You've Inherited a House: What Are Your Options?
If you’ve inherited a property, a long list of decisions is coming your way. Knowing what to do when you inherit a house is the best way to turn that property into cash for your own goals as quickly as possible. It’s also important for helping you avoid excessive holding costs.
But before you can start to decide what you want to do with the inherited house, you need to first understand your options.
Your Property Inheritance Options
If the house has zero value or comes with other headaches, you might decide to refuse the inheritance right from the start. You’ll need to have a written disclaimer stating you’re refusing the bequest. Having a lawyer draft the disclaimer is a small investment that can ensure the document is completely legal and absolves you of any involvement or responsibility with regard to the estate. In most cases, that means probate will continue as if you were not even included in the will in the first place.
Fixing and selling makes sense only if the “fixed-up” value is substantially above what you could make by selling the property as-is. Remember, you’ll pay taxes on the amount you make above the step-up market value. Plus, you’ll have holding costs while the property is being renovated. Since renovations rarely stay on schedule, factoring in construction delays (and extra holding costs) can help avoid unpleasant surprises. If the home is old or has deferred maintenance, you might want to plan ahead for additional costs and problems as the renovation proceeds. If you factor in all those potential costs and you can still make substantially more than if you sell as-is, it’s an option worth considering.
The fix and rent method combines issues from fixing and selling with the realities and responsibilities of being a landlord. Landlording is a business, and as with any business, without the right training and skills, you can wind up losing your “job” and a lot of money in the process. One bad tenant is all it takes to tie up your property for months or years, and tenant damage can easily run into the thousands. If you choose this option, be sure you have the skills, understanding, and support you need to avoid these and other pitfalls.
If the inherited home is superior in some way to your own home, living in it could be a good option, especially if you’re inheriting a house that is free from a mortgage loan. If you’re inheriting a house with a mortgage, you’ll need to arrange for your own mortgage right away to replace the decedent’s mortgage. If you do decide to take this option, make sure you know all the expenses involved in owning the home, including property taxes, insurance, HOA fees, and extra costs for utilities, repairs, or maintenance.
One of the fastest ways to turn your inheritance into cash for your goals is to sell your property without making any improvements. An as is sale means the buyer takes on the headaches and hassles of fixing it up. They also take over all the holding costs and risks associated with vacant property. Plus, when you sell as is at the current market value, you don’t have to worry about capital gains taxes. Companies like HomeGo make the process as simple as possible by handling all the details so you can focus on your own goals.
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