Determining what to do with a family home during divorce is not only a big financial decision but often an emotionally fraught one. When a couple has additional properties, however, dividing them or continuing to share them often comes down solely to what’s in each spouse’s best financial interests.
Take rental properties. Maybe you and your spouse kept your first condo and rent it out for a little extra income. Maybe you have a place on the Jersey Shore that your family once used as a vacation home but now you list it on vacation rental sites and rarely use it yourselves.
Dealing with rental properties in divorce can be complicated. There are, therefore, a few things to consider before you determine what kind of agreement you want to seek.
Is an asset marital property?
If the two of you purchased a particular asset together, clearly it’s marital property. However, even if one of you owned it prior to your marriage, if you used joint assets to pay for maintenance, repairs and upgrades, the other spouse can likely successfully make some claim to part of its value.
Assuming it’s marital property, you have the same options as with the family home. You can sell it and add the profit to the value of your marital estate that must be divided. One of you can buy out the other one’s share. One of you can keep it and give the other something of equivalent value.
Can you continue as co-owners?
Another possibility: You may decide you both want to keep it and continue to rent it out. Maybe it’s a profitable piece of property, and neither of you wants to lose the income.
The key question then is whether you can work together to manage the property. Even if you turn over the day-to-day issues to a management company, you’ll still need to make some decisions together. If you’d rather not give a cut of the income to someone else, you’ll need to determine what role each of you will play in managing the property, renter issues and more. Either way, you’ll need to work out an agreement that at least covers things like how expenses and profits will be shared and how decisions will be made.
Whether you have one or multiple rental properties, it’s crucial to have experienced real estate, tax and financial advisors in addition to sound legal guidance. This can make all the difference to your future.