Short-term rentals, such as Airbnb and VRBO, are popular investment options. You may own one or more. When a marriage ends, dividing this type of asset creates unique challenges.
North Carolina law uses the concept of “equitable distribution” to divide marital property, which includes complex assets, such as rental properties.
Marital vs. separate property designations
North Carolina law categorizes property in two ways. “Marital property” includes assets you or your spouse acquired during your marriage, which applies up until the date you separate. Marital property is subject to equitable distribution, meaning a fair division, but not always an equal one.
“Separate property” refers to assets that you owned before the marriage. It also covers gifts or inheritances received during the marriage. Any increase in the value of separate property usually stays separate. Rental properties are subject to these same rules, with some exceptions.
Your Airbnb as a marital business asset
If you bought your rental property during your marriage, it is likely marital property. This is especially true if you used marital funds. But an Airbnb is more than just real estate. It operates as an active business. The court will look at several factors:
- The actual value of the real estate
- Any income your rental business generates
- Expenses related to running the operation
- Any “goodwill” or established reputation the business has
Can an Airbnb be separate property? Only if you bought it before marriage or inherited it. However, if you or your spouse put work into the property or used marital funds for upgrades or mortgage payments, a marital interest can arise. The value connected to this marital interest is typically subject to division.
Dividing rental assets
An Airbnb you acquired during your marriage is almost always considered marital property. Dividing this asset requires careful consideration. Here are common ways spouses handle these assets:
- One spouse buys out the other’s share
- You sell the property and divide the profits.
- You agree to continue co-owning and operating the property together.
Seeking skilled legal guidance is essential to ensure an accurate valuation, especially for the business side of your rental. An attorney’s role is critical. They work to correctly identify and classify your assets, like determining what portion of the rental is truly marital.
They also consult with financial professionals to accurately value the real estate and the operating business. An experienced lawyer understands how to advocate for a fair division that protects your financial future. A clear strategy helps ensure a fair outcome for you.