Investment properties after divorce?

[Dan Golby]

A friend of mine is getting a divorce and asked me what I thought about dividing the assets, I had no idea so I thought I would ask on here.

His scenario is that he has 3 properties, each worth roughly $325000 with very little equity in any of them. They are all located in Alberta (Edmonton area).
If they sell them all there will likely be a loss by the time the mortgage penalties and lawyer fees get paid etc. The loss will likely be about $30k total.

Is it easier to just transfer one of the names off the title and the other spouse to keep going assuming they qualify for financing? Or does it make more sense to just take the shared loss and move on and start over.

Since this is a topic that maybe too personal for some, please feel free to email responses to me at [email protected]

Thanks

 

[RE123RE]

Hi,
If your wife believes there is no equity, maybe she will agree to transfer them all to you (together with all the mortgages).
Win-Win. Mission accomplished.
If she doesn't agree, maybe she will be ok with you taking 2 and she takes one.
Both scenarios are presented to her as better than generating a loss or a bigger loss right.
If she doesn't agree then sell them all you have no choice. - this scenario is worse for the RE investor becasue even if there is a small loss, owning has other benefits and the loss can easily shortly become a profit thanks to value appreciation or/and principal reduction or/and cash flow and more - like RE experience.
Thanks

 

[Cory Sperle]

It would depend on how the divorce is proceeding, nasty with lawyers involved or consensually and respectful. If it is the latter simply wait until the planned exit on all properties and then split the profits equally. Everyone wins. If they decide to go the first route, everyone loses except for the lawyers. It's really up to them.

 

[Thomas Beyer]

Mortgage change usually requires a brand new application of mortgage goes from two to one name.

Agreeing to split assets is far cheaper than sueing each other.

 

[Dan Golby]

So the brand new application would also involve paying off any penalties would it not?
In that case it might not be worth it for him to hold since one penalty is $9000
Might as well share the loss and move on

 

[Thomas Beyer]

It involves no penalties usually.

Only clearing up ownership but not debt might create more messes down the road. If person A now holds the property and A and B are on the mortgage it might force B to be on the hook for A's non-payment of mortgage.

 

[Dan Golby]

It seems like the best route might be to hold the properties and remove one name from the mortgages and titles.
Since the mortgage penalties will be about $10000 in total the costs associated with some name changes on the titles must be less......I would hope!

 

[Thomas Beyer]

You cannot just remove a name from a mortgage. That is essentially a new application.