As more and more information comes to light re: TIC investments, ESPECIALLY those thru SUN1031 of Arizona, there are a few things i've been hearing from owners on which i'll expound.
#1) SOME Property Managers who have their own "construction departments" are looking to increase their cash flow. This is because their fee structure may be down due to lost tenants and the economy. (i won't go into the entire set up of these TIC's & how expensive they were which contributes to this problem.)
Getting back to PM's cash flow. A property manager may start looking to maximize their cash flow by looking to "make repairs to make the (vacant) property show better". tho this can be true to a point, still make sure to get 'outside' bids VS your PM's if you're allowed via your contract.
Also, during this crucial and long downturn, it's important to keep costs as low as possible. so i'd advise against any repairs but those of dire need.
#2) Try not to allow ONE OWNER to deal with your PM or leasing agent. Two to three owners to offset the thinking process will usually yield better results.
#3) As most of us know, SUN1031 has been and IS being investigated
in many ways regarding these investments. These instruments had about zero regulatory oversight, YET strict IRS rules.
This has created a bit of a monster on a few fronts.• If you prove that these TIC's
are a rip-off you
just may end up with owing your original capital gains tax to the IRS,
PLUS still have a poor investment on your hands.• There's also attorney fees, etc. Attorney's have been requesting anywhere from $3,500 to $15,000 just to review one of these cases. As in the DBSI case, the people who really made out, besides the swindlers were the attorney's.
(but ambiguous contracts can tend to side with the Buyer.)• FINRA is NO HELP as it's a self policing agency. SUN1031 didn't belong to FINRA thus they have no jurisdiction. That was
another red flag in which we've now all learned. SUN1031 belonged to NO business or financial GROUPS of any kind–not even the Tenants in Common Assoc.!
• It IS good to report your story to the Attorney Generals, but again they are mostly of no help. This is partially due to any new TIC business is now just a trickle,
if any. The poor business model has cut off it's own head... and ours.SO, many of us are trying to manage the properties the best we can by cutting costs to the bone & hoping for an economic upswing. We are stuck between many rocks.
The ONLY positive I can find is that they are physical buildings, etc. not 'worthless' like a Bernie Madoff or penny stock.
Albeit, most of the property values have sunk
at least 50%. And trying to lower the taxes & get tenants has proved hard. Also, lease prices also have been hit by at least 50%.
Thus, most owners are receiving ZERO monthly distributions.Another thing sticks in my craw. Remember how this were "hands off" investments, etc. Well, we all know how that turned out.
Owners have put in a ton of uncompensated time & any improvements made to the business model of your property has (AGAIN!) benefited SUN1031 at no cost to them as they've sat & done nothing but gained huge profits on our hard earned monies.
If i were SUN1031 I'd be afraid to sleep at night and I'd be looking over my shoulder at every turn.
