Investing in real estate has always been a hot commodity. Owning one or more properties can provide families with increased financial security, diversification of assets, and as a source of direct income in the case of many rental units. Millions of properties around CA and the country are managed by small, local investors rather than large conglomerates. 

While rental properties are often a safe and smart investment, things aren’t so cut and dry for those who are going through or planning a divorce. What happens to rental properties when a couple gets divorced, and how are they treated during the pivotal phase of the divorce when assets are split? Today’s post is a look at how rental property is treated, all of which largely depends on whether it is community or separate property.

Consider Whether the Rental Units are Community Property

As we’ve covered before, assets are broadly categorized into two classifications. During asset division, property is either community property or shared property. 

• Community property refers to all assets, possessions, and income that was attained during the length of the marriage.  As its name implies, community property is split equitably between both parties during divorce. 

• Separate property is anything that either party owned or amassed before the marriage was established. Separate property is not subject to asset division and both parties will get to retain possession of any separate property regardless of the specifics of the divorce. 

In many cases, it is fairly clear cut whether the rental property originally belonged to one person, or whether it was purchased during the length of the marriage. One important caveat with rental property is that any income gained via said property after the marriage was established is typically considered community property. In addition, gains in the value of the property during this time as well could be considered community property.  

Is it a Good Idea to Sell the Rental Property During my Divorce?

In cases where the rental property falls squarely under the community property category, this gives both parties equal stake in how the property should be divided. In these cases, the most straightforward option is often to simply sell the property and divide the proceeds between the involved parties. 

In some cases though, this could be a less than desirable option particularly in cases where the market may have dipped, or in cases where one or both spouses can’t see a path forward without continuing to get that rental property income. For these instances, there are alternative strategies that can help make everyone whole without having to sell the property. One example is having one “person” buy out another or perhaps offer a bigger share of other assets. Spouses can work with mediators and their attorneys to explore these viable options when selling simply does not make sense. 

Talk to Our Experienced Divorce Attorneys in CA Today 

If you own one or more rental properties in CA and are planning or dealing with a divorce, it pays to consult with a qualified legal expert. Our shrewd attorneys at the White Oak Law have decades of experience dealing with asset division involving all types of arrangements and income levels. Count on us to help you assess your financial landscape and help move your divorce towards an outcome that aligns with your interests. 

Book an appointment with our team of legal experts today to discuss your specific legal needs. Call us at the White Oak Law today at 925-271-0999 to connect with our team and learn more about how we can help.