Own a Short-Term Rental Property? 4 Choices for Divorcing Spouses
When you own a business enterprise with your spouse, divorce is often more challenging than normal. This is the case even with a relatively simple income generator such as a short-term rental home.
If you and your spouse use a vacation property to earn additional income throughout the year, how can you fairly divide up this asset during divorce negotiations? Here are the four primary choices and what they mean for you.
1. Sell the Property
Certainly, the simplest solution is to sell the real estate outright and split the profits 50/50. This is often the best solution if the home doesn't generate a large amount of income or if your relationship would further sour the longer you argue over this property.
2. Buy Out the Other Spouse
What if one spouse wants to keep the rental home? In this case, the one who wants it could opt to refinance the property in their name alone. Using a 'cash out' refinance loan, they would then pay the other spouse for their half. Of course, this presumes that you have sufficient equity in the home or other cash to tap.
3. Offer an Equivalent
In the event that you can't come up with liquid funds sufficient to buy out your ex, you could try to negotiate a replacement for the vacation house. For instance, you might offer a larger portion of retirement accounts or an adjustment to support in exchange for full ownership of the rental.
This would work particularly well if the rental property could generate a large monthly return for you in the future.
4. Run the Rental Together
Couples who have a business (of any form) generally always have the option of keeping the business in place and operating it as partners.
Only you can decide if your relationship as ex-spouses would be amenable to this option. If the income is significant, it can be worth the trouble if you can come to a formal agreement as to how to run the business together and how to end it if things don't go so well as co-owners.
Which of these choices is the right one for you and your soon-to-be ex-spouse? The decision is unique to your situation, but you can make the best one by being informed about all your options.
Want to know more about divvying up your specific income-producing assets? Start by meeting with a local divorce lawyer for more information.
