What is TIC “wraparound” financing?
In “wraparound” or “all-inclusive” tenancy in common financing, there is one or more underlying loan(s) that predate the tenancy in common formation, for which the prior owner/seller retains responsibility. Each TIC buyer obtains an individual loan from the prior owner/seller. The TIC owners each pay the seller who, in turn, pays the bank holding the underlying mortgage(s). This wraparound tenants in common financing structure has several advantages for all parties as compared to traditional group TIC loans. For the buyers, it eliminates the risk that one buyer’s mortgage default will blemish another buyer’s credit, or worse, cause another buyer to lose his/her home and investment. For the seller, it (i) diminishes the risk of carrying secondary financing by allowing the seller to make sure payments are current on the senior financing, (ii) allows the seller to charge an interest rate markup on the entire amount financed, and (iii) enables the seller to defer capital gains taxes using
