Deciding what to do with your home as you divorce will likely be one of the biggest decisions you’ll make. There are many financial, practical and emotional factors at play. If you and your spouse own one or more rental properties, your decisions are more likely to be financially driven.
Rental properties may have one spouse’s name or both on the title. If you decided to hold onto the home you had before you got married and rent it out, you may not have added your spouse to the title. However, if you used funds from your bank account to remodel or refurnish it, your spouse could make a legitimate legal argument that it’s now joint or marital property.
If a home that you rent out or maybe offer on vacation rental sites is determined to be marital property, then you need to come to an agreement on what to do with it. If you can’t, a judge will have to do so.
What are your options?
Several options are basically the same as for your residential home:
- You can sell it and split the proceeds.
- One of you can buy out the other one.
- One of you can keep it and let the other spouse have something of equivalent value for their share.
Whichever of these you choose, you’ll need to get an accurate valuation on the property and determine what percentage of it belongs to each of you.
Having a legal agreement is crucial if you continue as landlords
There’s another possible option for your rental property, but it’s not right for everyone. You may determine that the rental income makes it worth keeping for both of you. To do that, of course, you’ll need to be able to work together as landlords.
If you choose to do that, it’s important to put an agreement in place to detail things like how expenses and income will be split, who will handle which responsibilities, what decisions require mutual agreement and more. You can hire a management company to handle the property. However, that means less profit for you, so you’ll need to decide if it’s worth it.
It’s a lot to consider. It’s wise to consult with real estate, financial and tax professionals in addition to having strong legal guidance.