What to do With Inherited Real Estate

By admin, November 17, 2017

As awful as it is to think about our loved ones passing away, unfortunately, death is the only thing guaranteed about life, aside from perhaps taxes as the saying goes. Most of us dream of having something to leave our children when we go, property, money or a family business being the ultimate goals. Some of us are even lucky enough to be able to pass things on before we die. Giving us the chance to see the people that we love benefit from our life’s work. Your parents and family are no different. Leaving you a property is something that will have pleased them, so it’s certainly nothing to feel guilty about.

When you inherit property, there can be a period of adjustment. Whether your loss has been expected or come as a complete surprise, it can be a lot to take in. In these situations, it’s best to let yourself grieve and take your time to adjust before rushing into a decision on what to do with your new property. An instinctive reaction can be to either move straight in or not want it at all and offer your inheritance to someone else. Both of these things could prove to be a mistake. So, take your time and give these options some consideration.

Rent it Out

Renting the house out is an interesting option, with both pros and cons. If you choose to rent your house to someone else, you get a steady monthly income from it. Sometimes, there’ll be very little you’ll need to do for this money. Then, other months absolutely everything will go wrong, and you’ll need to work ridiculously hard as a landlord. You will also be subject to landlord’s insurance and taxes as well as having to ensure that your property meets all health and safety standards and completely adheres to the law.

But, it does keep your options open. When your tenants move out, you can rethink, sell, move in or search for a new tenant.

Finding tenants is much easier than it used to be now so much business is done online, and properties rarely sit empty for long. Keeping your property in good condition and appealing to tenants is also easier than ever. You don’t even need to do any of the work. Learn more about these options before making your decision.

Live in it

Whether or not you chose to live in the house can depend on a variety of circumstances. You need to consider your current housing situation. If you already own your own home and feel happy and comfortable where you are, you may not want to move. It will also depend on your past experiences in the house and with its previous owners. If it’s the happy home of your childhood, you could either love going back or feel a bit odd, like you’ve been out and made your own life only to find yourself taking a step backwards.

If you don’t own a home, work locally and still have relationships with people in the area, moving into your new property could be the perfect answer. You won’t have to worry about selling, finding tenants or the pressures of being a landlord.

The value of the home should be another consideration. Is it worth selling? Or could you make more in the long term by renting it out? If you already own a house, could selling or renting that out instead be more cost-effective?

Of course, if you do decide to live in it, for now, you’ll still be able to sell at any point in the future should you change your mind. However, it is worth bearing capital gains tax in mind. If you inherit a house and choose to sell, you get a bit of a tax break. Say the house was bought for $150000 and is now worth $300000, only the difference will be subject to capital gains tax. Once you’ve lived in the house for two years, this tax break starts to decrease.

Sell it On

Selling the property on is a popular choice. If you need money quickly, because your current financial situation isn’t great, then this can be the best option. You save money on capital gains tax; you don’t have the constant responsibility of being a landlord or the hassle of moving to a new house yourself and you get a large cash injection. If you currently rent but have significant debts, selling to enable you to pay things off could be a good idea too, as it will allow you to improve your credit score before you get on the property ladder. You could even have plenty left for a good deposit.

However, selling has associated costs of its own. You’ll need to make sure the house is in sellable condition, pay to get it valued and pay estate agents fees. If it’s on the market for a long time, these fees increase, and you have to wait for your payout.

It’s also the only option on this list that’s final. Once the house is sold, that’s it. There’s no changing your mind once the sale has been made.

Use it as a Business Premises

Another option is to use the property in another way. If it’s in a great location, you could convert it into a business. Perhaps a shop or restaurant. If you work from home and need some more space, it could give you an ideal solution. These options very much depend on location and how much the conversion would cost.

Another alternative use is hiring it out as a holiday property. If it’s in a great location that would attract tourists or people on business trips, list in on Airbnb and make some money off it. Then, there’s nothing to stop you keeping it as a second home when you need a break yourself.

When deciding what to do with your inherited property, there is a lot to consider. Your own living situation, your income, cash flow and debt levels, your long-term plans and the home’s condition and location for a start. So, wait if you can, let yourself grieve and then take you time to reach the right decision.