1031 Exchange Rules

1031 Exchange Rules

1031 Exchanges require an acquisition period of 180 days, during which the investment property investor must identify potential properties for the exchange (within 45 days) and acquire said investment property or investment properties. The acquisition period begins at the close of escrow on the relinquished investment property. Furthermore, all 1031 exchanges must adhere to one of the following rules:

The Three-Investment Property Rule states that the exchanger must identify up to, but no more than three potential investment properties during the acquisition period.

The Two Hundred Percent Rule - This rule dictates that, in the event that three or more like kind investment properties are selected as replacement investment properties, the aggregate market value of said investment properties may not exceed 200% of the market value of relinquished investment property.

The Ninety-five Percent Exception In the even that rules 1 and 2 do not apply, the Ninety-Five Percent Exception takes precedence. This rule dictates that the aggregate market value of all replacement investment properties must represent at least 95% of the value of the relinquished investment property in order for the exchange to still qualify.

Many exchangers choose TIC exchanges because of the efficiency in closing---which is due, in large part, to pre-arranged financing available.