What to Do When You Inherit a Property
What to do when you inherit a property is a question that many people find themselves asking. If you are lucky enough to be in this situation, it is important to take the time to understand your options and make the best decision for you and your family. We will outline the steps that you need to take when inheriting a property. We will also discuss some of the things you should consider before making a decision. Here are the key steps and things to take into consideration when you inherit a property.
Take inventory of the inherited property
This includes taking stock of any physical damage to the property as well as any legal entanglements that may come with it. Some questions to answer include:
- What is the condition of the property?
- Are there any outstanding mortgages or liens on the property?
- Are there any easements or restrictions on the property?
- What are the current zoning regulations in place for the property?
- Get a professional appraisal so that you know the value of the property as-is
- What is the market rent for this property?
Consider your options
Get a realistic idea of what the property is worth. inherited properties often come with an “as-is” value, which may be lower or higher than the market value.
Consider your personal circumstances. Do you have the time and resources to take on a fixer-upper? Are you prepared to handle any potential repairs or renovations that may need to be made?
Weigh your options. After taking inventory of the property and considering your personal circumstances, you will need to decide what to do with the property. You can sell it, rent it, or live in it.
Selling the property
If you decide to sell the property, you will need to find a real estate agent who specializes in inherited properties. You will also need to get the property appraised so that you know how much it is worth. Once you have an idea of the value of the property, you can set a price and put it on the market.
Renting the property
If you decide to rent the property, you will need to find a tenant and draw up a lease agreement. You will also need to get the property inspected so that you are aware of any repairs that need to be made. Once the property is in good condition, you can start advertising it for rent. Many times, an inherited property is located far away from you. In these instances, sometimes folks feel like it is just easier to sell a property – other people can find a local property management company to manage the rental (these companies typically charge 8% to 10% of the monthly rent).
Living in the property
If you decide to live in the property, you will need to make sure that it is in good condition. You will also need to get any necessary repairs or renovations done so that the property is livable. Once the property is ready, you can move in and start enjoying your new home.
Tax Implications of Inherited Property
If you have inherited a property, you may be wondering what the tax implications are. The good news is that inherited properties usually have a stepped-up basis, which means that the value of the property for tax purposes is reset to its market value at the time of inheritance. This can result in a lower capital gains tax bill when you eventually sell the property. Make sure you understand the rules in your state.
With the stepped-up basis, your capital gains tax should be relatively limited if you decide to immediately sell the property the moment you inherit it. Stepped-up basis means that your inherited property avoids what’s known as “estate tax.” This is a federal tax that can apply to inherited assets, and it maxes out at 40%.
How to handle a Co-Inheritance
If you have inherited a property with one or more people, you will need to decide what to do with the property. You can sell it, rent it, or live in it. If you decide to sell the property, you will need to find a real estate agent who specializes in inherited properties. You will also need to get the property appraised so that you know how much it is worth. Once you have an idea of the value of the property, you can set a price and put it on the market. You’ll have to decide how to split the proceeds with your co-inheritor (or inherited).
Personal Belongings in the Inherited Property
If the property you have inherited is furnished, you will need to decide what to do with the personal belongings. You can either keep the belongings, sell them, or donate them. If you decide to keep the belongings, you will need to find a place to store them. Selling them in a garage sale or an estate sale are very common options. If you choose to donate them, you can contact a local charity. There are companies that handle the entire estate sale for you – this can save you alot of work and time especially if you live out of town. Be sure to check out the REALTOR recommended estate sale companies on HomeHub.
The Bottom Line
Inheriting a property can be a blessing or a curse. It is important to take the time to understand your options and make the best decision for you and your family. We hope that this article has helped you to understand what to do when you inherit a property.