1031 Exchange Rules

All 1031 exchanges must comply with at least one of the following three 1031 rules in order to qualify as such:

1) The Three-Investment Property Rule - This rule allows the exchanger to identify up to a total of 3 potential replacement investment properties within the Acquisition Period.

The Two Hundred Percent Rule dictates that if three or more investment properties are identified, the aggregate market value of all investment properties may not exceed 200% of the value of the investment property, which was sold.

The Ninety-five Percent Exception dictates that in the event the other rules do not apply, if the replacement investment properties acquired represent at least 95% of the aggregate value of investment properties identified, the exchange will still qualify.

In their 1031 exchange, many property owners benefit from buying 1031 exchange property as tenants in common because it completes their exchange and can be closed in a timely manner due to pre-arranged financing.