If you and your spouse are heading toward divorce, it’s smart to start thinking about what you want out of the property division settlement. The family home is often the largest single asset. It can have great financial as well as emotional value.
If the two of you own a rental property, you’ll also need to decide what you want to do with that. Whether it’s a small condo that was your first home and that you now rent out or a house at the Jersey Shore that you no longer use since the kids moved out and list on a vacation rental site, it can be a source of income that neither one of you wants to lose.
Each situation is unique, but here are a couple of key things to consider.
Is it marital property?
If the two of you bought the property together and both names are on the title, it’s marital property. If you owned it before the marriage and your spouse isn’t listed on the title, it might seem like your individual property that you don’t have to split. However, if marital assets were used to renovate and maintain it and your spouse has been an involved landlord, they can likely claim some ownership.
If it’s marital property, you may choose to sell it and divide the proceeds, buy out your spouse’s share (or vice versa) or continue to co-own it and rent it out.
Can you continue to manage the property together?
If the rental income is too good to give up and you both want to continue to own it and rent it out, you’ll need to determine whether you can work together as hands-on landlords or hire a management company. If you do the latter, it will cut into your income, but you won’t have to deal with each other as much.
There’s a lot that will have to be decided upfront if you continue to co-own a rental property (or multiple properties). You’ll need to codify things like how the income is split, how expenses are covered and how decisions are made.
No matter what you do, you’ll need an accurate valuation. Getting sound legal and financial guidance is also key. It’s never too early to consider your options and goals.