1031 Exchange Rules
1031 Exchange Rules
1031 Exchange rules require a property investors to identify potential replacement
income properties within 45 days of the close of escrow and acquire the replacement
income property (or
income properties ) within 180 days of close of the relinquished income property. Furthermore, when choosing a replacement
1031 exchange income property for the 1031 exchange, the
property investor must follow one of the following
1031 exchange rules:
The Three-Income Property Rule - Any three income properties regardless of their market values may be identified by the exchanger as potential replacement income properties for the like kind exchange, however no more than 3 income properties may qualify.
The Two Hundred Percent Rule - This rule dictates that, in the event that three or more like kind income properties are selected as replacement income properties, the aggregate market value of said income properties may not exceed 200% of the market value of relinquished income 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 income properties must represent at least 95% of the value of the relinquished income 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.