While it’s exciting to inherit a house, you need to understand that it comes with legal and financial responsibilities. You might also need to negotiate with siblings or other heirs. In many cases, property inheritance can cause unnecessary conflicts between relatives.
When you inherit a house, we suggest first creating a short-term plan to maintain the upkeep of the property while the estate settles. You might need to set a budget for property maintenance in order to meet your long-term goals. You might also need to discuss future and long-term plans with your siblings or other property stakeholders.
This article will cover important factors to consider when you inherit a property:
Financial and Legal Responsibilities
As soon as you inherit a home, you need to plan a budget for recurring expenses including maintenance, utilities, mortgage, property taxes, homeowners’ insurance and any necessary repairs.
The following are the common expenses that you need to prepare for:
Insurance
If the original owner of the property passes away, the property insurance should be updated. Some insurance companies will allow you to keep the old insurance until it expires, as long as you update the payment. However, other insurance companies will give you up to 30 days to find your own coverage.
If the property is in probate, you might not be allowed to get insurance under your name. This is because you can’t assume ownership of the house while it’s in probate. You can ask your insurance companies for options on how to get coverage if the property’s still in probate.
Mortgage
As the new owner of the property, you’re expected to continue paying for the mortgage. Failure to pay can lead to foreclosure, meaning you’ll lose the property without any compensation from the bank.
To find out if there’s an outstanding mortgage, check the property’s title. You’ll see a lien that should state the mortgage and what bank or lender holds it. Another alternative is to request a credit report for the person who passed away. The report will show the person’s outstanding loans and mortgages.
Other Outstanding Debts
The title of the property will tell you if there are other liens or outstanding debts secured by the property, including second mortgages and unpaid contractor bills. Since the property is used as collateral for these debts, it means you’ll essentially inherit the debts as well if you become the new owner of the house.
What to Do With Your Property
After identifying any financial obligations related to owning the property, it’s time to decide what to do with the property itself. If you’re the only one who inherited the property, it’s easier to make a decision based on what you need. If there are multiple owners however, it’s best to discuss your options with them to avoid conflicts and ensure a smooth transition.
Here are your options:
Use the Property as Your Own
Whether you’re the only new owner or you share this inheritance with other heirs, you might consider moving into the property and using it as your primary residence.
This is a great option if you can afford it. If you choose to make the house your residence, make sure you have enough financial resources to pay for the mortgage, maintenance and repair costs, utilities, taxes, insurance and other expenses associated with the property.
If there are siblings or relatives who share the inheritance with you, you can discuss your options with them. They might decide to move in with you (if the property is big enough to share), or you might have to buy them out of their shares. This means a larger cost and recurring expenses.
Rent Out the Property
If you don’t have plans to stay in the inherited home, you can always rent it out. Using your inherited property as a rental property is a great idea because it will become an income-generating asset.
This means that your inheritance will essentially become an investment, helping you cover its associated expenses and eventually earning returns.
You might need to invest money into your inheritance property to convert it into a rental home. For example, the property might need repairs and renovations to make it appealing to tenants. In most cases, this investment will pay itself off as your property becomes a great source of additional income.
You have to understand, however, that being a landlord requires time and hard work. If you’re up for the challenge, this option might be perfect for you. You can also always partner with an experienced property management company like Florida Property Management & Sales to help manage your property effectively.
Sell the Property
If keeping or renting out the house as your own is not a practical option for you, the best course of action is to sell it. Selling an inherited property is usually common among those who inherit it with other heirs. This can help you pay off mortgages and earn extra income.
If you decide to sell the house, make sure to cover the expenses, including the mortgage, taxes, and the cost of preparing the house for the market. If you have the time and budget, you can have it renovated first to increase its value and maximize your profits.
Bottom Line: Understand Your Options
Though inheriting a home is a blessing, it can also cause stress. Florida Property Management & Sales suggests you understand the financial and legal responsibilities of owning an investment property so you can better decide how to move forward.
It’s important to discuss future plans with all other stakeholders in order to avoid conflicts. If you decide to rent out your inherited property, consider partnering with Florida Management & Sales.
We’re happy to discuss inheritance options and property management services with you in more detail. Reach out to us today by dialing (954) 752-4800.