Tuesday, June 4, 2013

45 Day Deadline for Identifying Replacement Property

The time periods involved in 1031 exchanges are pretty strict.  There really is no room for leniency on things, unfortunately!  But, because these property exchanges allow you to save so much and have more capital available to use to invest, it is worth following the rules exactly so that you can get the benefits.

The 45 day rule is the first deadline you will run into on a typical exchange.  From the date that you close on the property that you are selling, you must identify very specifically up to 3 properties that you intend to buy. Either that, or you can identify as many properties as you like as long as the total ask price on all of them is not over 200% of what the sales price was on the one you just sold.  But most people simply identify 3 properties, and begin looking even before they close on the property that they are selling, so that they have a comfortable amount of time in case one goes pending, or is somehow not available.

You must then present this list of 3 properties within 45 days to your qualified intermediary, who is facilitating the transaction on your behalf. On the 45th day, this list is permanent, and you must then close on one of these properties by 180 days after the closing date of the sale of your old property.  I think it is best if you give the list a few days before the deadline, and then make sure that your intermediary got it.  If you email it to them, have them acknowledge it by email you back "Received", so that you have something for your records.  

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