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1031EXCHANGECOMPANIES.


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.

    1031 Exchange Rules Continued:

  • The Two Hundred Percent Rule - If three or more replacement investment properties are used in the exchange, their total value must not exceed 200% of the value of the investment property relinquished.

  • The Ninety-five Percent Exception - Finally, in the event that rules 1 and 2 do not apply, the exchange may still qualify assuming that the aggregate value of the replacement investment properties accounts for at least 95% of the value of the relinquished investment property at the time of sale.

    Many 1031 exchange property owners are drawn to tenants in common exchanges due to the pre-approved financing options available.

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