Three-Property Rule Strategy

The three-property rule lets you identify up to three replacement candidates with no cap on their combined value, and in Connecticut it maps naturally onto the state's own geography — one candidate in Hartford County, one in Fairfield County, one in New Haven County — giving you a genuine backup in each price tier rather than three similar properties competing for the same slot.

The strategy question isn't whether the rule applies — it almost always does — but how to fill those three slots so the list actually protects the exchange rather than just satisfying a paperwork requirement.

Fairfield County property routinely trades at a multiple of what a similar building costs in Hartford County or New Haven County, and the three-property rule doesn't care about that spread — it only counts properties, not value. That makes it a useful tool for an investor who wants to keep a high-basis Fairfield County option live alongside two lower-basis alternatives without worrying about the 200% ceiling.

It also removes a layer of math from the identification process. Investors comparing candidates under the 200% rule have to track a running total against the START EXCHANGE REVIEW price throughout the search, while a three-property list only requires confirming that exactly three candidates are named, regardless of what each one is worth.

A three-property list that names three similar Hartford County office buildings gives you less real optionality than one that spans a Hartford County building, a Fairfield County building, and a New Haven County building, because market conditions, financing terms, and timelines differ by county. If the top choice falls through in one submarket, a genuinely different backup in another submarket is more likely to still be available.

This is the strategic reasoning behind the rule, not a technicality, and it's the piece most often skipped when an investor lets a broker fill out the last two slots on the list with whatever else happens to be available.

Before committing to a three-property strategy over the 200% rule, we confirm a few things:

• All three candidates have gone through the same underwriting screen as the top choice
• At least one candidate sits meaningfully outside your top choice's price tier as a real alternative
• Lender feedback has been checked on all three, not assumed to carry over
• Each property's identification description is specific enough for the qualified intermediary's records
• The list is finalized with enough margin before day 45 to fix a description error if one turns up
• A genuine intention exists to close on any of the three candidates if the top choice falls through

If a workable comparison across Connecticut submarkets needs more than three candidates — for example, comparing several lower-basis Hartford County and New Haven County properties against one Fairfield County property — the 200% rule usually serves better, since it allows more properties as long as the combined value stays under twice the START EXCHANGE REVIEW price. We decide between the two rules based on how the actual candidate list shapes up, not by default.

Can I use the three-property rule and still close on all three properties?

Yes, the three-property rule doesn't require you to drop any candidates — you can close on one, two, or all three, as long as the total replacement value satisfies your exchange requirements and each closing happens within the 180-day period.

Does it matter which county I put first on a three-property list?

No, the rule doesn't rank the properties by order listed — all three carry equal standing as identified candidates. What matters is that each is described specifically enough for your qualified intermediary's records.

What if I want to identify a fourth property as a backup?

The three-property rule caps you at three regardless of value, so a fourth candidate would require switching to the 200% rule instead, which allows more properties as long as their combined value doesn't exceed twice your START EXCHANGE REVIEW price.

Is the three-property rule riskier than the 200% rule in a state with Connecticut's price spread?

Not inherently — the risk comes from how the list is built, not which rule is used. A three-property list spanning genuinely different submarkets carries less risk than a 200% list padded with properties nobody intends to actually close on.

How late can I finalize a three-property list before the 45-day deadline?

Legally, right up until midnight on day 45, but we push to finalize several days earlier so there's time to fix a legal description error or confirm a lender's read on the last candidate without racing the clock.