When the time comes that you will receive your inheritance, what will you plan to do with it?
There are basically three types of questions that will enter into your mind: “Should I sell my inherited house?” “Should I move in it?” or “Will it be better if I just rent the house out?” This article can help you decide on the answer.
Selling the inherited house
According to FasterHouse, selling and dividing the profits from the inherited house is a good idea if it is a shared inheritance among you and your siblings. If you sell the house immediately after you inherited it, you are most likely to avoid owing capital gains taxes on its sale. However, you must make sure that the homeowner’s insurance on the house is up-to-date on payments and that the estate is the insured.
Before selling the house, you must also make sure that any mortgage payments, property taxes, and utility bills are all paid and settled. When selling the house, you should also agree on the minimum price that it will sell for. Consider the payments for any remaining mortgage balance, real estate commissions and transfer taxes in setting the minimum selling price of the house.
Moving into the house
This is advantageous if you are living near the inherited house. However, you must consider that when you move in, you may get an increase in property taxes since the senior citizens’ property tax break that your parents were enjoying will not be applicable to you. However, if you make your inherited home your principal residence, you may qualify for the capital gains exclusion once you decide to sell the property in the future.
Renting out the house
If you have strong emotional ties with the house, renting it out will be the best decision for you and any siblings that you may have. However, when renting out your inherited house, you should change your insurance coverage to a landlord policy. You may end up owing a lot in capital gains taxes once you decide to sell the house but at least you get to keep your childhood home longer while getting profit from its rent.
The decision that you will make regarding your inherited house will solely depend on your emotional ties to the place and your financial needs.