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

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

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