When you inherit a house - from parents or other family members - it can be an incredibly emotional time. There will be a sense of loss to deal with, of course, and shortly after all the funeral arrangements have taken place, there will be a mounting sense of pressure. Should you keep the property, and live in it or rent it out? Or should you just sell up and take the money, so that you can invest it elsewhere? In this guide, we're going to help you come to the best decision for your needs.
The pros and cons of keeping it
Let’s not forget that homes are incredible assets. And if the mortgage is paid off, you can hang on to the inherited house for years to come, and it can make you an even more significant sum of money when you sell, later on down the line. However, the waters are muddied a little when there are other people in the mix. It’s not uncommon for siblings to fall out -permanently - when arguments about the house and what should happen to it start to happen. Plus, the reality is that many inherited homes are a little on the rundown side. They have been lived in for years and may need major home repairs which could end up costing you a small fortune. Is it worth it?
The pros and cons of renting it out
Of course, you will still need to pay for a lot of repairs and renovations if you decide to rent the home out. And make no mistake about it, being a landlord is no easy task in this day and age. That said, it could provide you with all kinds of benefits. Assuming you have tenants at all times, you will receive a regular, monthly income. And if you hire a management agency to run the place for you - at a cost, of course, typically between 8-12 percent of the rent - it can ease a considerable amount of burden. The problems will arise when tenants leave, and you are unable to fill the home with new ones. It’s not such a bad situation if the mortgage is paid in full, but it will hit you in the pocket if you still need to meet your repayments.
The pros and cons of selling
Selling is probably the best option if you have other family members with a stake in the inheritance. Sure, you might want to keep the family home going, but selling gives you that instant boost of cash and will hopefully reduce the chances of feuds occurring. However, bear in mind that you will need to clear out the entire house from top to bottom. That includes anything stuffed in the shed, the basement, and the attic. It could be a lifetime of possessions, and you’ll need to decide what to dump, what to keep, and what to give away to charity. There will be significant tax implications, too. Uncle Sam sees your inherited ‘stock’ as a long-term capital gain, so you will have to offer the IRS anything up to 20 percent of the profits on a sale.
As you can see, there are pros and cons for each scenario. And the reality is that your situation will be entirely unique. Ultimately, it’s a decision that is down to you - good luck!
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