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1031 Exchange Rules

1031 Identification Rules

All exchanges require that property owners identify up to three potential replacement investment properties within 45 days of the close of escrow on the relinquished investment property. Furthermore, acquisition of said identified investment properties must occur within 180 days of close on the relinquished investment property. All exchanges must comply with at least 1 of the 3 following rules:

  • Three-Investment Property Rule - allows the exchanger to identify up to, but no more than 3 potential replacement investment properties within the acquisition period.

  • The Two Hundred Percent Rule - The second rule holds that in the event that three or more investment properties are identified, the market value of all investment properties combined may not exceed 200% of the value of the investment property, which was sold.

  • The Ninety-five Percent Exception - This third rule is set in place in the event that the other rules do not apply. The exchange will still qualify as a 1031 exchange only if the replacement investment properties acquired represent at least 95% of the aggregate value of investment properties identified.

    Many property owners have benefited from engaging in tenants in common investment property investments because they qualify under the mentioned rules and can be completed in a timely manner.