Who knew that inheriting a house would mean inheriting so many decisions?

It's true. Losing someone is hard enough; now that you've inherited a house, you must decide to sell it, live in it or rent it.

Here's what you need to know to make the most informed decisions: 

Are you inheriting a property with co-owners? 

Typically, co-owners will share equal responsibility for debts, liabilities and income. Rent, property taxes, property insurance, property management fees, maintenance can usually be divided among beneficiaries. This means juggling a lot of tasks - and a lot of people. If your parents left their house to you and your siblings, it's unlikely that you’ll all pack up and move in together. Selling may be ideal if splitting the money equally from the sale can be agreed upon.  Renting it out is a viable alternative and a great way to generate extra income. On the other hand, shuffling landlord duty is time consuming. 

Is there a mortgage still to pay? 

If the person who left you a property also left you with a mortgage, you have to pay it. That is, assuming you will keep the property. Some banks will allow you to assume the loan, while others may force you to refinance. If you don’t qualify for a new loan, renting out the home may not be an option. 

Are you willing to manage the investment? 

Dealing with brokers, maintenance, tenants, rent collection and all the nuances of property management begs constant time and energy. You may consider hiring a professional to help, in order to keep the investment - as your new home or a rental property.  Either way, you need to be prepared to manage the property, problems, people and hassles that can go along with the investment. Or, you can cash out. 

Can you afford property ownership? 

Quite likely, something about the inherited home needs maintenence, repair or renovation. One option is to hire a  property inspector to give you a detailed rundown on what you’ll need to do within a certain time frame, (i.e. the next five years) as well as a list of associated, estimate costs. Fixes, updates and upkeep can be very expensive.

Can you afford to sell for top dollar? 

In general, you’ll want to recognize some of the taxes involved.

Inheritance taxes are levied on the transfer of assets, at death. Most beneficiaries will never have to worry about them because only some states collect them. Estate taxes are imposed on the fair market value of the property (FMV). If, say, you’re able to sell the property for more than its FMV (calculated at the time of death) you’ll have to pay capital gains tax on the difference between the closing price and the FMV.

Generally, an inheritance is not considered income, so you won't have to report it on a state or federal income tax return. The property that you inherit may have built in income tax consequences. Additionally, with so many misconceptions about taxes and inheritances it’s wise to consult with an estate planning attorney or accountant.

 If you don’t want to deal with making repairs, updating kitchens, improving landscaping and overall cleanup, don’t worry. Local professional investors can help you take the property off your hands for fair-market value, as-is, and often for cash.

Do you understand the value?

Professionals can analyze the value of your property today versus the long-term benefits of renting or selling. If you can use the equity in your property in another way that outpaces the performance of the real estate market, you should. If you don’t have anything better to do with the money and the neighborhood is rising in value, hang on – real estate can be a great investment if you know how to correctly read the market.

We are seasoned real estate investors looking to buy several houses each month in the New Jersey area. Every month we get calls from those who have inherited a house and are looking to sell the house.

Once you've considered your options -give us a call and we can help you navigate the process of selling your house.