What to Do When You Inherit a Property: Know Your Options
When you inherit a property, you have a lot of options. Maybe you were expecting the gift of a house and you’re excited to own it, or maybe you’re dreading the responsibility now that the property is yours. Whatever your situation happens to be, you need to be prepared, and you need to have an idea of what you want to do with the asset.
Inheriting a property isn’t like inheriting Grandpa Joe’s Rolex. You basically have three choices: You can move into the property yourself, you can sell the home and pocket the cash, or you can rent it out. The latter choice means you will turn your home into a rental property, thus setting yourself up as a real estate investor.
While you’re deciding which way to go, there are a few things to keep in mind.
Maintain Your Property
The first order of business when you inherit a property is to not let it fall into disrepair. You’ll want to keep it clean, maintained and protected. Make sure the utilities remain on. Be aware that you may need to switch those accounts into your own name. Some of the accounts can be canceled outright.
For example, unless you’re going to live in the home, you can probably turn off the cable and Internet service. There might also be accounts that need to be added. For example, if the property owner was meticulous about lawn care and no one is in the house now to mow and weed, you’ll want to consider hiring a landscaping service.
Assess Insurance and Taxes
You’ll also want to update the homeowner’s insurance. If the property is unoccupied for 30 days or longer, coverage may change. If you ultimately decide to rent out your inheritance , you’ll want to change your coverage to a property owners’ policy.
Check into what may be owed in taxes. If there’s a mortgage, make sure the payments stay current. There will be some paperwork involved with transferring the deed, the title and lots of other details. Don’t let those things fester. The work that’s required won’t diminish the longer you leave it. Get out ahead of these things so you can make a decision on what to do with the property.
Clean House, Literally
You also need to keep the property clean, especially if your end game involves renting out the property. Remove all the belongings that you and your family members don’t want to keep. Once everyone in the family has had a chance to claim the items they want, you can donate or sell the things that are left.
Consider Donating to Charities
If you’re willing to part with some items, consider donating to charity when you inherit a property. Many charities will be willing to pick up furniture and other items from the home. Whether you’re going to rent or sell the home, you won’t want to have clothing in the closets and photo albums in the attic.
Clean everything out. Once the belongings are removed, focus on cleaning the home. Hire professional cleaners if you don’t want to do it yourself. Have the property scrubbed and shining so you can really assess it and decide what you want to do.
This can be an emotional thing to do, and if you’re dreading the act of going through a parent’s personal possessions, ask for support from other family members or close friends. Even if you inherited the property on your own, you shouldn’t be left with the task of cleaning it out all alone. Get it done as quickly as possible, so you can move on.
Living in the Property: Pros and Cons
Living in the property you inherited can save you money, and provide you comfort. But, if you already have a residence that you love or you have a family that’s larger than the home will accommodate, moving in won’t be the best option. Maybe you don’t even live in the city where the property is located. That’s going to give you a good reason to sell or rent out the home as well.
If other parties are included in the inheritance, you’ll need to settle who owns how much of the home and jointly decide on what happens to it. Moving into a home that’s owned by you and two or three siblings could be awkward.
Selling the Property: Pros and Cons
If you have no interest in the property you inherited, the easiest course of action might be to sell it. Depending on the market and the amount of equity in the property, this could be a lucrative and profitable option. It’s also a wise idea if you inherited the home jointly with other family members or individuals. Everyone would get an equal share of the proceeds. However, if the market isn’t at its strongest, you might be leaving money on the table. Additionally, if the property isn’t in great shape, you’ll have to sell it at a lower price as-is, or invest some money in making repairs and upgrades.
Renting the Property Out: Pros and Cons
If you decide to rent out the home, you’ll need to have a complete home inspection. There may be updates and upgrades that need to be made to the property in order to have it in habitable condition for residents. Then, you’ll have to decide how much to rent it for and what kind of lease to offer. You could do a long-term rental with a lease of a year or more, or you can rent it out temporarily, on sites like Airbnb or as a vacation property.
The downside to renting out a home is that you need to find great and reliable residents. You need to know the laws associated with rental property, and you need to be available to respond to any maintenance or repair needs. Being a property owner isn’t easy.
Work with a Professional Property Manager
If you decide to rent out the property you’ve inherited, it’s essential that you hire a professional property management company. A property manager will remove a lot of risk and liability from your plate after inheriting a property. A good management company knows the market inside and out, and understands the resident pool. You’ll get a competitive price for your property, you’ll have excellent residents with a record of paying rent on time and taking care of properties. Plus, you’ll have a legally binding lease in place that your manager will enforce.
A professional management company will handle all routine and emergency maintenance. You’ll also have a better chance of earning more and spending less on the property.
When you’re making the decision about what to do with a property you’ve inherited, contact us at Mynd Property Management. We work with investors as well as accidental property owners like you, and we’d be happy to help.