So, you’ve recently inherited a house-now what?
Inheriting a home can be an emotional and stressful endeavor, especially if there are multiple family members involved. There are a few routes available, depending on what works best for you and your family.
Due to the tax and mortgage status of the inherited house, some options may seem better than others. In the most basic sense, when you inherit a house, you have 3 options: move in, rent or sell.
Renting An Inherited House
This can be a great option if the inherited home is in a good neighborhood with high value. Besides retaining the ownership of the home, added benefits include tax depreciation to the home and improvement costs. However, if you sell down the road, you will have to repay the depreciation along with a capital gains tax.
If there is a reverse mortgage from the original owners, you will have to refinance the property before renting. You will also need to transfer the insurance to a landlord policy.
However, this option really only works if you live near the property. You will have to hire a management company if there is a substantial distance. Or you may want to consider selling.
[MORE: 8 Tips to Prepare a Home for Rental]
Selling An Inherited Property
Many see this as the best option for dealing with inherited property. Selling the house will be easier if you make sure that all homeowners insurance, mortgages,current taxes and bills are in your name before beginning the process.
- Assess the market the home is in. Is it a profitable venture to sell?
- In what condition is the home? Will there need to be repairs? If so, what type of renovation costs are you looking at? It may be much easier to sell the inherited home to investors as-is.
- Is the home worth cutting a percentage of profit to a realtor?
- Is there still a mortgage on the home? If one remains and you can afford to pay it off, do it. You may save yourself some trouble in the long run.
Remember: It’s important to consult a tax professional before selling. You’ll have to pay gains taxes on the appreciated value of the home, which sometimes makes selling financially stressful. There are also inheritance taxes that will need to be considered.
[More: How to Sell an Inherited Home]
Move In To An Inherited Property
This option isn’t always ideal, however, if the opportunity works for you, then moving into an inherited house has excellent long-term benefits.
You can take over the mortgage of a family member if you intend to make the home your new residence. Of course, the option still remains to sell or rent the home later.
Many find keeping the home as a legacy of the family is an advantage, as well as allowing for extra time to manage any remaining items from the previous owners.
Moving into your inherited property could bring about some changes. Taxes will be based on the current value of the home under you as the owner, as opposed to the rates paid by the previous tenants. Also, any senior citizen discounts no long apply.
[More: 5 Things You Probably Didn’t Know About Inheriting a House]