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1031 Exchange Rules

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1031 Exchange Rules

1031 Exchanges require an acquisition period of 180 days, during which the real estate investor must identify potential properties for the exchange (within 45 days) and acquire said real estate or real estate. The acquisition period begins at the close of escrow on the relinquished real estate. Furthermore, all 1031 exchanges must adhere to one of the following rules:

  • The Three-Real Estate Rule states that the exchanger must identify up to, but no more than three potential real estate during the acquisition period.

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

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

    In their 1031 exchange, many real estate investors benefit from buying 1031 real estate as TIC because it completes their exchange and can be closed in a timely manner due to pre-arranged financing.




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