Homes are commonly passed down to heirs, and it can seem difficult to know what to do. Trying to come to terms with inheritance can be overwhelming, especially when you are grieving. There can be both financial and emotional considerations to figure, and the picture can become more complex when there are siblings involved. Let us take you through the main options you have when you inherit your parent’s house.
Firstly, it is crucial to take your time before rushing into a decision. There will be important implications to consider that should be made once you have all the information required to make the best choice. Delaying the decision means you can make a more rational judgment, rather than one that is fueled by emotion. There are three main options that you have when you inherit your parents’ house. They are living in the home, selling the home, or renting out the home. All of these options have specific pros and cons, which we will discuss below.
Living in the Home
The first option to consider is living in the home. This can be the most practical option in some cases. You may have discussed this option beforehand, and therefore can plan for it. However, in other cases, it may come as somewhat of a shock. Moving into the home gives you time to sort through the belongings of the deceased. However, you may need to pay additional taxes. Moving also means that you won’t need to pay rent. Additionally, you may be able to profit if the inherited property goes up in value after a few years, and you decide to sell.
Overall, if it makes sense to live in the home both from a personal and financial perspective, then it is something that you should definitely consider. However, you should not feel forced to live in the home simply for nostalgic or sentimental purposes. Sometimes it can make sense to sell the home or put it out for rent.
Selling the Home
Although the home may have certain sentimental value, wanting to sell my home for cash is something that many individuals will consider. If you need funds quickly, there are many people that will buy homes for cash. Depending on the market and type of home, you should be able to find cash home buyers that can make you an excellent deal.
You should get the advice of a realtor who can check comparables and see recent sales prices for similar homes in the area. This will give you an idea of valuation, and you can gauge whether this would be an appealing price for you. One important thing to take into account is that the capital gains tax may not be due.
For beneficiaries, there is no tax charged if the sale is done to the valuation of the property’s fair value at the date of death. The 20% tax is only charged on the “stepped-up cost.” This means you can sell your home for cash without needing to deal with this significant tax.
You will, however, need to deal with any remaining mortgage balance, transfer taxes, and other various closing costs. If you do decide to sell, you will also need to deal with the belongings and prepare the home through staging.
Renting out the Home
The final option available to you is to keep the home, but rent it out. This can make sense if you don’t immediately require funds and are instead looking for a longer-term investment. You can get a stable monthly income for a prolonged period of time. However, you will need to consider the costs of maintenance and gaps between tenants. You can manage the property yourself or utilize the services of a property management team.
There is a fee involved, but it means you can take in cash without needing to do any work on the property and without the need to be available to tenants. For tax purposes, the home is considered a depreciable asset, and there is also the option to add depreciable improvements. This can help you save on costs. Even if you aren’t present, you can be satisfied with the knowledge that your parents’ home is bringing happiness to other tenants.
You should now have a clearer understanding of what each option entails when you inherit a home. There can be tough decisions to make, but it is vital to ensure that you have all the essential information available to you, and the capability of making a decision that is best for your long-term requirements. Selling your home for cash may be the option that works in your favor.