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Dividing investment properties in your divorce

Like many couples in California, you and your spouse have taken advantage of the fluctuating real estate market to acquire some investment properties. Perhaps you used these properties as part of your retirement portfolio, or your profits helped you achieve a comfortable standard of living. Now that you are facing divorce, you must consider what part the investment real estate will play in asset division.

As with your home, you and your spouse have several options for dividing the rental properties. However, there are a number of factors you must consider that are different from dividing your interest in your primary residence.

Property basics

The first question to answer is when the property was purchased. Any real estate that you or your spouse acquired individually before your marriage may be exempt from property division by California's community property laws. You may be able to make a case for a share in those properties your spouse owned before you wed if you participated in their management or if you contributed financially to their maintenance.

Additionally, you will want to have a fair assessment of the property's value including the outstanding mortgage and the tenant-to-vacancy ratio. Properties that are already paid off and whose rent provides a profit are obviously more appealing than a building for which you still owe a mortgage and which is vacant because of needed renovations.

Options for property division

Your choices for dividing investment property with your spouse are similar to those available for your residence. The main concern will be obtaining your fair share through an accurate and thorough valuation of the real estate. Once you have an appraisal, you may decide to use one of these options:

  • Sell your interest in the properties to your spouse.
  • Buy your spouse's interest in the properties.
  • Sell all the properties and split the profits.
  • Continue to own and manage the properties as business partners.

There is no fast and easy way to divide real estate, so you can expect that, whatever method you choose, the transaction may drag on past the settlement of your divorce. Depending on the real estate market and the kinds of commercial properties you own, this may take months or years. Having legal counsel throughout the process of property division can help ensure you receive your fair portion of all marital assets.

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