Recently, we talked about various options for dealing with the family home during a divorce. Many couples also co-own rental properties. Determining how to handle a rental property can be a far less emotional decision but certainly an important financial one.
Whether you rent out an old home that you and your family outgrew, you turned a vacation home into an Airbnb rental or some other scenario, deciding what to do with a rental property that brings in a nice amount of cash can be challenging.
Is it marital property?
It’s not always obvious that both spouses have a claim to rental property. For example, maybe you’re renting out the condo your spouse owned before you got married. Even if you’re not on the title, if your money has gone towards upgrades and repairs and you’ve been sharing in the profits, a court will likely consider it marital property to be divided somehow.
What if you don’t want to sell it and divide the proceeds or let your spouse keep it in exchange for something of similar value? Maybe you don’t want to give up the money it brings in – especially now when you’ll each be living on one income.
Can you continue to work together as property owners?
Then the question is whether you can continue to work together to manage the property. If it’s an amicable divorce – particularly if you’re going to be co-parenting together and therefore remaining in each other’s lives – you may be able to.
However, it’s crucial to negotiate an agreement that clearly details how costs and profits are divided as well as who handles which responsibilities and how decisions are made. In a sense, you’re remaining business partners with your soon-to-be ex, so these things need to be codified. You may decide it will work best if you hire a property management company to handle the rental agreements and deal with the day-to-day issues that pop up.
Only you and your spouse can determine what’s right for you. However, having experienced legal and real estate guidance can help you consider all of the potential options and the pros and cons of each so that you can make the best decision for you and your family