200 Percent Rule Strategy

The three-property rule works cleanly when an investor is comfortable naming three candidates and closing on one or two. It gets tight fast when the plan is to diversify sale proceeds from a Romulus-area logistics building across, say, a Grand Rapids medical office condo, a Lansing government-adjacent office building, and a Kalamazoo flex property. The 200 percent rule removes the three-property ceiling entirely and instead caps total identified value at twice the relinquished property's sale price, which is usually the more workable limit for someone buying into three or four different Michigan submarkets at once.

We reach for this rule most with investors coming out of a single large Southeast Michigan asset, often an industrial building tied to the auto supplier economy, who have decided one replacement building would leave them too concentrated in a single tenant or submarket. Spreading that same value across Grand Rapids, Lansing, and a smaller Ann Arbor or Kalamazoo property is a different risk profile entirely, and the 200 percent rule is what makes naming five or six candidates at once workable within the same 45-day window.

We see this rule applied most often on these kinds of Michigan replacement plans.

• several smaller net-lease assets spread across Southeast and West Michigan
• a blend of direct ownership and DST interests
• multi-market industrial positions along the I-94 and I-96 corridors
• a mix of medical office and retail allocations
• a Lansing office asset paired with a Grand Rapids or Ann Arbor property

The value cap is aggregate, not per-property, and it is measured against the relinquished sale price, not against whatever the investor eventually spends. That distinction matters in a state with as much price variation as Michigan has between, say, Birmingham office space and a Saginaw-area industrial building. We keep a running value worksheet from the day the relinquished sale goes under contract, because prices on identified candidates move between the letter of intent and the identification deadline, and an offer that creeps upward can push the aggregate list past the 200 percent ceiling without anyone noticing until it is too late to fix.

The worksheet tracks each candidate's asking price, any negotiated adjustment, and a conservative estimate of where it will likely land at contract, updated every time new information comes in from a broker or seller. When a Grand Rapids medical office candidate gets a price bump mid-negotiation, that change gets reflected in the aggregate total the same day, not discovered weeks later when the identification notice is already being drafted.

Once the list is identified, the harder work is sequencing acquisitions that might close in Oakland County, Kent County, and Ingham County within weeks of each other. Different title companies, different lenders in some cases, and different closing customs by county all have to land inside the same 180-day window. We build the closing order around whichever asset has the least closing risk first, saving the more complicated file for the middle of the window rather than the end. That usually means a straightforward net-lease closing in a familiar Oakland County submarket goes first, while a Kalamazoo industrial building with an open environmental question gets extra weeks of runway before its own deadline arrives.

If the plan is really just three properties and a straightforward closing, the three-property rule is simpler to track and does not require the same ongoing value math. We only recommend the 200 percent approach when diversification across Michigan regions is the actual investment goal, not a default choice made out of habit.