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Addressing investment properties in a California divorce

On Behalf of | Jun 6, 2024 | Property Division

Marriages between people with more property tend to result in particularly complicated divorce proceedings. Unless spouses have already negotiated a prenuptial or postnuptial agreement, they may have challenging property division details to settle with one another.

Those negotiations can be difficult to manage, especially when the marital estate is relatively large with a variety of different assets. Many couples with significant resources diversify their portfolios. They look for assets that can weather economic downturns or generate revenue.

Investing in real estate is a common strategy. A property purchased and held for several years could then generate substantial revenue when resold in the future. People can flip properties by buying them in poor condition, fixing them up and selling them. People can also generate regular income by charging rent for the properties that they own. What happens to investment real estate holdings during a California divorce?

Real property may be marital property

Real property holdings including investment resources are often marital assets that people need to divide when they divorce. Even if only one spouse has their name on the title or played a role in maintaining the property, both may have an interest in their overall value.

The timing of the acquisition of the asset is a key consideration. Real estate purchased during the marriage is typically subject to division when couples divorce. Additionally, if someone used marital income to maintain real property holdings that they already owned prior to marriage, that could make a portion of the properties’ value subject to division.

How couples divide investment real estate

Addressing investment real estate often begins by valuing the property to establish a fair market value for each property. From there, spouses can begin establishing personal goals. If one spouse intends to continue renting real property for income or repairing and reselling homes, they may want to retain most or all of the investment real estate portfolio in the divorce.

If someone does not have the time or skills necessary to maintain multiple properties, they may solely want to claim the value of the property instead of seeking to retain actual possession of investment real estate. In some cases, the future sale value or rental income generated by investment properties could influence child support and other financial matters in a pending divorce.

Those with complex marital estates often require assistance when strategizing for divorce negotiations and establishing goals for the future. Determining which real estate holdings may be subject to division is a good starting point for those preparing for a complex divorce.