• Stay at home restrictions prevent investors from viewing and inspecting properties
• The identified property doesn’t appraise at adequate value
• Sellers change their minds
• Investor doesn’t have sufficient funds
• Investor can’t secure a loan 

These are not uncommon situations. That’s why we always recommend that 1031 exchangers select a few properties as back-up, even if they still intend to complete their exchange with a previously identified property. This provides an excellent backstop in the event something goes wrong. The DST provides three different ways to identify a replacement property:

3 Property Rule: The exchanger may identify any three properties as potential replacement properties, without regard to their fair market value.

200% Rule:  The exchanger may identify any number of properties, provided the aggregate fair market value of all the properties does not exceed 200% of the aggregate fair market value of all of the relinquished properties.

95% Exception Rule: If the exchanger identifies more potential replacement properties than allowed under either the Three Property or the 200% Rules, the exchanger will be treated as if no replacement property was identified unless they actually receive a replacement property worth at least 95% of the aggregate fair market value of all of the identified replacement properties.

If you are considering a 1031 Exchange or involved in one now, do the simple and smart thing to help protect your exchange by using a DST backup plan with the three different identification approaches. 

For more information, please feel free to contact our team!