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What Will Happen to Our Rental Properties if We Divorce?

In a Georgia divorce, property division can be fairly simple, such as splitting furniture and other personal belongings. When real estate is involved, however, things can quickly become more complex. The situation may be even more complicated if the parties own rental properties that they acquired during their marriage. Some properties may contain equity, which necessitates a valuation of them as assets. This process can become even more difficult if the properties contain no equity, which means that the balance of the mortgage loan on the property exceeds the actual value of the property.

The first step in dividing rental property is to place a financial value on it. In most cases, a real estate appraiser will value the land and the building on it by looking to recent sales of comparable properties in the immediate area. This information will help the appraiser to estimate the true value of the rental property if it were to be sold. When considering a rental property, however, the parties also must consider the potential investment value of owning the rental property. Some rental units may command a monthly profit, some may provide an opportunity to reap the benefits of tax-sheltered depreciation from the property, some may result in future profits if the property were to be sold, and some may be available for one of the parties’ personal use.

The next step is to decide how to divide the rental property between the parties. One solution is simply to sell the property. This option can provide an easy way to pay off any mortgage debt on the property, or, if the sale proceeds are insufficient to pay off the mortgage, then the parties will have to either liquidate other assets to pay the debt or be jointly responsible for it in some manner.

Another solution is for one spouse to buy the other spouse’s share of the rental property. If one spouse wants to keep the property, then he or she can pay a sum that is equal to the investment value of the property to the other spouse. That spouse thereafter would be ordered to refinance the mortgage on the property in order to remove the other spouse’s name from the property. Again, however, if the spouse defaults on the mortgage payments before the refinancing occurs, then both spouses will remain liable for the debt, with the mortgage company potentially taking legal action against both of them.

Dividing rental property in the midst of a divorce is a complex process that involves many tax issues, as well as legal issues. Therefore, it is best for anyone in this situation to consult with a qualified Georgia divorce lawyer who can guide him or her throughout the process. Contact us or call today to learn how Shaw Law can work with you to achieve the best outcome possible for you and your children.

Scott Shaw is founder and principle of Shaw Law Firm LLC, founded in 1995 and dedicated solely to divorce, family law and child custody matters that must be addressed and decided in the state of Georgia. Shaw Law Firm serves the greater Metro Atlanta area, particularly the counties of Fulton, Gwinnett, Cobb, Cherokee, Forsyth, Paulding, Henry, Fayette, Coweta, Newton, Walton, Bartow and Douglas. Schedule a consultation today at 770-594-8309.