Part 2: NJ Divorce: What Happens to Investment Properties?

In Part 2 of our series, we dive a little deeper at what happens to vacation homes and rental properties during divorce. When couples own real estate beyond the marital home, dividing those assets can become significantly more complex.

If you are facing divorce in Somerset County or Hunterdon County, NJ, understanding how real estate is divided is critical — especially if you own more than just a primary residence.

New Jersey follows a legal framework called equitable distribution when dividing marital assets. This applies to homes, vacation properties, rental real estate, and other investment properties.

Importantly, equitable does not automatically mean equal. It means the court aims for what is fair under the circumstances.

What Is Marital Property in New Jersey?

In plain English:

• Marital property: generally assets acquired during the marriage, is typically subject to division.
• Separate property: assets owned before the marriage or received by gift or inheritance,  may be excluded.

However, there’s a major exception.

Separate property can become partially marital if it was:

• Mixed (or “commingled”) with marital funds
• Paid down with marital income
• Improved or renovated using marital money or effort
• Actively increased in value during the marriage

This is where many real estate disputes begin.

 Part 2: How New Jersey Divides Real Estate in Divorce – Equitable Distribution Basics 

With real estate portfolios, the distinction between marital and separate property is rarely simple.

For example:

• One spouse purchased a shore home before marriage.
• During the marriage, both spouses used marital income to pay the mortgage.
• They renovated the kitchen and added a deck.
• The property significantly increased in value.

Even though the home was originally “separate,” there may now be a marital component subject to equitable distribution.

The Key Question:

Was the property maintained, improved, or paid down with marital money or marital effort?

The answer can significantly impact how much of the property is divided.

Equitable Distribution Is Fact-Specific

New Jersey courts consider many factors when determining what is fair, including:

• Length of the marriage
• Income and earning capacity of each spouse
• Contributions to the marriage (financial and non-financial)
• The value of the property
• Debts and liabilities

No two real estate portfolios are identical. That’s why divorces involving income-producing assets, vacation homes, or investment properties in Somerset or Hunterdon County require detailed financial review and thoughtful legal strategy.

Careful Planning Protects Your Financial Future

When real estate holdings are involved, divorce is not just about dividing property — it is about protecting:

• Cash flow
• Equity
• Credit exposure
• Tax position
• Long-term wealth

Understanding how equitable distribution applies to each property is the foundation for building a fair and workable settlement.

Coming Next in the Series:

In Part 3, we’ll discuss what happens specifically to vacation homes and rental properties — sell, buyout, or co-own?

If you are contemplating divorce and own real estate, our divorce attorneys at Simon Law Group, LLC offer free consultations.

Call 800-709-1131 or text 908-864-4450 to discuss your situation confidentially.