1031 Exchange Rules
1031 Exchange Rules
When choosing a replacement
1031 exchange investment property for the 1031 exchange, the
property owner must follow one of the following
1031 exchange rules:
The Three-Investment Property Rule - No more than three investment properties regardless of their market values, may be chosen as potential replacement investment properties within 45 days of the close of escrow on the relinquished investment property. Said investment properties must be acquired within 180 days of the close of escrow on the relinquished investment property.
The Two Hundred Percent Rule dictates that if three or more investment properties are identified, the aggregate market value of all investment properties may not exceed 200% of the value of the investment property, which was sold.
The Ninety-five Percent Exception dictates that in the event the other rules do not apply, if the replacement investment properties acquired represent at least 95% of the aggregate value of investment properties identified, the exchange will still qualify.
In their 1031 exchange, many property owners benefit from buying 1031 exchange property as tenants in common because it completes their exchange and can be closed in a timely manner due to pre-arranged financing.