Important questions to ask about investment properties in divorce

Owning and operating your own business can be a great way to spend more time with your spouse, but it can also put a lot of strain on your marriage. Real estate investments can offer multiple paths to profit, from reselling homes after rehabilitating them to renting properties out to others.

Regardless of whether your investment property business contributed to your desire to divorce, your real estate holdings are going to complicate the process. The more money you have invested in real estate holdings, the more important a cautious approach to divorce becomes.

There are some questions that you need to ask yourself before you make any decisions about divorce as someone with substantial real estate investments.

Are your real estate holdings separate or marital property?

The first question about your real estate investments in a divorce is whether the courts have the authority to split them. You need to know whether they will be separate property owned by one spouse or marital property held by both.

When you purchased the property and the assets you used to pay for, invest in or maintain the property will influence whether it is separate or marital. If you owned the properties or at least some of them prior to marriage or received them as part of an inheritance, a portion of their value could be separate.

However, if you used income earned during your marriage to maintain or improve those properties, that could give your spouse a partial claim of ownership. The same is true of any sweat equity due to personal work on improving the property during your marriage.

Do you have a prenuptial or postnuptial agreement?

If you have a marital agreement on record, that could potentially earmark the properties as separate or provide guidance about how to split them.

What is the current value of your real estate portfolio?

Establishing a fair market value for the properties that you hold is crucial to the division of your assets. Especially if you have fixed the property up since buying it or you have held onto it for many years, what you paid for it probably isn’t what it is currently worth. You will need to determine the value of each property in order to make things as fair as possible.

What is the outcome that would be best for your situation?

Is the real estate market soft, meaning that you will benefit from holding the properties for a few years before selling them? Do you hope to sell the properties, receive a share of their value or continue working on or renting them out as a source of income?

Your goals will play a role in your strategy going into the divorce, as well as any negotiations you have with your ex. Knowing the value, status and best outcome for each property will help you achieve the best outcome.