Three-Property Rule Strategy

The three-property rule lets an investor name up to three replacement candidates on the identification notice regardless of their combined value, which is the identification rule most Park City-area exchanges default to since local inventory rarely supports naming a longer list under the alternative rules. That default is a reflection of local supply, not a preference set in advance, and it holds for most searches conducted across the wider Snyderville Basin as well.

Because qualifying commercial inventory in this market is limited compared to a large metro area, three well-vetted candidates, say a Main Street retail building, a Kimball Junction net lease pad, and a Heber Valley multifamily property, often represents a realistic and complete list rather than an artificial cap on options.

Diversifying the three slots across different asset classes, rather than naming three similar properties, also gives the investor more room to maneuver if pricing or financing shifts on one candidate during the exchange period, since a setback on one asset class does not threaten the whole list.

Each of the three candidates needs to be identified unambiguously and cleared through a first pass of diligence before the notice is filed. The submittal package for each candidate includes:

• legal description or street address
• current lease or rent roll summary
• financing feasibility check with the lender
• estimated closing timeline against the exchange period

Each package is assembled to the same standard regardless of whether the candidate is expected to be the final choice, since any one of the three could end up being the property that actually closes, and an incomplete package on a backup candidate defeats the purpose of naming it.

How many properties can be named under the three-property rule?

Up to three, regardless of their combined value, which makes this the simplest identification rule to apply and the one most commonly used when local inventory naturally produces a short list of strong candidates. Its simplicity is why it remains the default choice for most searches.

Does the three-property rule work well in a market with limited inventory like this one?

It often does, since a smaller commercial market like this one may not produce more than a handful of genuinely qualifying candidates, making a three-property cap a realistic reflection of the search rather than an artificial limit.

How should an investor choose which three properties to name?

Selection should weigh closing certainty alongside projected income, since naming a candidate whose seller is unlikely to close within the exchange period wastes one of only three available slots on the notice.

What happens if one of the three named properties falls through?

Generally no fourth property can be added after the forty-five-day window closes, so the remaining two named candidates are what the investor has left to work with, which is why ranking by closing certainty matters at the outset.

When should the two-hundred-percent rule be used instead of the three-property rule?

If a search turns up more viable candidates than three and the investor wants to preserve additional options, the two-hundred-percent rule may fit better since it allows more properties as long as their combined value stays within the cap. The underlying diligence on each candidate stays the same regardless of which rule is ultimately used, so switching does not add rework.