What Happens When you Inherit a house?
Inheriting a house – most people would love to be in a position where a family member generously gives them a house. Unfortunately, the reality of the situation is often far more complicated and stressful than the average person assumes. And if you don’t know what to do, it could have unintended tax and legal ramifications that turn a would-be blessing into a frustrating curse.
3 Options When Inheriting a House
When it comes to complex financial situations, it’s best to simplify as much as possible. And while there are dozens of possible outcomes for an inherited house, there are really only three main choices:
- Move Into the Inherited House
The first option is to move into the house. If the property has sentimental value to you – such as the family home in which you were raised – this is obviously a very attractive choice. However, be warned that moving into an inherited house often comes with strings attached. Here are some considerations:
- Multiple owners? In many cases, real estate is inherited by siblings. There’s nothing technically wrong with this, but it does complicate things if one sibling wants to move in. This may require you to buy out the other “shares.”
- Monthly expenses. Does the house still have a mortgage, or is it paid off? This is obviously a big element in the equation. But even if you own it free and clear, you still have to pay property taxes and monthly utilities. Make sure you’re factoring in these costs.
- Upkeep. In many cases, older family homes need a lot of repairs, maintenance, and remodeling to be considered desirable. Consider the time and cost required.
We’re not telling you that you can’t move into your house – just that you have to consider this decision from all angles!
- Rent the Inherited House Out
If you want to keep the house but don’t want to live in it, your best bet is to turn it into a rental property. In many situations, this is actually the best option. It allows you to generate monthly cash flow and benefit from the real estate’s future appreciation. However, being a landlord isn’t for everyone.
If you’re going to rent the house, be prepared to deal with marketing the property, accepting applications, screening tenants, collecting rent checks, and handling inconvenient phone calls at inopportune times (oftentimes dealing with an emergency repair).
If you share ownership of the property with siblings, things get even more complicated. Not only do you all have to agree on rent prices, tenants, and various management processes, but the cash flow is seriously diminished. For example, by the time you account for taxes and repairs and then split the rent two or three ways, there isn’t always enough meat on the bone to justify the stress.
Carefully think about whether the stress of managing the property is worth the money. (Sometimes it is and other times it’s not.)
- Sell the Inherited House
If you don’t want to live in the house and don’t have any interest in renting it out, the final option is to sell the house. And in a hot market, this often makes the most sense.
The benefits of selling your inherited house include:
- Less complicated in the long run. Selling the inherited house right away might be more stressful initially, but it simplifies things down the road. This is especially true if you’re a co-owner with siblings. It’s better to sell it now, divide up the proceeds, and each make your own decisions independently.
- Pay fewer taxes. When you sell an asset that has increased in value since you originally purchased/received it, you must pay capital gains taxes on that amount. By selling your house quickly after inheriting it, you may be able to avoid capital gains taxes. (However, you should consult a CPA for more clarity.)
- No holding costs. Every month you keep the house is costing you (especially if you aren’t living in it). Taxes, utilities, and (potentially) mortgage payments add up. Selling means no holding costs.
- Gives you control. Don’t get us wrong – inheriting a house is a great problem to have! However, you might have other hopes, dreams, and financial goals. Consider the value of the house and what you could do with that money. (You might be able to get out of debt, start a business, or retire early.) By selling, you liquidate the asset and can use it as you see fit.
When it comes to selling your inherited house, you can obviously list it on the MLS. However, you may find it faster and less stressful to sell your house for cash. This speeds up the process and means you don’t have to worry about inspections, negotiations, and other complicated matters. For many individuals, this is truly the best option.
Samuel Property Group Buys Inherited Houses
At Samuel Property Group, we understand that no two situations are the same. Whether you inherited a house from your late parents and suddenly own it with three of your siblings, or you were given a property by a living relative and have 100 percent ownership – every situation is unique. Thankfully, we’ve seen a thing or two! And no matter how complicated your circumstances might seem, we can almost always find a satisfactory option that allows you to minimize stress and maximize your ROI.
Want to learn more about selling your inherited house for cash? Just fill out this simple form and we’ll get in touch to explore your options!