You’re going through a divorce in Colorado, and you and your spouse own one or more rental properties. You’re likely wondering what happens next. Will the rental income be split? Who gets the property?
What about the mortgage, the equity, or the tenants? When emotions run high and real estate is on the line, understanding how rental properties in Colorado are divided during divorce becomes critically important.
Below, our team breaks down what Colorado law says, how courts approach these issues, and how a seasoned divorce attorney can protect your financial future.
If you have additional questions about how rental property is divided in a divorce, please contact us today at (303) 781-0322.
What Makes Rental Properties Unique in a Colorado Divorce?
Rental properties are more than just physical assets. They’re income-generating investments. That makes them more complex to divide than a family home. In divorce, Colorado follows equitable distribution principles, meaning property is divided fairly, not necessarily 50/50.
Rental real estate may include:
- Single-family homes leased to tenants,
- Vacation properties listed on Airbnb or VRBO,
- Multi-family buildings or duplexes, or
- Commercial real estate or mixed-use properties.
These properties can be considered marital, separate, or a combination of both, depending on when and how they were acquired and maintained. That classification affects how ownership and income are handled.
Is Rental Income Marital Property?
Rental income is generally considered marital property if it is earned during the marriage. Under Colorado law, income generated from either spouse’s efforts or matrimonial assets during the marriage becomes part of the marital estate.
This rule applies to rent collected from jointly owned properties and income from a property one spouse owned before the marriage if that property was managed using shared resources.
Even if a rental property was initially acquired as separate property, any appreciation in its value or profits generated during the marriage may be subject to division by the courts during divorce proceedings. Several factors can lead to this outcome:
- One spouse contributed to the property’s upkeep, management, or enhancements;
- Marital funds were used for property taxes, repairs, or mortgage payments; or
- Rental profits or losses were reported on joint tax returns by the couple.
Ultimately, the way rental income and appreciation are handled depends on how the property was acquired, maintained, and reported during the marriage. Because these issues are fact-specific, spouses who own or manage rental properties should be prepared to document contributions and financial records to protect their interests during divorce proceedings.
How Is Property Divided in a Divorce in Colorado?
Courts divide marital property based on what’s fair, not always what’s equal. This includes real estate, retirement accounts, bank accounts, business interests, and debts. When it comes to rental properties in Colorado, the court will consider factors like:
- Whether the property was acquired before or during the marriage;
- Financial and non-financial contributions from both spouses;
- The current and potential future value of the property;
- The economic circumstances of each spouse post-divorce;
- Whether the property was kept separate, like in the case of an inheritance or gift; and
- Any written agreements, such as a valid prenuptial agreement.
The court may award full ownership to one spouse, require a buyout, or order the property to be sold and the proceeds split.
Split Ownership of Rental Property: How Does It Work?
When spouses who own rental property together divorce, they encounter difficult choices. Here are some ways to divide ownership of rental property:
- One spouse buys out the other’s share through refinancing or offsetting with other marital assets;
- The property is sold, and the proceeds are divided according to the court or other agreement; or
- Both spouses continue to co-own the property with a formal written agreement and clear exit strategy (not ideal in high-conflict divorces).
Courts generally prefer clear financial separations. Ongoing co-ownership is risky and can lead to future disputes unless carefully structured.
When One Spouse Owned the Property Before Marriage
If a rental property was purchased before the marriage, it may be considered separate. However, this doesn’t automatically exclude it from division. If the property increased in value during the marriage or marital funds or efforts were used to maintain it, that appreciation may be divided.
The court distinguishes between separate property (original value) and marital appreciation (growth due to joint efforts). Spouses seeking to protect pre-marital rental assets must be ready to trace those funds and demonstrate minimal marital contribution.
What Happens to Rental Expenses and Mortgage Debt?
The court will also look at expenses associated with the property, such as:
- Mortgage payments made during the marriage;
- Property taxes and insurance;
- Repairs, upgrades, and capital improvements; and
- Property management costs.
If these were paid with marital funds, they may increase the marital interest in the property. Debts tied to rental property, such as mortgages or liens, will also be factored into the division of property and may reduce one spouse’s equity.
The Importance of Legal Representation When Dealing with Divorce and Rental Properties in Colorado
Handling rental property division in Colorado divorce means confronting valuation wars, tracing fund origins, and structuring ownership or income allocation. That’s exactly where a firm like Plog & Stein, P.C. makes a difference:
- Aggressive tracing and documentation. We can gather evidence to ensure the property is appropriately classified as marital or separate, especially when assets were merged or co-titled.
- Expert valuation and forensic accounting. Rental properties often come with tax, depreciation, and capital accounts arguments. We bring in professionals to support your position.
- Creative settlement structure. We can help sculpt deals, such as staggered buyouts, deferred payments, or income sharing that your spouse might accept, and a judge would approve.
- Litigation readiness. If the other side resorts to undervaluing or misclassifying, we’ll fight those issues aggressively at trial.
Our firm has over 70 years of combined experience in Colorado family law, intimate knowledge of Denver and mountain counties’ valuation practices, and a track record of protecting clients’ investment interests even in heated cases.
We Provide Strategic Property Division Solutions
At Plog & Stein, P.C., our decades of combined experience mean we understand the high financial stakes when dividing rental property in a Colorado divorce. Our firm doesn’t treat your property like just another asset. We advocate clearly and firmly for your interests and evaluate the full financial picture to help you retain what matters most.
Don’t guess how your rental properties will be handled in a divorce. Get our divorce attorney’s guidance, grounded in Colorado law and financial common sense. Whether you’re protecting your assets or ensuring a fair split, we’re ready to help. Contact us today to schedule a consultation.
FAQs
Can I Keep a Rental Property If It’s in My Name Only?
While it’s possible, it isn’t automatic. If the property was acquired during the marriage or if marital funds were used, it may still be deemed part of the marital estate. Courts will assess the source of funds and each spouse’s contributions.
What If We Co-Owned a Property, but I Paid All the Expenses?
If you made financial contributions from non-marital funds, it may give you a stronger claim to a greater share of the property. However, courts may still view the property as jointly owned and subject to equitable division without a written agreement.
Can We Sell the Property and Split the Proceeds?
Yes, this is a common resolution. The property can be sold, and the net proceeds divided fairly. The court may order this if the spouses can’t agree on another solution.
What Happens to Tenant Leases During Divorce?
Tenant leases remain valid. If the property is transferred to one spouse, that person assumes the landlord responsibilities unless both parties agree otherwise or the property is sold.
