1031 Exchange Rules
1031 Exchange Rules
1031 Identification Rules
1031 Exchange Rules require property owners to identify like kind
rental properties for replacement within 45 days of the close of escrow on the relinquished rental property. Furthermore, all replacement
rental properties must be acquired within 180 days of close on the relinquished rental property. All
1031 exchanges must comply with one of the follow three rules:
The Three-Rental Property Rule - This rule allows the exchanger to identify up to, but no more than 3 potential rental properties as qualified replacement rental properties within the allotted time frame.
The Two Hundred Percent Rule dictates that if three or more rental properties are identified, the aggregate market value of all rental properties may not exceed 200% of the value of the rental property, which was sold.
The Ninety-five Percent Exception dictates that in the event the other rules do not apply, if the replacement rental properties acquired represent at least 95% of the aggregate value of rental properties identified, the exchange will still qualify.
In their 1031 exchange, many property owners benefit from buying 1031 property as tenants in common because it completes their exchange and can be closed in a timely manner due to pre-arranged financing.