{"id":4406,"date":"2024-12-05T15:52:18","date_gmt":"2024-12-05T20:52:18","guid":{"rendered":"https:\/\/tomo.com\/blog\/?p=4406"},"modified":"2025-02-10T11:31:57","modified_gmt":"2025-02-10T16:31:57","slug":"tenants-in-common-explained-ownership-co-borrowing-and-how-it-works-for-rental-properties","status":"publish","type":"post","link":"https:\/\/tomo.com\/blog\/tenants-in-common-explained-ownership-co-borrowing-and-how-it-works-for-rental-properties\/","title":{"rendered":"Tenants in common explained: ownership, co-borrowing, and how it works for rental properties"},"content":{"rendered":"\n<p>If you\u2019re looking to co-own property but want flexibility in ownership and inheritance, tenants in common might be the right setup. here\u2019s how it works, how it\u2019s different from <a href=\"https:\/\/tomo.com\/blog\/co-borrowers-101-when-sharing-a-loan-makes-sense-and-when-it-doesnt\/\" title=\"co-borrowing\">co-borrowing<\/a>, and what it means for rentals.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What are tenants in common?<\/h3>\n\n\n\n<p><\/p>\n\n\n\n<p>\u201cTenants in common\u201d is a type of property ownership where two or more people co-own a property with individual shares. unlike joint tenancy, where ownership is \u201call-for-one,\u201d tenants in common is more of a \u201cyours, mine, and ours\u201d approach:<\/p>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Individual shares:<\/strong> each co-owner has their own defined share of the property, which doesn\u2019t have to be equal. for instance, one person could own 70% of a property, while the other owns 30%.<\/li>\n\n\n\n<li><strong>Independent ownership rights:<\/strong> each tenant in common\u2019s share is separate, meaning they\u2019re free to transfer or sell their portion without involving the other owners. they can also leave their share to anyone they like in a will.<\/li>\n\n\n\n<li><strong>Inheritance flexibility:<\/strong> tenants in common is one of the few ownership types where your share doesn\u2019t automatically go to the other co-owners when you pass. instead, your share can go to a beneficiary of your choice, like family, friends, or even a charity.<\/li>\n\n\n\n<li><strong>Shared costs and responsibilities:<\/strong> each tenant in common is typically responsible for the property expenses\u2014like taxes, maintenance, and mortgage payments\u2014based on their ownership percentage. so, if you own 40%, you\u2019ll likely cover 40% of the costs.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">How is tenants in common different from being co-borrowers?<\/h3>\n\n\n\n<p><\/p>\n\n\n\n<p>While tenants in common deals with ownership, co-borrowing is about loan responsibility:<\/p>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Tenants in common:<\/strong> this term is strictly about the ownership structure. it determines who owns what portion of the property and gives each person the freedom to do what they want with their share.<\/li>\n\n\n\n<li><strong>Co-borrowers:<\/strong> co-borrowing relates to the mortgage itself. if you and another person sign onto a loan as co-borrowers, you\u2019re both legally responsible for paying it back. however, being a co-borrower doesn\u2019t automatically make you an owner. for example, parents often co-sign on loans for their children without actually owning any part of the property.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<p>So, in short: tenants in common is all about who owns what. co-borrowing is about who\u2019s on the hook for paying back the loan.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">How tenants in common applies to rental properties<\/h3>\n\n\n\n<p><\/p>\n\n\n\n<p>Tenants in common isn\u2019t just for people who plan to live on the property; it can also work well for <a href=\"https:\/\/tomo.com\/blog\/how-to-buy-an-investment-property-your-guide-to-growing-your-money\/\" title=\"investment\">investment<\/a> and rental properties. here\u2019s how:<\/p>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Flexibility for rental properties:<\/strong> tenants in common can own any type of property together, whether it\u2019s a single-family home, a vacation property, or a rental. they don\u2019t have to live on the property at all, which makes this a popular arrangement for investment properties.<\/li>\n\n\n\n<li><strong>Income and expense splits:<\/strong> with a rental property, tenants in common split the rental income and property expenses according to their ownership shares. if one person owns 60%, they\u2019d typically receive 60% of the rental income and cover 60% of the property costs.<\/li>\n\n\n\n<li><strong>Separate interests:<\/strong> one huge benefit for tenants in common with rental properties is that each person can decide what to do with their share independently. if one owner wants to cash out and sell, they can do that without forcing the other co-owners to sell their shares. this flexibility can be valuable if co-owners have different goals or timelines.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">When tenants in common makes sense<\/h3>\n\n\n\n<p><\/p>\n\n\n\n<p>Tenants in common can work well if <\/p>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>You want flexibility in ownership:<\/strong> each owner can decide who inherits their share or sell their portion at any time.<\/li>\n\n\n\n<li><strong>You\u2019re buying with friends or family:<\/strong> this setup is popular among people who want to invest together but keep their finances and ownership rights separate.<\/li>\n\n\n\n<li><strong>You\u2019re investing in a rental property:<\/strong> tenants in common allows for flexibility with rental income and property management, making it ideal for investors who want independence over their share of the property.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">How do you get into a tenants in common situation?<\/h3>\n\n\n\n<p><\/p>\n\n\n\n<p>Getting into a tenants in common (TIC) setup involves a few straightforward steps, but it\u2019s crucial to plan out the details with any co-owners so everyone\u2019s on the same page.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Find co-owners you trust<\/strong><br>whether it\u2019s friends, family members, business partners, or other investors, it\u2019s essential to co-own property with people you trust. everyone\u2019s goals should be aligned, especially around how to use the property (primary residence, rental, vacation, etc.), managing expenses, and deciding on future changes.<\/li>\n\n\n\n<li><strong>Decide on ownership shares<\/strong><br>one of the benefits of tenants in common is flexibility in ownership shares. you and your co-owners can each own a different percentage of the property. discuss and agree on how much each person will contribute and how you\u2019ll divide ownership. the shares could be equal, or, for example, 60% for one person and 40% for another.<\/li>\n\n\n\n<li><strong>Secure financing<\/strong><br>if you\u2019re purchasing the property with a mortgage, each co-owner might need to qualify individually or as a group. some lenders may allow co-borrowing arrangements where multiple people sign onto the mortgage. remember that co-borrowing makes each person responsible for the loan payments, even if their ownership shares are unequal.<\/li>\n\n\n\n<li><strong>Draft a tenants in common agreement<\/strong><br>this agreement is crucial for defining each co-owner\u2019s rights and responsibilities. you\u2019ll want to include details such as:<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Ownership shares and how you\u2019ll split any rental income or property expenses<\/li>\n\n\n\n<li>Rules for what happens if one owner wants to sell or transfer their share<\/li>\n\n\n\n<li>Plans for covering taxes, insurance, and maintenance costs<\/li>\n\n\n\n<li>An exit strategy if anyone wants out in the future, such as offering their Share to other owners before selling it on the open market<\/li>\n\n\n\n<li>Real estate attorney can help you draft a solid tenants in common agreement to prevent misunderstandings.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\" start=\"5\">\n<li><strong>Set up the title as tenants in common<\/strong><br>when you buy the property, make sure your deed lists each owner as \u201ctenants in common.\u201d this designation is what makes your ownership separate and distinct. if you already own a property but want to convert to tenants in common, you can typically do so with a <a href=\"https:\/\/tomo.com\/blog\/whats-a-mortgage-title-and-whats-it-to-you\/\" title=\"title\">title<\/a> change.<\/li>\n\n\n\n<li><strong>Plan for management and ongoing responsibilities<\/strong><br>since all tenants in common share in the property\u2019s maintenance, decide how you\u2019ll handle management tasks. for a rental property, you might hire a property manager or agree to split tasks. you\u2019ll also need to decide how to handle expenses like repairs, taxes, and mortgage payments based on each owner\u2019s share.<\/li>\n\n\n\n<li><strong>Document your exit strategy<\/strong><br>think ahead about how each person might want to exit the investment. maybe someone will want to sell their share, or you\u2019ll all agree to sell the property after a certain time. by documenting your exit plans in the original agreement, you\u2019ll have a clear roadmap when it\u2019s time for changes.<\/li>\n<\/ol>\n\n\n\n<p><\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/tomo.com\/mortgage\/rates?utm_source=tomo_blog\">See today&#8217;s interest rates<\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n<div style=\"padding-top:var(--wp--preset--spacing--30);padding-bottom:var(--wp--preset--spacing--30);padding-left:var(--wp--preset--spacing--30);padding-right:var(--wp--preset--spacing--30);margin-top:var(--wp--preset--spacing--30);margin-bottom:var(--wp--preset--spacing--30);margin-left:0;margin-right:0;\" class=\"has-link-color wp-elements-c54b177fd5d2f341f8967a20726f2ac0 wp-block-post-author has-text-color has-contrast-color has-background has-tertiary-background-color has-large-font-size\"><div class=\"wp-block-post-author__content\"><p class=\"wp-block-post-author__name\"><a href=\"https:\/\/tomo.com\/blog\/author\/clairegtomonetworks-com\/\" target=\"_self\">Claire Gallaudet<\/a><\/p><p class=\"wp-block-post-author__bio\">Claire is a Mortgage Analyst at Tomo, where she explores the data and trends shaping the housing market. She is especially interested in how economic forces impact homebuyers. A Seattle native, she now lives in Austin, where she balances analysis and communications with teaching yoga and walks around the lake with her dog.<\/p><\/div><\/div>\n\n\n<p>If you&#8217;re ready to start your journey to homeownership, <a href=\"https:\/\/tomo.com\/mortgage\/app\/preapproval?utm_source=tomo_blog\" title=\"\">get pre approved with Tomo Mortgage today.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you\u2019re looking to co-own property but want flexibility in ownership and inheritance, tenants in common might be the right setup. here\u2019s how it works, how it\u2019s different from co-borrowing, and what it means for rentals. What are tenants in common? \u201cTenants in common\u201d is a type of property ownership where two or more people [&hellip;]<\/p>\n","protected":false},"author":31,"featured_media":3767,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[38],"tags":[],"class_list":["post-4406","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mortgage-dictionary"],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/tomo.com\/blog\/wp-content\/uploads\/2024\/08\/does-a-credit-check-hurt-my-credit-score-tomo-jpg.webp","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/posts\/4406","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/users\/31"}],"replies":[{"embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/comments?post=4406"}],"version-history":[{"count":3,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/posts\/4406\/revisions"}],"predecessor-version":[{"id":4411,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/posts\/4406\/revisions\/4411"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/media\/3767"}],"wp:attachment":[{"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/media?parent=4406"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/categories?post=4406"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/tags?post=4406"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}