Understandably, this can be a very challenging time for many reasons, and dealing with property ownership can be tough even at the best of times.
You may be thinking, “I’ve inherited a house, so what should I do now? Should I rent it? Should I sell it? How should I sell it?”
These are all very common questions that go through peoples’ minds in these situations.
We can help!
Check out our considerations below for what to do when you inherit a house.
I Inherited A House, What To Do Next?
Here’s a few important considerations to help you make the right decision:
1) Make sure the mortgage is paid
This may sound obvious, but make sure you contact the lender and make plans to pay the mortgage each month. Sometimes people make the mistake of believing that if the house has been owned for decades that the mortgage will have been paid off, but this isn’t always the case. Many homeowners refinance into a new mortgage somewhere along the way.
Some lenders may allow you to assume the loan and transfer it into your name, while others may force you to refinance into a new loan. If you can’t qualify for a new loan, keeping the property and renting it out may not be an option for you.
2) Thinking about renting it out?
Some people who inherit homes consider renting it out for extra income. This is a great idea, but it can certainly come with its own set of headaches. if you don’t have the time or the expertise to screen for tenants, manage service requests, collect rent payments, and deal with general property upkeep, then you should consider hiring a property manager.
Do your homework here. Some property managers are better than others, so make sure to do the research.
Of course, all the other costs of owning a home still apply – like taxes, insurance, and mortgage payments, so just be sure that the rental income exceeds what you are paying out each month. You can check out the calculator here to see if the math works in your situation.
3) Property ownership costs money
It’s rare to see a house that’s been perfectly maintained, and most inherited houses need major improvements. There are a few ways you can go with this.
The easiest thing to do is just sell it “as is”. Depending on the condition and the area where you live, you may be able to sell it through a realtor – but you should also consider selling to an investor, particularly if you want to sell it quickly without spending any money on it.
Secondly, if you want to rent it out, you can make some updates to get it rental ready. To rent the home, you don’t have to put in a new kitchen, roof, or bathroom – but you should paint, re-carpet, and fix any obvious issues that would deter renters.
Consider hiring a professional property inspector to give you a detailed rundown on what you’ll need to do within the next five years, along with estimated costs. This will cost you less than $500, and help to prevent very expensive surprises. Then you can budget to replace the roof, plumbing, etc. that may not be in your budget today.
Lastly, if you do want to list with a realtor and sell for top dollar, then do your research on the pros and cons. You most likely will have to invest in some upgrades here, but can be a great option if you have the budget and time to do it.
4) Consider the home as an investment
If you are thinking about the house as an investment, then you can feel pretty safe that the value of the home will be stable or increase over the long term. But since we are in a very strong market in which home values have been increasing for the last decade, many believe that we are at the top of the current cycle.
Real estate as an investment goes through cycles about every 10 years or so on average. Since the last downturn in 2008, home values have been rising. If you plan to hold onto the home for at least another 10 years or longer than it may be a good investment in terms of appreciation.
But we don’t like to look at property ownership purely for appreciation reasons – especially since we believe that we are near the top of the market. Remember “buy low, sell high”…..
We look at real estate as a cash flow investment – similar to bonds. If you are able to rent the property and make a steady monthly income on it, and you are ok with riding out any potential market downturns, then a house can be a good investment.
There are certainly lots of considerations here, and it can seem complicated. We can help you analyze the value of your property today versus the long-term benefits of renting. Just reach out to us, and we’ll be happy to help!
5) Uncle Sam wants a piece of the action
Don’t forget to discuss your inheritance with tax and legal professionals before you take action on anything. There are going to be some tax consequences regardless of the direction you take. We can recommend some great CPA’s here in Atlanta that are real estate pros.
6) Consider your options
Honestly, there are many more options than simply selling or renting. You can structure a lease-option plan, turn the home into a short-term rental to list on Air BNB, you can renovate it and sell it like on HGTV, you can keep it and leave it in your will for your kids, an on and on.
Inheriting a home, especially from your parents, can be understandly very emotional. The probate process and all of these considerations that we’ve discussed in this article can be overwhelming. We get that. We see it a lot.
When you are ready, reach out with any questions and we will be happy to look at the situation and draw up a few scenarios for you. Of course, there is never any obligation or cost for our consultations.