Three-property rule strategy for New York City 1031 exchanges, used when high per-property values make the 200-percent rule too tight.
The three-property rule lets a New York City exchanger identify up to three replacement properties in writing, regardless of their combined value. It is the identification rule we reach for most often here, since a single candidate can easily exceed the value limits that apply under the alternative rules described below.
The 200-percent rule allows naming any number of properties, but only if their combined fair market value stays under twice the relinquished property's value. In a market where one multifamily building, one medical office condominium, or one industrial parcel can already approach or exceed a START EXCHANGE REVIEW's full proceeds, adding even a second full-value candidate can blow past that 200-percent ceiling.
The three-property rule removes the value cap entirely and instead limits the count, which matches how New York City exchanges typically get structured: one strong primary candidate, one realistic backup, and sometimes a third longer-shot option. We map this out against the taxpayer's actual candidate pricing before recommending which rule the written notice should rely on.
The per-square-foot math makes the point concrete: a Manhattan office condo priced at a premium per-square-foot rate can, by itself, already approach or exceed 200 percent of a START EXCHANGE REVIEW's value, while an outer-borough industrial parcel in Queens or the Bronx priced at a fraction of that per-square-foot rate might leave meaningful room under the 200-percent ceiling even as a second full candidate. Comparing candidates on a per-square-foot basis, alongside total price, is often what determines which identification rule actually fits.
A three-property list is only useful if every property on it is one the taxpayer could actually close on, not a placeholder entered to preserve optionality.
We review every candidate's title status and any known encumbrances before it is finalized on the list, since a candidate with an unresolved title issue can look strong on paper but fail to close within the 180-day period.
A representative three-property list for a Manhattan seller might pair a Brooklyn multifamily building as the primary candidate with an outer-borough industrial parcel in Queens as a backup and a regional net-lease asset as the third, spreading closing risk across boroughs, asset classes, and lender types rather than concentrating it in one submarket.
We default to the three-property rule whenever a New York City exchanger's leading candidate is priced near or above the relinquished property's value, since that single candidate alone could exhaust the 200-percent ceiling. The 95-percent rule, which allows naming more than three properties but requires acquiring 95 percent of their combined value, comes up less often here because it requires closing on nearly everything named, a harder standard for a taxpayer weighing several distinct property types.
Where a taxpayer genuinely wants to spread proceeds across several smaller, lower-priced properties, such as a handful of retail condominium units, the 200-percent rule may fit better, and we compare both paths against the taxpayer's actual candidate values before finalizing the written notice.
Once the three properties are chosen, we confirm each one's address or legal description is specific enough to satisfy the written identification requirement, then deliver the notice to the qualified intermediary with time to spare before the 45-day deadline. Revisions after that date are not possible, so the ranking and backup logic have to be settled while there is still room to adjust.
We keep a dated checklist for each of the three properties through the remainder of the exchange, tracking financing progress, title clearance, and any seller-side contingencies so the taxpayer knows well before day 180 which of the three is most likely to actually close.
The three-property rule caps the count at three properties with no value limit. The 200-percent rule allows any number of properties but caps their combined value at twice the relinquished property's value. Most New York City exchangers use the three-property rule because individual candidates are often high-value.
No. Under the three-property rule, the taxpayer only needs to close on one or more of the identified properties, not all three, as long as at least one closing happens within the 180-day exchange period.
Yes, as long as it is added and delivered to the qualified intermediary before the 45-day identification deadline passes. After that date, the list is generally locked, so any addition has to happen while there is still time before the deadline.
The 95-percent rule allows naming more than three properties, which can help when a taxpayer wants broad optionality across many smaller assets, but it requires acquiring 95 percent of the combined identified value, a higher bar than the three-property rule requires.
A street address or legal description that leaves no ambiguity about which property is meant. A general description of a property type or neighborhood does not satisfy the written identification requirement, so precision matters more than brevity in the notice.
200% rule identification strategy for New York City 1031 exchanges: how to list more than three replacement candidates without breaching the.
Explore
95% rule identification strategy for New York City 1031 exchanges: when an unlimited candidate list makes sense and what closing certainty it.
Explore
Forward exchange coordination for New York City 1031 exchanges: sequencing a sale-then-purchase structure across the five boroughs.
Explore
Reverse exchange coordination for New York City 1031 sellers who need to acquire replacement property before the relinquished sale closes.
Explore
Send the sale timing, property type, target replacement path, and questions already raised by your advisor team. We will respond with the next coordination steps.