The 200% rule is an alternative 1031 identification rule allowing unlimited number of replacement properties identified, as long as total combined value does not exceed 200% of the relinquished property's sale price.
Used when exchangers want to cast a wider net of candidate properties. Total fair market value of all identified properties cannot exceed 200% of the relinquished sale price. Useful when each candidate is much smaller than the sale.
For LA multifamily 1031 exchangers considering DST partial-interest replacements or multiple smaller properties, the 200% rule provides more flexibility than the three-property rule. Less common in single-replacement scenarios.
From the Sterman LA Multifamily Glossary — defined the way a broker with $1.41 billion across 254 closed transactions actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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