A parent or grandparent has recently passed away. In the midst of all the grief and turmoil, you’ve inherited a house that you need to deal with. Although it can seem overwhelming to tackle another project while you’re mourning, it can be fairly straight forward.
There are three paths you can take: sell it, rent it, live in it.
How do you decide which path is right for you? Here’s a quick and easy guide that will make this one part of the process a little easier.
When to Sell It
As sad as it is to let go of your childhood home, sometimes it just makes the most sense. If you don’t live in the state, don’t have the time and energy to be a landlord, or simply want to start fresh after the passing of your parent, selling is the right move.
If you are going to go the traditional route of listing it with a real estate agent, you’ll need to make sure the house is in selling condition. This means that you’ll need to go through all of your parent’s possessions, stage the house, and make all the repairs.
Make sure the homeowner’s insurance, mortgage, property taxes, and utility bills are paid. Once it sells, you’ll need to settle up the remaining mortgage balance, taxes, and other closing costs.
Thankfully, you pay limited capital gains tax on an inherited property. You only pay taxes on the difference in fair market value between the day you inherited the house and the day you sell the house.
If you need to sell quickly, you can complete the sale while the house is in probate.
When to Rent It
Renting is a smart idea if the mortgage is paid off, you’re looking for an additional source of income, and the house is located in a renting-friendly area.
As with selling the house, you’ll need to make sure the property is in rental-ready condition. This means you’ll have to remove all of the personal belongings and make the repairs necessary to attract renters.
You should be prepared to deal with ongoing maintenance, landlord duties and gaps in tenancy. If you don’t live nearby or don’t have the time and energy to be a landlord, you can always hire a property manager to handle the day-to-day operations. This can cost up to 12% of the monthly rent.
Like any home you own, you’ll have to pay annual property tax. However, as a rental, the house, and big-ticket improvements to the house, are considered depreciable assets.
When to Move In
If the home is in an area you want to live and the space works for your family, it may make sense to move into the house. This may be especially true if the mortgage is already paid off.
Be prepared to deal with maintenance, HOA fees, annual property taxes, and the emotions that come with living in your parent’s home.
If you decide to live in the house for a couple of years and sell down the road, you’re permitted the capital gain exclusions if you’ve lived there for two of the last five years – $250,000 for individuals and $500,000 for joint filers.
What to Do When You’ve Inherited a House
So you’ve inherited a house. No matter the situation, deciding what to do with the inherited property is always a little sticky. There are emotional and sentimental considerations to be made.
And if you’ve inherited the house with another person, say your two siblings, it can become even more difficult to decide what to do. But the information in this article should give you a good starting point.
If you decide to sell, we can buy it – in cash!