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1031 Real Estate Exchange Rules

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1031 Real Estate Exchange Rules

1031 Identification Rules

All exchanges require that property owners identify up to three potential replacement rental properties within 45 days of the close of escrow on the relinquished rental property. Furthermore, acquisition of said identified rental properties must occur within 180 days of close on the relinquished rental property. All exchanges must comply with at least 1 of the 3 following rules:

  • Three-Rental Property Rule - allows the exchanger to identify up to, but no more than 3 potential replacement rental properties within the acquisition period.

  • The Two Hundred Percent Rule - Stipulates that, if three or more replacement rental properties are used in the exchange, their aggregate value must not exceed 200% of the value of the rental property that is being relinquished.

  • The Ninety-five Percent Exception - Finally, if circumstances are such that rules 1 and 2 do not apply, the aggregate value of the like kind replacement rental properties must account for at least 95% of the value of the relinquished rental property at the time of sale in order for the exchange to qualify.

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