Buying before divorce: brilliant or stupid?

Question

My wife and I are divorcing (amicably). As part of that, we've agreed that I will take 100% of our shared savings and invest in an income-producing property that will will live in, house hack, rent etc. Be the landlord and do all that work. She would retain 50% equity since she's contributing 50% of the down payment. She cannot qualify for a house but I can. I will be on the hook for alimony but we don't know for how much yet.

This plan does several things: it allows me to offset a future alimony payment, gets me into investing, and helps to secure a financial future for us both (to whatever extent the property appreciates).

Two questions:

1: Will I have to disclose to the mortgage lender that I will have an alimony obligation in my future?

2: What legal form (if any) should this arrangement take? I don't want her (nor does she want) any decision-making or expense obligations around the property. All income would flow to me and I would take all tax benefits.

Joe S. · Answer

It sounds like y’all have kids together. You also seem like y’all are thinking about financial future together. Maybe it’s wishful thinking on my part, but for your kids and since you still care about your wife, it sure would be nice if y’all could stay together and work through this challenging situation without getting a divorce.

If y’all are already determined to get a divorce, I don’t see where buying property together at this point makes good sense.

Roger Doyon · Answer

Thank you to everyone who weighed in. You have given me much to consider based on sound reason and experience.

Update: My wife and I happened to discuss this very topic this morning and she shared with me that she would consider this truly a shared asset where she'd want input and decision-making power over the property that does not fit with my vision of a future life, therefore I'll not be pursing this.

Thanks again!

Ned J. · Answer

So you want to become a business partner with your soon to be ex-wife?

The relationship may be amicable right now but the chance of it staying that way as business partners is slim to none IMO

My advice...find a way to split your finances evenly now.....and keep them separate FOREVER after that.....

Jim K. · Answer

@Roger Doyon

What @Alecia Loveless said.

This is a terrible idea. Over and over again in these forums, I have talked about how important my spouse as been to our development in real estate. Sooner or later, if you're bright, you will likely find someone with the mentality and skillset you need to help you succeed who will go all-in with you on real estate. What happens then to your ex-wife, sitting in one apartment in your first househack?

The curve balls are coming, as Alecia pointed out, but you're just getting reading to turn into an inside hundred-mile-an-hour fastball and take it right in the jewels.

Alecia Loveless · Answer

@Roger Doyon I divorced my wife 6 years ago. It took 3 years to untangle our finances and 3 years for her to move out of my house. And she only moved out 2 days before the closing date when I sold it.

I moved on with my life, found a new long term relationship and got into real estate investing. My ex continued to party and after following my success through the “grapevine” became more and more jealous and today we don’t even speak to one another after a 24 year relationship.

I’d think long and hard about being business partners with your ex no matter how amicable you may be now. You never know how either of you will react to the curve balls life may throw at you in the future.

Jason Wray · Answer

Roger,

I would rethink that option since your wife cannot qualify for a home.  I would put your wife in that unit have her pay rent and have her work on her situation for 12-24 months in order to qualify for her own home.  At that point you can refinance that property pull some cash out and she can use part of it as  down payment.  I would not buy a home until the divorce is final unless you can get something in the divorce decree or in writing that removes your next home from marital asset.

Why put your 50% down, contribute 100% for your side of the unit rent and then have to split the equity/cash flow down the road?  Keep in mind the judge may decide you owe more than what you think.  You only need 5% down to buy a home just take your 50% of the money and let her decide on her own life.

Fast forward 3-5 years and you are both in a new relationship/marriage and one of you wants to sell the house and the other wants to refinance.  Thats a future argument I would want to avoid!

Roger Doyon · Answer

Kaci,

No we are not. It's simply that she hasn't the income or work history to qualify.

Kaci Hunter · Answer

Hi Roger,

You say she can't qualify to buy her own house; why is that?

And are ya'll located in a community property state?

Buying before divorce: brilliant or stupid?

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