🔑 TICs: The Ownership Structure Quietly Reshaping What You Can Afford

The A,B,C’s of Buying a Home!

You found it. Two bedrooms, original 1920s details, walkable to everything you actually go to, and priced well under every comparable condo you’ve toured. Then you read the remarks: TIC. Most buyers stop right there — I’ve watched it happen. In this market, that reflex is getting expensive, so let’s take it apart properly.

Myth: A TIC is a risky workaround where you co-own a building with strangers and share their mortgage.

Truth: TICs have been mainstream in San Francisco for decades, you get your own loan on your own share, and in LA they’re often the only path to ownership in the neighborhood you actually want.

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What a TIC Actually Is

Tenancy in Common means several people co-own one property, each holding an undivided percentage of the whole. One deed, one legal parcel, and — this is the load-bearing part — a written TIC agreement giving each owner the exclusive right to occupy a specific unit.

Compare that to a condo, where the county has legally subdivided the building and you hold title to your own unit. Or a co-op, where you don’t own real estate at all — you own shares in a corporation that does.

TIC sits between them. You own real property. You just own it with people, on paper.

Day to day, living in one feels much closer to a condo than buyers expect. You have your unit. You have your own mortgage. You pay a monthly amount toward shared expenses. You can sell, refinance, or leave your share to your kids without asking anyone’s permission.

Why LA Suddenly Has So Many

This isn’t a loophole someone discovered last year. San Francisco attorney Andy Sirkin pioneered the modern structure back in the 1980s, and TICs have been an established part of that market ever since.

LA’s version grew for a specific structural reason: condo conversion here is heavily restricted. Turning an older four-unit building into legal condominiums means subdivision mapping, parking requirements, and a permitting path that frequently doesn’t pencil — or isn’t available at all.

TIC conversion doesn’t require that subdivision. So an owner of a small, character-rich building in Silver Lake, Echo Park, Highland Park, or Los Feliz who’d rather sell to homeowners than to an investor has a path that condo law would otherwise close.

The result: a growing supply of for-sale housing in exactly the neighborhoods where for-sale housing is scarcest, typically priced 10% to 20% below comparable condos.

The Thing That Changed: Fractional Financing

Here’s the part that matters most, and the reason TICs are having a moment.

The old way — group loans. Every owner signed onto one shared mortgage. If your upstairs neighbor lost their job, you were on the hook. Refinancing required unanimous cooperation. It was genuinely risky, and it’s why TICs earned a bad reputation with an entire generation of agents and lenders — a reputation that has now outlived the thing that caused it.

The current way — fractional loans. You get your own mortgage, secured by a deed of trust against your own percentage interest, underwritten on your own income and credit. Your neighbor’s default is your neighbor’s problem. If a lender ever forecloses, they foreclose that owner’s share — not the building.

That single change moved TICs from “risky curiosity” to “legitimate option.” Fractional lending has been standard in San Francisco for years and has steadily expanded into Los Angeles as more portfolio lenders got comfortable with the product.

What to expect from a fractional loan:

• Down payment generally in the 15% to 25% range, depending on credit and occupancy
• Rates typically modestly above a comparable conventional loan
• Often adjustable-rate rather than 30-year fixed — these loans are held on the lender’s own books rather than sold to Fannie or Freddie, so the fixed-rate machinery simply doesn’t apply
• A short list of lenders who actually fund them, which changes over time

That last point is the one to sit with. Only a short list of lenders write these loans, and the list moves. Getting to the closing table on a TIC isn’t just about finding one of them — it’s about your agent knowing who’s actively funding right now, how their underwriting reads a TIC agreement, what they’ll want to see from the building, and how to keep escrow, the lender, and the TIC attorney moving in the same direction on the same timeline. That coordination is most of the work, and it’s not work a lender does for you.

The Document That Is Actually the Product

When you buy a condo, the HOA docs describe how the building is run. When you buy a TIC, the TIC agreement doesn’t describe the arrangement — it creates it. Everything you think you’re buying exists because that document says so.

A well-drafted one covers:

• Occupancy rights — which unit is exclusively yours, and how that’s protected
• Cost sharing — insurance, maintenance, utilities, reserves
• Property tax allocation — more on this in a moment
• Decision-making — what needs unanimity, what needs a majority, what one owner can just do
• Default and remedies — what happens if someone stops paying their share
• Transfer rules — how you sell, and whether anyone holds a right of first refusal
• Dispute resolution — mediation and arbitration before anything reaches a courthouse

A thin, homemade TIC agreement is the single biggest red flag in this category. A thorough one, drafted by an attorney who does this work regularly, is what makes the discount worth taking.

Property Taxes Work Differently — and Prop 13 Is Why

In most California counties, a TIC property gets one property tax bill, no matter how many owners there are. The TIC agreement decides how it’s divided.

The naive approach — split it by ownership percentage — quietly penalizes whoever bought first. Here’s why. Under Prop 13, a change in ownership triggers reassessment. When a fractional interest sells, only that share gets reassessed to the new purchase price. The building’s total tax bill rises, but the increase was caused by one owner’s purchase.

Good TIC agreements solve this with an allocation formula tied to each owner’s own purchase price and improvements, so everyone pays tax on what they actually paid — preserving the Prop 13 logic I walked through a few issues back.

Ask to see the tax allocation method before you go into contract. It tells you a great deal about how carefully the whole structure was built.

The Honest Risks

I’m not going to sell you a structure without its downsides.

A smaller buyer pool at resale. Fewer buyers understand TICs and fewer lenders finance them. That’s precisely why the discount exists going in — but it also means pricing and marketing on the way out require someone who knows the product.

Financing dependence. Your future buyer needs a fractional lender. If that lending market tightens, your resale market tightens with it.

Your neighbors matter more. In a 200-unit condo building, a difficult owner is an annoyance. In a four-unit TIC, they’re a co-owner with a vote.

Building history deserves real scrutiny. Some TIC conversions come out of formerly rent-stabilized buildings, including ones where tenancies ended under the Ellis Act. Tenant advocates have raised legitimate concerns about this, and the LA City Council has directed the city to monitor TIC conversions for exactly that reason. Ask directly how and when the units were vacated. A straight answer is a good sign; a vague one is information too.

Insurance and reserves. One master policy covers the building and you carry your own contents coverage. Underfunded reserves in a small building mean special assessments land hard on very few people.

If You’re on the Other Side of This: Why Owners Are Converting

A quick word for the investors on this list, because the economics here are worth understanding even if you’re only ever a buyer.

If you own a small multifamily building in Los Angeles and you sell it as a rental property, you’re selling to a buyer who is pricing a cap rate. That buyer is valuing your income stream, and they’ll pay what the numbers support — no more.

If you sell the same building as individual TIC units, you’re selling to homeowners. A homeowner isn’t buying a cap rate. They’re buying the place they’re going to live, in the neighborhood they want, and they price it accordingly.

The gap between those two valuations is the entire strategy. Sold as separate units to owner-occupants, a small building can bring meaningfully more in aggregate than the same building sold whole to an investor — often on the order of 10% to 20% above its value as a rental. On a four-unit property in a desirable neighborhood, that spread is real money.

And in Los Angeles, TIC is frequently the only way to reach that buyer, because condo conversion is so heavily restricted. The subdivision mapping and parking requirements that make condo conversion impractical on an older four-unit building simply don’t apply to a TIC conversion.

That said, this is a project, not a transaction:

• It takes time. Selling units individually is typically an 18-to-30-month process, not a 45-day close. You’re carrying the building the whole way.
• It depends on buyer financing. Your exit requires fractional lenders to be actively funding. If that market tightens, your sell-out slows.
• The tenant situation is the whole ballgame. How occupied units are handled has serious legal weight, and Ellis Act conversions have drawn genuine scrutiny — the LA City Council has directed the city to monitor TIC conversions specifically. This is attorney territory from day one, not something to improvise.
• You need a real fallback. Anyone underwriting one of these should know what the building is worth in a bulk sale before they start, not after.

Structured well, it’s one of the more interesting plays in LA small multifamily right now. Structured casually, it’s a long, expensive way to end up back where you started. If you own a building and you’re curious whether yours is a candidate, that’s a conversation I’m always happy to have.

What You Can Do

Before you tour a TIC, get two things moving: a lender who actively funds fractional loans today, and a commitment from the listing side to produce the TIC agreement early. Those two documents will tell you more in an afternoon than a month of reading will.

Then judge it on the merits, the way you’d judge any property. A TIC is right for someone who wants a specific kind of home in a specific kind of neighborhood, plans to stay a while, and is knowingly trading a narrower resale market for a real discount and a real location.

It isn’t a shortcut and it isn’t for everyone. But treating “TIC” as an automatic no, in a market this expensive, means walking past the one category of LA housing that’s getting more accessible, not less. My job is to tell you plainly whether a given discount compensates for real risk — or just unfamiliarity. Sometimes the answer is that this one isn’t worth it. That’s a useful answer too.

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Coming soon in this series: Co-ops — the third ownership structure, where you don’t own real estate at all, a board can approve or reject your buyer, and the discount can be steeper still. Rare in LA, misunderstood everywhere, and worth knowing before one turns up in your search.

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I’m YOUR Real Estate JED.i and I love helping first-time home buyers make their first home more affordable, and I love helping sellers looking to move up to their forever home. Let’s jump on a V.I.P. (Vision & Initial Possibilities) Call and see where you’re at, and I’ll help you figure out next steps to getting you where you want to be!