Perhaps a dear loved one left you something special to commemorate your relationship; perhaps some long-lost relative included you in their will to your surprise. However you gained your inheritance, you need to be careful to manage the windfall appropriately — and that can be easier said than done when it comes to real estate.

If you aren’t familiar with real estate investment, managing inherited real estate can seem daunting. Here are a few options for what to do with your new real estate property, so you can make the most of your inheritance.

Understand Taxes

Inherited property is subject to a bevy of taxes: federal and state estate taxes, state inheritance taxes, property taxes and capital gains taxes. Understanding these taxes more should help you make a decision regarding what to do with your own property and how to handle any real estate you inherit.

Estate taxes. The federal government and states impose estate taxes to ensure that wealthy Americans do not have pockets of income that go completely untaxed. Fortunately, estate taxes are paid out of the deceased’s remaining estate, not by heirs, so you don’t need to worry about these taxes when considering what to do with inherited real estate.

State inheritance taxes. Only a handful of states — Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania — impose inheritance taxes, which require heirs to pay a tax on the net worth of the inheritance. This includes any real estate included in the bequest.

Property taxes. Every state has a minimum property tax, which means you will need to pay taxes on every piece of real estate you own. This might affect what you choose to do with any property you inherit, if you cannot afford the taxes on the property.

Capital gains taxes. Capital gains are the money you make when something you sell has appreciated in value. It is typical to pay capital gains taxes on inherited real estate because there is typically a financial difference in the value of the property bequeathed to you and the value you sell it for. If you do sell your inherited property for its stated value (or less) you can avoid capital gains taxes.

It is important that you look into your local and state tax code to better understand which taxes apply to your unique circumstances and affect your inheritance.

Navigate Co-heirs

Rarely is one person the sole inheritor of a large estate. Most likely, you are co-heirs with siblings, children, spouses or other members of your family. Unfortunately, real estate isn’t as easy as cash to split up amongst the heirs, so it is critical that you keep communications open with your co-heirs to prevent any lawsuits amongst beneficiaries.

Move in

There are many good reasons to keep an inherited property and make it your primary residence. Often, inherited property is a step up from an heir’s current living situation; moving could be a practical decision for you and your family. Yet, before you start packing, you should consider how the property will affect your budget. You may need to assume responsibility for mortgage payments if the estate does not own the real estate outright or allocate resources to pay off the mortgage debt. Additionally, you will be financially responsible for property taxes, insurance, utilities as well as any repairs or renovations required.

Use the Investment

Real estate is an investment, and you might consider using this inheritance as such. Both residential and commercial properties can be rented out to supply you with some passive monthly income. However, it might be wise to take a real estate course to better understand commercial property investment before you make this decision. Real estate investment certainly can be lucrative, but it is also potentially a financial liability if you don’t know how to handle your properties properly.

Sell the Property

Selling an inherited property is often the most straightforward option, especially if you are dealing with belligerent co-heirs. Still, selling also has its share of snafus, such as waiting for a probate court to settle the estate and properly reporting the proceeds of the sale on your taxes. It might be worthwhile to look for a real estate agent familiar with inherited property to help guide you through this process.

Inherited real estate is a generous gift, indicating that the deceased held you in high regard. However, real estate is also a significant responsibility, so it is worth exploring all your options before you make a decision.