Inheriting a house can serve as a wonderful boost to your personal financial wealth. However, there are some things that you need to know to make the process of inheritance more streamlined ahead of time.
In this post, we tackle what you need to do if you just inherited a property. Please read on to learn more.
Consider Your Options
The first thing you’ll want to work out is whether you want to move into the property, turn it into a rental, or sell it.
If you move in, you’ll need to consider things like mortgage expenses and maintenance costs. You may also have to fork out for HOA fees if the home is in a unit in a larger building.
If you turn it into a rental, you can generate a financial return. However, you’ll have to manage tenants, deal with late payments and ensure that the property complies with rental laws. You can get a management company to do all this for you, but that will eat into your returns. You’ll also have to pay income tax on the money you receive, again, reducing your returns.
Lastly, you can sell it. Expect to pay high costs for transaction fees. Also, you may have a tax bill if there is a big difference between the sale price and the fair value of the home.
Learn What To Do About The Mortgage
Many people who pass their estates onto their children still have mortgages to pay on their property. So if you inherit the estate, you take on this liability.
In some cases, you’ll want to use trust loans. These are ideal for anyone who passes their property onto you (or others in your family) in the form of a trust. Such loans can provide the liquidity that you need to avoid selling the estate.
In some cases, you’ll have to fork out for a “due on sale” mortgage. These mortgages stipulate that inheritors must pay off the remainder of the mortgage when the owner of the property dies. In some cases, therefore, you might have a large bill to pay. You’ll want to find this out in advance if you plan on keeping the property. Otherwise, your only option could be to sell.
You might also inherit what banks call an “underwater property.” In these situations, more is owed on the home than it is worth. In many cases, the bank will accept less for the home than the value of the outstanding loan, but not always.
Find Out About Repairs
In many cases, you will have to make repairs to the property to bring it up to standard. If you have just inherited a home, get an inspection. Make sure that you check all the areas most prone to damage, particularly the roof, foundation, and windows. Home inspections aren’t cheap, but they are effective. They can tell you whether it is worth your time renting the property or just selling it outright and allowing somebody else to deal with the problem.