1031 Property Exchange Rules

1031 Property Exchange Rules

1031 Identification Rules

1031 Property Exchange Rules require property investors to identify like kind income properties for replacement within 45 days of the close of escrow on the relinquished income property. Furthermore, all replacement income properties must be acquired within 180 days of close on the relinquished income property. All 1031 property exchanges must comply with one of the follow three rules:

The Three-Income Property Rule - This rule allows the exchanger to identify up to, but no more than 3 potential income properties as qualified replacement income properties within the allotted time frame.

The Two Hundred Percent Rule - The second rule holds that in the event that three or more income properties are identified, the market value of all income properties combined may not exceed 200% of the value of the income 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 property exchange only if the replacement income properties acquired represent at least 95% of the aggregate value of income properties identified.

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

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