If you have a relative who has recently passed away, you may stand to inherit a house. In fact, you may inherit multiple houses if the person had a full real estate portfolio to manage.
If you’re new to the world of real estate investing, or if you’re totally unfamiliar with home ownership, you may not know what to do with an inherited home. What are your options and how do you make the best choice for your situation?
Your Immediate Responsibilities
Let’s start by focusing on your immediate responsibilities. When you inherit a home, there are a few hurdles you’ll need to jump through before you decide what to do with the house long term.
- Negotiation and finalization. Depending on the arrangements in place and the nature of your family, you may need to negotiate or make a plan for what to do with the house with other people. For example, if you and your siblings jointly inherit a house, you’ll need to jointly decide how to move forward; siblings have the option of buying out other siblings, selling the house and splitting the proceeds, or even living together in the same house. You, your family members, and your lawyers can decide how best to navigate this.
- Mortgage responsibilities. After you inherit the house, you will be responsible for the mortgage, regardless of what you decide to do with the house in the future. Depending on your current financial situation, you may be in a position to pay off the mortgage, but at minimum, you’ll need to continue making payments. Otherwise, you risk foreclosure.
- Maintenance and upkeep. You’re also responsible for maintaining the house. If a pipe bursts, you’re the one who has to fix it. If your lawn is required to be mowed at a certain interval, you’re responsible for making arrangements to do the mowing. If you live close, you might be able to take care of these things yourself; otherwise, you’ll need to hire someone.
- Insurance. You’re responsible for securing insurance for this house; you may be able to take over the existing policy, or you may be interested in securing a new one.
- Taxes. You’re also responsible for paying property taxes. Both insurance and property taxes may already be incorporated into your escrow account, allowing you to pay them every month with the mortgage. Otherwise, you’ll owe property taxes on an annual (or similarly regular) basis.
- Outstanding debts. If there are any liens or outstanding debts that have been secured by the home, you’ll need to recognize and manage those as well.
Your Long-Term Options
Now let’s look at the long-term options that are available to you. What can you do with this inherited house?
One of the most straightforward options is to move into the property. If you like the house, or if you need a house, this could be the best option for you. You can take over the mortgage as if you’re the homebuyer and enjoy all the benefits that the home offers.
Before you do this, conduct a home inspection so you fully understand any and all issues that may be associated with this property. It’s also important to conduct a financial analysis and make sure you can afford this house. Some expenses, like your monthly mortgage payment, will be easy to calculate, but it’s also important to plan for less predictable expenses, like home repairs. Only move forward if you’re confident that you can appropriately maintain this house with your current finances.
Another option is selling the home. If you’re not interested in moving in, and if you’re looking for the most convenient management option possible, this could be your best choice.
You have several options for how to sell the house. The most common way is to hire a real estate agent, list the house for sale, repair and stage the home, arrange showings, and eventually review offers. Unfortunately, this process tends to be long and stressful. There’s no guarantee you’ll get substantial offers, and it could take weeks or months before the sale is finalized.
You could also sell the house for cash, as is. The cash offer you receive will likely be slightly lower than market value, but the deal will close within a few days and you’ll have a much simpler, less stressful process to deal with.
If you’re interested in making more money from the property, you can also consider renting it. Actively managing a property is a lot of work, but it may be worth it if you can reap a significant monthly profit. Also, you can hire a property management company to do most of the work on your behalf.
Factors to Consider in Your Decision
So, how should you approach this decision?
Consider the following:
- Personal needs/desires. What is your gut telling you to do? And what is your current financial position? If you love the house and you can afford it, moving in is probably the best option. If you’re in dire need of money and you live far away, selling in cash is probably more appropriate.
- Experience and familiarity. How much experience and familiarity with real estate do you have? If you’re an avid real estate investor, you’ve probably already made up your mind on what to do with this house. If you’re a total novice, renting may not be the best decision.
- Geographic location. How close are you to this house? Would you be able to move in without completely uprooting your life? Can you manage this property conveniently?
- Home condition. Keep the condition of the home in mind. If it’s in excellent shape, moving in or renting the home could both be viable. If there’s a lot of work to do, selling as is would save you a ton of time and effort.
- Your time and stress tolerance. Some of these options are more stressful and time-consuming than others. How much extra time do you have? What are you willing to do? Becoming a landlord is a lot of work – and so is selling the home conventionally. If you want to make this as fast and simple as possible, selling in cash is the best option.
Dealing with an inherited house can be stressful, even if you’re excited and grateful for this financial opportunity. If you want to make things as simple as possible and sell the house for cash you can use for anything you want, Light Street Residential could be exactly the partner you need. Get your free cash offer today in mere minutes!