What is the 95% rule in a 1031 exchange?
Direct answer
The 95% rule lets you identify more replacement properties than the other rules allow, but only if you actually acquire at least 95% of the total value you identified. If you fall short of that threshold, the exchange fails.
What to know
There are three identification rules, and you only need to satisfy one. The three-property rule allows up to three properties of any value. The 200% rule allows any number of properties as long as their combined value is no more than 200% of the property you sold. The 95% rule is the escape hatch for larger lists: identify what you want, but you must close on at least 95% of the total identified value.
In practice the 95% rule is risky for senior housing buyers, because community purchases involve licensing, financing and diligence that can delay or kill individual deals. Most exchangers stay within the three-property or 200% rules.
This is general information, not tax, legal or investment advice. Talk to your CPA and attorney about your situation.
How Haven helps
Haven helps 1031 buyers build a realistic identification list so deadlines and deal risk stay manageable. Read our 1031 exchange guide for senior housing.