Death is never an easy subject to talk about, but there are occasionally good outcomes that result from a loved one’s passing.
While most people don’t like to sit around and think about what they’ll inherit, there may come a day when you suddenly have rights to possessions or property that you didn’t have before.
And, if your inheritance is in the form of a house, you may have no idea what to do!
Not sure where to start? Don’t worry, we got you covered.
Let’s take a look at everything you need to know about how to handle an inherited house.
1. Try to Keep Money and Memories Separate
This is one of the most difficult things for people to do when they inherit a house. They often can’t bear the thought of someone else’s belongings in their old bedroom, or another family’s photos on the wall.
But, there’s often good money to be made from selling a house that you can invest in other projects (or a stock portfolio).
If you and your family could greatly benefit from the money you’d receive from selling the inherited house, give it some serious thought. It’s not often that you get an opportunity to catapult yourself forward financially.
Selling becomes an even more appealing option if you have siblings, as it’s unlikely that you and your brother or sister (or both) are going to live in the home together.
2. Think Hard Before You Move in
In some cases, suddenly having the deed to a home fall in your lap can seem like a dream come true (minus the circumstances). But, you should take some time to really think about whether or not you’d like to live there.
Unfortunately for those who inherit homes, living on the property will almost constantly remind them of their loved one’s death.
Pictures, old heirlooms, and even certain characteristics like a squeaky door can trigger flashbacks. This is particularly true if their death occurred in the home.
Even if all the belongings are cleared out, the memories often remain.
If you are someone who could use a home upgrade and won’t have a hard time getting past the sentimentality, moving in is likely a viable option.
For everyone else, be aware of what you’re getting into if you decide to relocate.
3. You May Be Eligible for a Tax Break
Capital gains tax is something that many people making large sales dread. If you sell an asset (a home, for example) for more than what you originally purchased it for, you have to pay taxes on this amount.
Inherited homes are subject to different rules, however. When you inherit a house, any market value increase the home might have had is untaxable.
For example, let’s say your parents purchased their home in the 1980s for $200,000 in today’s money.
After their passing in 2019, the home is worth $450,000. Although there is a $250,000 difference, you aren’t responsible for paying taxes on it.
However, let’s say you hold onto the home for a couple of years. The market shifts and now your home is worth $500,000. If you choose to sell it for this amount, you’re responsible for paying a capital gains tax on the $50,000 difference.
So, if you’re looking to sell, it’s often best to do it sooner rather than later if the home has significantly increased in value. That also means taking care of any necessary renovations as quickly as possible.
If you’re in the Brooklyn, New York area and looking for ways to sell your home quickly, you can learn more about that here.
4. Don’t Forget to Consider Renting it Out
The last thing you want to do is forego selling the house because of its sentimental value and also not move into the home. Then it’s just sitting around while you pay to maintain it in the form of homeowner’s insurance, utilities, etc.
As previously mentioned, siblings make an already complicated situation even more difficult. One of you might want to sell the home while the others want to keep it.
Renting the home, however, can allow you to maintain ownership and bring in a stream of residual monthly income. For many, this is the best option as it removes the trouble of having to jump through the various hoops that selling a home entails.
Renting also allows you and your siblings to split the monthly revenue.
There are, however, some factors about renting out an inherited home that you need to keep in mind. These include:
- You are responsible for damage/repairs that may need to be taken care of while the tenants live there.
- Being a landlord can be a stressful responsibility if it isn’t your main source of income. You’ll occasionally have to drop by after you 9 to 5 to see how things are going.
- Similarly, handling repairs is also done on your own time.
- In cases where you need the tenant to vacate the home, eviction can be a lengthy and costly process.
As long as you’re prepared to face the potential issues that come with having tenants live in your inherited home, you can turn this endeavor into one that puts plenty of extra cash in your pocket.
Knowing What to Do With an Inherited House Can Seem Difficult
But it doesn’t have to be.
With the above information about how to deal with an inherited house in mind, you’ll be well on your way to figuring out the best option for you.
Want to learn more real estate tips to help make your life easier? Make sure to check out the rest of our blog!