What happens to our buy-to-let property in the event of a divorce?

We answer these and many other questions in our video blog episodes.

Here is the transcript of episode 32 to read:

The great advantage of an investment property is: unlike an owner-occupied property, it still works if you break up. In my 30-year career, I've naturally experienced quite often that clients separate and the big problem always happens when you live in a detached house for your own use and then the divorce comes and then the question is who keeps the house? How is that sorted out financially?

With an investment property, it is much, much easier. If in doubt, a divorce costs a lot of money. And if you are, for example, in the statutory pension scheme, pension entitlements may also be taken away from you in the divorce settlement agreement and assigned to your former husband or former wife. This means you have even greater pension problems. Precisely then you need passive income, you need additional earnings to build up good assets for your retirement provision. However, in all separations in the past, I have repeatedly experienced that the investment property remains untouched. Because just because the owners of the property get divorced or separate, the tenant still keeps paying the rent, the tax office still keeps paying the tax benefits, and then everything is simply split fifty-fifty.

There is an account where the rental income flows into, there is an account where the tax benefits flow into, and there is an account where the interest and principal repayments for the bank are debited from, and the management debits the management costs from. And if such an investment property perhaps costs €1,000 a month, so you or y'all put €1,000 into wealth accumulation and then at some point a separation happens, then it gets split up.
From that moment on, another €1,000 will flow into the property. Maybe €800 of that is paid every month by the tenant and the tax office. And €200 is paid by you. And if, as a married couple, you pay €200, then even if you separate afterwards, each of you can just keep paying €100. And when it comes to an investment, that is completely unemotional. You want to do business! And if you do separate, then later on each of you gets half the property and you keep having the tenant pay it off for you.

Sit back and relax, and say: Sure thing, we're no longer walking this path together, but the tenant and the tax office will continue paying off the mortgage on the investment property for you, and at some point you'll be glad when, 400,000 to 700,000 euros later, you get the money back tax-free into your account when the property is sold. And then each of you gets half in your account and goes your separate ways, separate ways indeed. But each with half the money.

Keywords:
Investment property, divorce, owner-occupied property, pension claims, passive incomes, rental income, financial settlement