The three-property rule is one of three 1031 identification rules — allowing the exchanger to identify up to three replacement properties of any value within the 45-day identification period.
Most common identification rule. Simple to satisfy: identify up to three specific properties by address or unambiguous description. The exchanger ultimately needs to close on only one to complete the exchange, but has up to three to choose from.
For LA multifamily 1031 exchanges, the three-property rule is the default choice. Simpler than the 200% rule or 95% rule. Allows the exchanger to have backup options if their preferred replacement falls through during diligence.
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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