Inheriting a home may be one of the most emotional and confusing ways in which you acquire real estate. Whether you have lost a loved one or your family member is still living yet unable to live independently, you now have another residence to consider on top of your own property list. Making the decision to sell the real estate, rent it, or fix it up to make it your own residence can be difficult.
In this article I want to help you get started in the process of making the right choices for you and your family by discussing some important options to consider when deciding the fate of an inherited home:
1. Sell the Home
While this may seem like a solid choice, keep in mind that the tax man will come. The house you are inheriting may not have a "Step Up" to its market value in terms of tax purposes. Without a "Step Up", you will pay tax on the full amount but with it, you will only be required to pay capital gains tax on the difference between the sale price and the value of the home at the time of inheritance. Before selling the home, consult a tax professional on the step up situation before you place a “For Sale” sign on the lawn. It may be in your best interest to wait before putting the house up for sale.
2. Rent the Property
Again, you may consider renting the home in an attempt to help with mortgage payments and to allow yourself additional income. However, you can only assume a mortgage as your own if you plan on living in the home yourself. If you want to keep the house as a rental, you will be required to pay the remaining mortgage out of your own income. If you fail to pay off the debt in full, the house will be sold and used as payment itself to the bank. Also keep in mind that, should you decide to rent the home, you may still be responsible for utilities, maintenance and general upkeep, depending on the lease you create. Consider whether you have the time and finances to devote to another property prior to making this decision.
3. Transform Your Current Residence
If a family member is still living and has lost the ability to live independently on the property, you may consider selling the home and using the money to build a mother-in-law suite onto your existing residence. Or, if you would rather not make additions to your home or you simply do not have the space to do so, some families sell both properties, the inherited home and their current residence, and purchase real estate that either has a mother-in-law suite already intact or the correct requirements and space to build a mother-in-law suite from the ground up.
4. Discuss Your Plans
To avoid potential family feuds, it is vital to discuss your plans with relatives ahead of time, assuming that you are the one inheriting the home. However, if siblings are not in agreement and you want to sell the property, yet your sister wants to live in it herself, or gain additional income from renting it out -- do your best to find a creative solution. Heirs who inherit a home together are known as “tenants in common” and, in these cases, one sibling can force the home to be put up for sale. Consider an agreement such as using the home as a vacation retreat or a timeshare while dividing expenses and taxes amongst all participating family members. You could be faced with financial hardships or even family feuds later on if you make a quick, rash decision. If you have inherited a house or think you may obtain property the future, make sure you understand the financial, legal and emotional aspects of each of your options before you take the first step. Avoid jumping to a decision that seems perfect right away, as many real estate investments could potentially hurt you farther down the road if you are not careful.
5. Find Someone To Help
Find Tom Bills @ www.TBillsHomes.com
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