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1031 Exchange Rules

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Difficulty Finding NNN Property? Consider NNN Tenant in Common.
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1031 Exchange Rules

1031 Exchange rules require a property owners to identify potential replacement investment properties within 45 days of the close of escrow and acquire the replacement investment property (or investment properties ) within 180 days of close of the relinquished investment property. Furthermore, 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 - Any three investment properties regardless of their market values may be identified by the exchanger as potential replacement investment properties for the like kind exchange, however no more than 3 investment properties may qualify.

  • 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 tenants in common exchanges because of the efficiency in closing---which is due, in large part, to pre-arranged financing available.




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