Rent, Renovate, or Sell: A Guide to Managing Your Inherited Property
Inheriting a property can be both a blessing and a challenge. If you know you’re not going to live in the home, the inheritance comes with a big decision: Should you maintain ownership and rent it out? Should you renovate it and sell it? Or should you sell it without bothering with a remodel? In this guide, we'll walk you through the pros and cons of these three options to help you determine which path is right for you and best aligns with your current situation.
Before you jump into decision-making mode, follow these steps to better inform your course of action:
Determine Your Goals: Take a moment—or a few days or weeks—to outline your goals for the property. Are you looking to maximize profit, sell as quickly as possible, or preserve historical value? Does the home/land hold sentimentality among your family? These factors and many more can act as north stars in your decision-making process, so it’s important to understand your objectives at the outset. That said, goals can change over time, so in some instances, maintaining a flexible approach and attitude can be beneficial.
Assess the Property: Before diving into any renovations or sales plans, take the time to thoroughly assess the inherited property. Hire a professional to evaluate its condition, including any structural issues and necessary repairs, and gather quotes from contractors for potential renovation opportunities. Having a clear picture of the current condition of the home and the costs of renovations can heavily influence your decision and will create clarity and ease as you move forward.
Renting may be a great option for inherited property
Perks and Pitfalls: Rent
If your primary goal is to turn the inherited property into a long-term investment, renting it out could be your best option. Depending on where you live and the state of the current market there, your tenants could help pay off the remaining mortgage (if applicable) and then some. If the home holds sentimental value—say, it was the house you grew up in or it’s a vacation home that has been in your family for generations—renting it out allows you keep the home in your family’s name and ensure that it’s well cared for, while also giving you or a family member the option to live in the home down the line if you choose.
But just as being a landlord comes with rewards, it also comes with risks and responsibilities. If you have problematic tenants who damage the property or consistently miss their payment deadlines, renting out your inherited property can become a big headache. Keeping the home under your ownership also requires upkeep and maintenance, so you want to be sure you have the capacity to facilitate roof repairs, replace faulty appliances, or resolve electrical issues, for example—as these common setbacks can eat into profits from your rental.
Perks & Pitfalls: Renovate First
If the home you’ve inherited is cosmetically or structurally dated, undergoing renovations and improvements before you decide to sell the property can entice potential buyers and maximize your profit. And if you make updates before listing the house for rent, you’re likely to get more rental applications, fewer complaints from tenants, and spend less time on initial maintenance projects.
The potential pitfall of renovating before making the next move is the upfront costs associated with remodels. It’s important to prioritize projects that will add value to the property while staying within budget constraints—for example, replacing the cracked and creaky flooring might be more beneficial than splurging on luxury appliances. And if necessary renovations fall outside your means, you might need to take out a loan to finance upgrades, which can cut into the profits made through renting or selling the property.
If you plan to embark on a renovation, you also run the risk of extended timelines and extra costs due to labor shortages, delivery delays, or unforeseen issues. Many contractors advise following the 30 percent rule, or setting aside an additional 20-30 percent of your renovation cost to cover unexpected costs, and mapping out the renovation timeline at the outset of the project to manage your expectations.
Perks & Pitfalls: List Immediately
When you sell a house as-is, the buyer purchases the home in its existing state, sparing you from paying for any upkeep or repairs that come with renting the house. This is a great option for those who don’t have the time or desire to maintain a property, who have no sentimental attachment to the property, and who don’t necessarily need to maximize their profits from the property.
The downside? Listing as-is might mean listing at a lower price point or, depending on your local market, less interest and a sluggish sale. A trusted real estate agent can help you strengthen an as-is listing and facilitate an efficient closing by effectively pricing the home, marketing the home to target buyers, and connecting with stagers to make the home look its best.
If you’ve recently inherited a home, Iron Works Realty can help! With our seasoned and professional approach, we help clients navigate the unknowns of property inheritance to give them peace of mind in an often challenging time. Contact us today to learn more about how to develop a real estate strategy that’s right for you.
