Understanding TICs: What You Need to Know Before Buying
Thinking about purchasing a Tenancy in Common (TIC) unit? It's a smart option that many buyers overlook—often saving 10-25% compared to a comparable condo. But before you jump in, here's what you really need to understand about how TICs work and whether they're right for your situation.
What Exactly Is a TIC?
Here's the simple version: A condo is official—it's a legally subdivided property where you own your unit outright. A TIC is more of a partnership agreement. You own a percentage of the whole building along with your co-owners, and a legal contract spells out exactly which unit is yours to live in or rent out.
The day-to-day living experience? Pretty much identical to a condo. The legal structure is what differs.
The Money Talk: Financing Your TIC
This is where things get real. Your regular bank won't touch a TIC loan. You need specialized financing, and this is where understanding your options matters.
Two Loan Types: Group vs. Fractional
Group loans are the old way of doing things. All owners apply together for one big loan on the whole building. Everyone contributes to one monthly payment. Sounds simple, but here's the problem: if one neighbor stops paying, you might have to cover their share. We've seen this happen during recessions. Plus, potential buyers get nervous about group loans—they'll often demand a cash discount or refuse to take over your share. This kills resale value.
Fractional loans are the modern solution. Each owner gets their own loan secured only by their own unit. If a neighbor has issues, it doesn't affect you. If someone needs to sell, they can do it independently. The market loves this—fractional loans command significantly higher prices than group loans (roughly 30% more, based on recent market data).
What to Expect with Fractional Loans
A few reliable lenders provide them: Bank of Marin, NCB, Redwood Credit Union, Patelco, and Bank of San Francisco to name a few. A few details to know about fractional loans:
Typically 3, 5, or 7-year fixed ARM options (Only NCB and Meriwest offer a 30-year fixed)
Higher Downpayment minimums (think 10% and up)
Lower Maximum loan amounts (Some banks capping financing at $1.5 Million )
The reason big banks like Chase or Bank of America avoid TICs is because they only want "standard" loans they can quickly sell off to other investors. Smaller banks, however, are willing to keep these loans on their own books because they specialize in local neighborhoods and understand the value of these unique properties.
This fundamental difference in strategy shapes how each institution views TIC risk:
TICs can be a more affordable avenue to home ownership than a condo, townhouse, or single-family home. They can also be a great option for friends or family members that want to share the cost of ownership.
The Condo Conversion Question
Here's where TICs get interesting—and where you could build real equity.
Currently, only 2-unit buildings where both owners occupy their units as primary residences are eligible for condo conversion. If your TIC qualifies, conversion can increase your property value significantly.
That said, conversion isn't automatic. You'll be working with the city, surveyors, and lawyers. It's doable but requires patience and planning.
The Real Advantages
Price advantage. TICs cost 10-25% less than comparable condos with identical functionality. Yes, some of that is perception, but equity is equity.
Conversion potential. If you buy a convertible TIC, that future value increase is yours to capture. We've seen clients gain meaningful equity in just a few years.
Creative investing. Some buyers purchase multi-unit buildings and create their own TICs with partners, unlocking significant value through both the structure and property improvements.
The Trade-Offs You Should Know
Rent control applies. If you ever move and rent out your TIC unit, you're fully subject to rent control. (Condos have more flexibility here.)
Financing limitations. You can't shop around for lenders the way condo buyers can. Your options are limited to fractional lenders.
The conversion process. When you're ready to convert, it's not a quick flip. You'll need patience, professional help, and time to navigate city requirements.
Eligibility uncertainty. The rules around what can and can't convert have changed over time, and future changes could affect your unit's value. This is partly political—TICs have historical ties to evictions, so some policies favor keeping units as rentals rather than owner-occupied.
When a Condo Wins
If you can afford a comparable condo, here's what you gain:
Any lender will work with you
You can raise rent freely between tenants (except for eviction protections on pre-1978 buildings)
No conversion process needed
More straightforward resale
The Bottom Line
A TIC can be an excellent entry point into ownership, especially if you're price-sensitive and the unit qualifies for conversion. You could be looking at meaningful equity gains over time. But it requires understanding the financing piece, the rent control implications, and the conversion timeline.
The choice between a TIC and a condo isn't just about price—it's about your long-term plans, your comfort with a slightly more complex loan process, and whether conversion potential matters to your investment timeline.
Want to talk through whether a TIC makes sense for your situation? That's exactly what we're here for.
