1031 Exchange Rules
1031 Exchange Rules
1031 Identification Rules
1031 Exchange Rules require real estate investors to identify like kind
income real estate for replacement within 45 days of the close of escrow on the relinquished income real estate. Furthermore, all replacement
income real estate must be acquired within 180 days of close on the relinquished income real estate. All 1031 exchanges must comply with one of the follow three rules:
The Three-Income Real Estate Rule - This rule allows the exchanger to identify up to, but no more than 3 potential income real estate as qualified replacement income real estate within the allotted time frame.
The Two Hundred Percent Rule dictates that if three or more income real estate are identified, the aggregate market value of all income real estate may not exceed 200% of the value of the income real estate, which was sold.
The Ninety-five Percent Exception dictates that in the event the other rules do not apply, if the replacement income real estate acquired represent at least 95% of the aggregate value of income real estate identified, the exchange will still qualify.
In their 1031 exchange, many real estate investors benefit from buying 1031 real estate as tenant in common because it completes their exchange and can be closed in a timely manner due to pre-arranged financing.