If you’re reading this, chances are that you have no idea what to do with a house you’ve inherited. You see, inheriting a house isn’t always good news, as some people (such as yourself, perhaps) don’t plan to live in it. Perhaps its distance is too far away or it’s in a poor state that would require extensive – and expensive – repairs.
Fortunately, you have plenty of options if you don’t intend to live in it. You can, for instance, sell it for a profit. You could also rent it out if you’re interested in the life of a landlord. The choice, however, depends on certain factors such as the property’s value. In this article, we’ll go over the pros and cons of these two choices so you can decide what to do with your property.
So, You Inherited a House. Now What?
When you inherit a property, you have plenty of options. For one, you can consider the property as your residence. Otherwise, you could sell it for profit, or rent it out to earn rental income. Whatever you decide to do is up to you. However, you should carefully consider whether or not the property can still be sold at a profit, or if it would make more sense to rent it out for now.
A reputed property management company can crunch the numbers for you to pinpoint the more profitable option. As a rule of thumb, you should go for the option that guarantees more money.
Renting Out an Inherited Property: Pros and Cons
Want to rent out your inherited property? When you rent it out, you will basically have a buy-and-hold investment. Here are a couple of its pros and cons:
Pros of Renting Out an Inherited Property
By renting it out, you’ll be able to generate income for years to come. The best part? If you partner with a property management firm, you won’t need to lift a finger, as they will do everything for you. Whether you rent it out as a short-term rental or a “regular” rental, you’ll be able to benefit from a consistent cash flow. Rental income can help pay for your day-to-day needs, particularly if you’re retired.
And as you earn rent, you can claim certain tax deductions, such as deductions for depreciation, property management fees, legal fees, and more. Plus, over time, the property’s value will increase, so you can sell it for more profit in the future.
In addition, if you don’t want to live in the inherited property now, however you want to in ten, twenty years or so, you should rent it out for now. That way, when the time comes, you won’t have to purchase a new property as you already own one. In short, while you wait until you’re ready, you can rent it out and earn extra income.
You can even convert the property into a vacation home which you’ll only rent out for a few weeks per year!
Cons of Renting Out an Inherited Property
Running it as a rental property may not be the best option if it is in poor shape. If you, unfortunately, inherited a property that needs a lot of repairs, you’ll likely have to pay out of pocket to cover the costs. It is also worth mentioning that it will take time to recover the amount you spent on repairs. For instance, if you spent $50,000 on repairs and your rental rate is only $1,000, that’s equal to fifty rent payments.
You won’t always have tenants, as well. When a tenant moves out, you’ll have to deal with tenant turnover and find a replacement tenant fast.
Managing a rental property can be time-consuming, too. If you can’t commit your entire time to your property, you can consider partnering with property management services. However, it would still be ideal to be a bit hands-on, as this is one of the best ways to build a relationship with your tenants.
Selling an Inherited Property: Pros and Cons
Now that you know what the pros and cons of renting are, let’s take a look at the pros and cons of selling.
Pros of Selling an Inherited Property
One of the common reasons to sell the property is to make money immediately. If you can’t wait for your rental income to accumulate, sell it so you can put the money in your pocket ASAP. That way, you can use the money to invest in real estate such as a vacation home, perhaps.
If you’re the type of person who doesn’t want to deal with rental-related problems, your best bet would be to sell it. Property management can be challenging, and if you don’t have the patience to attend to tenant-related matters, chances are that you aren’t up to the task.
Cons of Selling an Inherited Property
Your property won’t always sell for a profit, particularly if its location could be better. With that said, even if your property is perfect, if it’s in a bad neighborhood, you won’t be able to sell it at the price you wanted.
If its condition is poor, you’ll also need to pay for repairs. On average, it costs 10 percent of the property’s purchase price to flip it. A property management agent can help you crunch the numbers, but expect to pay about $50,000.
Finally, if you’re attached to the inherited property, you won’t want to sell it to a stranger. In that case, it would be better to rent it out – that way, the property will still be yours on paper. If you want to feel closer to your loved one who passed away, you’ll be able to live in it, too. You wouldn’t be able to do that if you sold your property.
If you need emergency cash you can sell it instead of renting. In that case, consider your family members first before you approach selling it to strangers. You can also sell your property when you understand that your inherited property won’t be worthy of rent.
Conclusion
The expert property management agents at Luxury Property Care can assess your situation to figure out if you should live in it, rent it out, or sell it. If you do decide to rent it out, know that you can count on us to provide full-spectrum property management services in South Florida. We’ll ensure your inherited home is managed the way your deceased loved one would have wanted it managed.
For more information, call (561) 944 – 2992 or contact us online today.
