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1031 Starker Exchange Rules


1031 Starker Exchange Rules

1031 Identification Rules

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

  • Three-Investment Real Estate Rule - allows the exchanger to identify up to, but no more than 3 potential replacement investment real estate within the acquisition period.

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

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

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