Sold your investment property and the 45-day clock is already ticking? You are not alone. The identification window in a 1031 exchange moves fast, and Chattanooga has enough submarkets and asset types to make quick decisions feel overwhelming. In this guide, you will learn how to assemble a smart, defensible shortlist within 45 days, what local factors to check first, and how to keep backup options ready so your exchange stays on track. Let’s dive in.
Master the 45-day rules
A 1031 exchange lets you defer capital gains when you reinvest into like-kind investment real estate under strict IRS timelines. The two deadlines that matter most are the 45-day identification period and the 180-day closing period. The IRS does not grant extensions for either, so planning is essential. Review the official requirements in the IRS overview of like-kind exchanges for the full details and definitions of qualified intermediaries and identification procedures. You can find those in the IRS page on Like-Kind Exchanges — Real Estate Tax Tips.
Key identification options you can use:
- Three-property rule. Identify up to three properties regardless of total value. Example: you sell for $1,000,000 and identify three properties that together total more or less than that. Any three is acceptable.
- 200% rule. Identify more than three properties as long as their combined value does not exceed 200% of the relinquished property’s value. Example: sell for $1,000,000 and identify six options that together do not exceed $2,000,000.
- 95% exception. If you exceed both limits above, you may still qualify if you acquire at least 95% of the total value of everything you identified.
Your identification must be in writing, signed, and delivered to your qualified intermediary within 45 calendar days of the relinquished closing. Because financing and due diligence often outlast 45 days, most exchangers prepare a prioritized list with backups to preserve optionality under these rules.
Why Chattanooga fits a 1031 timeline
Chattanooga offers a mix of urban, river-adjacent, and suburban submarkets that serve different strategies. You will find single-family rentals in neighborhoods such as Hixson, East Brainerd, Red Bank, and Lookout Valley, plus small to mid-sized multifamily options across Downtown and Southside. Tenant demand ranges from young professionals in urban nodes to longer-lease households in the suburbs, which influences turnover planning and rent assumptions.
Local operating details matter for underwriting:
- Property taxes and assessed values vary by area and property type.
- Flood exposure near the Tennessee River and low-lying areas can affect insurance and lender requirements.
- Landlord-tenant rules are governed by Tennessee statute and local ordinances, which can influence timelines and management planning.
For parcel checks and tax status, use Hamilton County offices. For flood checks, review the FEMA Flood Map Service Center early in your screening process.
Where to find deals fast
To hit a 45-day window, run multiple deal-sourcing streams in parallel:
- MLS via Chattanooga Area REALTORS. Best for single-family rentals and small multifamily with transparent listing history and comps.
- Commercial marketplaces such as LoopNet, Crexi, and CoStar. Useful for 2-plus unit multifamily and commercial assets, often with offering memos. Verify rent rolls and financials directly.
- Local commercial and multifamily brokers, including national affiliates. Relationships can unlock off-market or pre-market inventory and quicker access to financials.
- Off-market investor networks and wholesalers. Can move faster with less competition, but you may need extra title and condition diligence.
- DST sponsors and 1031 product platforms. Helpful when you need a turnkey backup to meet identification deadlines, but these are passive and include sponsor fees.
A practical combo for most exchangers: one or two trusted brokers working the MLS plus a curated off-market pipeline. If time is tight, include a DST or a quick-close SFR as a backup identification.
Multifamily vs SFR for a 45-day sprint
Multifamily pros and constraints
- Advantages: scale in a single purchase, operational efficiencies, diversified tenant base.
- Constraints: deeper underwriting on leases, historical expenses, utility allocation, and sometimes environmental due diligence. Lender underwriting can take longer for 5-plus unit assets.
- Financing: agency loans are competitive but more document-heavy. For speed, consider community banks, portfolio lenders, or bridge financing when appropriate. Learn more about multifamily products from Fannie Mae Multifamily and Freddie Mac Multifamily.
SFR pros and constraints
- Advantages: standardized inspections and appraisals, faster conventional lending timelines, abundant comparable sales data.
- Constraints: scaling to match a high-value relinquished sale may require multiple properties, which increases management complexity.
Practical takeaway
If you are replacing a larger sale, a single multifamily can be a cleaner value match, but build time buffers for lender and diligence steps. Many exchangers identify a mix: one primary multifamily target plus several SFRs or a DST as backups under the three-property or 200% rule.
Your 45-day sprint plan
Before Day 0
- Engage a qualified intermediary and confirm identification and closing requirements.
- Document your relinquished closing date and expected net proceeds.
- Assemble your team: 1031-savvy broker, CPA, attorney, title, lender, inspectors, and a property manager.
- Get pre-approval or pre-qualification from lenders, and prepare a standard diligence request list.
Day 0: closing the relinquished sale
- Notify your qualified intermediary immediately and confirm the identification deadline.
- Ensure proceeds transfer to the intermediary. Do not receive funds directly.
- Launch your search with MLS alerts, broker calls, and off-market outreach.
Days 1–14: aggressive sourcing and first-pass vetting
- Pull rent rolls, historical expenses, and any available inspection reports.
- Run a quick title check and verify tax status with county records.
- Check FEMA flood maps and obtain preliminary insurance quotes if needed.
- Confirm occupancy, lease expirations, and any immediate capital needs.
- Prioritize candidates by likelihood of closing within 180 days and fit for value.
Days 15–30: deeper diligence on top targets
- Order inspections and a Phase I environmental screening where appropriate.
- Secure an appraisal or broker price opinion if required by the lender.
- For multifamily, verify income and expense statements, utility allocations, and vendor contracts.
- Negotiate purchase contracts with appropriate inspection and financing timelines. Add 1031 language after counsel review.
- Coordinate with your qualified intermediary on identification format and requirements.
Days 31–45: finalize and deliver identification
- Complete your written identification and deliver it to the qualified intermediary within 45 days.
- Use the three-property rule or the 200% rule strategically to include backups.
- Keep clear documentation of delivery, signatures, and acknowledgment from the intermediary.
After 45 days, toward 180
- Continue due diligence and move to close on at least one identified property within 180 days or your tax filing due date, whichever is earlier.
- If one deal falls through, proceed with another identified option.
Quick vetting checklist
Use this fast screen for each candidate you consider:
- Property identifiers: address, parcel ID, and legal description
- Listing source and broker contact
- Asking price, comps, and preliminary cap rate assumptions
- Rent roll, current leases, and deposit records
- Two to three years of available income and expense history
- Occupancy, turnover trend, and any concessions
- Known capital expenditures and deferred maintenance
- Title exceptions, easements, and any liens
- FEMA flood zone status and preliminary insurance quotes
- Utilities: sub-metering or owner-paid services, and any HOA items
- Environmental red flags or adjacent uses
- Zoning and code compliance, plus any special assessments
- Lender pre-approval conditions and estimated loan timeline
Reduce risk with smart identification
Protect your exchange by structuring a tiered identification list:
- Primary: the best fit for value and cash flow, with active contract and advancing diligence.
- High-probability backups: assets with clean title, straightforward inspections, and financing paths you can execute quickly.
- Fallback: at least one property that can close fast, such as a financeable SFR or a DST option you have vetted. DSTs can help meet deadlines but come with fees and less control.
Also line up financing contingencies. Where possible, secure conditional commitments that outline underwriting steps and target closing windows. If agency or bank timelines are tight for a multifamily, consider a bridge or seller-financed approach when suitable to meet the 180-day close.
Local diligence shortcuts
For Hamilton County properties, confirm parcel details, assessed values, and deed history through county offices. For flood exposure, check the FEMA Flood Map Service Center before spending on inspections. Use established Chattanooga broker networks and the local MLS to surface on-market options, and tap property managers and investor groups for off-market leads. For multifamily financing education and timelines, see Fannie Mae Multifamily and Freddie Mac Multifamily.
Ready to build your identification list on a tight timeline? If you want local guidance, vetted deal flow, and a coordinated plan from Day 0 to Day 45, connect with Grace Frank. Our team pairs investor-scale execution with neighborhood-level insight so you can exchange with confidence.
FAQs
What is the 45-day identification rule in a 1031 exchange?
- You have 45 calendar days from the sale of your relinquished property to identify replacement properties in writing to your qualified intermediary per IRS rules.
How do the three-property and 200% rules differ?
- The three-property rule lets you name up to three properties regardless of value, while the 200% rule allows more than three as long as their combined value stays within 200% of what you sold.
Can I identify properties across multiple Chattanooga submarkets?
- Yes, as long as they are like-kind investment real estate and fit within the IRS identification rules you select, you can mix urban and suburban areas.
How do flood zones affect financing and insurance in Chattanooga?
- Properties in FEMA flood zones may require flood insurance and can trigger additional lender conditions, so check maps early and factor premiums into underwriting.
What happens if my primary identified property falls through after Day 45?
- You can still close on another property you identified within the 45-day window; this is why backups under the rules are essential.
Are DSTs a good backup to meet the deadline?
- DSTs can be identified and closed quickly, which helps with timelines, but they are passive investments with sponsor fees and less control compared with direct ownership.
