privacy.
If you can spend more money, or want amenities, or a view, or new construction then a condo will be the way to go.
If you want affordability, like the 1920’s to 1950’s apartment buildings (They are beautiful!) or bungalows, you don’t want amenities, you want to invest your money right away- a TIC will be the best option. TICs are alredy remodeled so if you don’t want to do any fixer upper stuff and just want to move in then a TIC might be easiest.
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