Converting Existing Buildings to Tenants In Common (TIC) Ownership in San Francisco

We are going to deep dive into another market we are active in today, San Francisco, CA. As one of the most dynamic and expensive real estate markets in the country, San Francisco often requires creative solutions for homebuyers looking to achieve their dream of property ownership. One increasingly popular option in the city is Tenants in Common (TIC) ownership. While TIC arrangements may not be as widely understood as traditional condo or single-family home ownership, they come with unique advantages that can make them a compelling choice for buyers navigating San Francisco’s high-cost housing market and a great product type for developers and investors to offer to buyers.

What is Tenants in Common (TIC) Ownership?

TIC ownership allows multiple individuals or parties to co-own a property while holding separate percentages of ownership. Unlike condominium ownership, where each owner has exclusive rights to their unit, TIC participants share ownership of the entire property and often allocate exclusive use of specific units among themselves through an agreement.

Here’s why TIC ownership is gaining traction in San Francisco:

1. Affordable Entry Point

TIC ownership typically offers a more affordable pathway into San Francisco’s real estate market. In many cases, TIC properties are priced lower than comparable condominiums, making it an attractive option for first-time buyers, young professionals, and others who want to enter the market without overextending their budget.

For example, a TIC property in a desirable neighborhood may cost 15-30% less than a similar condo, enabling buyers to live in areas they might otherwise be priced out of.

2. Access to Desirable Locations

San Francisco’s charming neighborhoods, like the Mission District, Noe Valley, or Russian Hill, often feature older multi-unit buildings that lend themselves to TIC arrangements. These properties allow buyers to secure homes in sought-after locations, preserving the city’s iconic character while offering modernized living spaces.

3. Potential for Future Conversion to Condominiums

Many TIC agreements come with the potential for condominium conversion, which can significantly increase the property’s value. While this process can be lengthy and requires compliance with San Francisco’s strict regulations, it’s an appealing long-term strategy for owners looking to build equity.

4. Building Equity in a High-Value Market

While renting can feel like a financial treadmill, TIC ownership allows individuals to build equity in one of the country’s most robust real estate markets. Over time, this equity can be a valuable asset, even if the initial cost of entry is lower than other forms of ownership.

5. Community Living with Independence

TIC arrangements often foster a sense of community among co-owners, as participants share responsibilities for property upkeep and decision-making. At the same time, exclusive-use agreements ensure that each owner has their own private space, striking a balance between shared and independent living.

6. Lower Maintenance Costs Through Shared Responsibility

Maintenance costs for multi-unit TIC properties are shared among co-owners, which can make managing repairs and upgrades more affordable. This shared responsibility helps reduce the financial burden of ownership compared to maintaining a single-family home alone.

Considerations to Keep in Mind

While TIC ownership has many advantages, it’s not without its challenges. Financing can be more complex, as it typically requires group or fractional loans instead of traditional mortgages. Additionally, co-owners must collaborate effectively to manage shared responsibilities, making a well-crafted TIC agreement essential.

Take a look at our newest TIC conversion project in San Francisco, CA

Final Thoughts

For those seeking a more accessible route into San Francisco’s real estate market, Tenants in Common ownership can offer affordability, flexibility, and long-term investment potential. By understanding the benefits and working with knowledgeable real estate professionals and attorneys, buyers can confidently navigate the process and make the most of this unique ownership model.

Whether you’re a first-time buyer or someone looking to own a slice of San Francisco, TIC ownership could be the key to unlocking opportunities in the city’s vibrant housing market. As a developer, there are many opportunities to convert an existing multi-family building into a TIC project.

Have questions about TIC ownership or ready to explore your options? Let’s connect!