Losing a loved one can be a devastating time for the entire family. Not only are you dealing with grief and adjustments in your life, but there are also several arrangements that must be made following your loss. For example, you may inherit a house or other real estate during this time and may be unsure of what to do next.

While it can be difficult to suddenly find yourself the heir to your loved one’s property after their passing, it can help to focus on the practical steps you need to take to move forward. Here are important things to keep in mind if you inherit a house and how a property manager can help.

Weighing Your Options

After you inherit a house, you can break down your options into three basic choices. You can choose to move into the home, sell the property, or use the house for passive income by renting it out.

1. Use the Home as a Primary Residence

While this is often the most expensive option, some people will decide to move into the inherited house and use it as their primary residence. Of course, there are several factors to consider before making this decision after you inherit a house. You will need to evaluate the following:

• Is there a mortgage?
• What is the potential cost of taxes?
• Does the house need expensive maintenance or repairs?
• Will you need to buy out co-inheritors?
• What types of insurance will you need, and how much is it?

Depending on your situation, moving into the inherited house may be a great option. However, it can also cost you if the house needs a lot of work or the mortgage payments are high.

2. Sell the House

If you do not want to use the house as your primary residence, there is also the option to sell the inherited property. You may decide to sell your portion of the property to other beneficiaries who also inherited the house with you. You and the co-inheritors can also sell the house together, divide the profits, or use it to pay off any remaining debt your loved one may have left behind.

Keep in mind that you may need to do some work on the house and make necessary improvements to get the most from the sale. You may also be subject to capital gain taxes if you earn a profit from the sale. According to “step-up” tax rules in many states, your profit will be based on the house’s fair market value when you inherited it—not what it was worth when your loved one bought it.

3. Rent Out the Property

You can also choose to keep the house after you inherit it and rent it out as an investment home. This is a great option for those who are happy with their current residence but do not want to let go of the inherited house. This way, you will keep the property in the family while generating some income.

If there are co-inheritors, you may decide together that you want to rent the house and split the income and costs of maintaining the property. You can also buy out the other beneficiaries and rent the property on your own. Either way, you may need to invest in the property to bring it up to date and ensure the house is safe and secure for renters. Making these upgrades will also help attract the best tenants, which will help you maximize your rental income.

Things to Consider After Inheriting Property

The Probate Process

In general, a legal process takes place after a person passes away to review their will, the value of their assets and debts, and to whom these assets will be transferred. This process is called probate. During this time, estate assets (including real estate) are reviewed by a probate court to determine beneficiaries and how to distribute assets.

If your loved one had a will, there may be a designated executor who will file the will with the probate court and handle the probate process. If there is no executor, the probate judge will appoint one. However, laws do vary from state to state on this process. It is a good idea to hire a reputable probate attorney to help you navigate this process.

Determine If There Are Co-Inheritors

It is common to inherit a property with other stakeholders, such as siblings or other close family members. If there are co-inheritors, you will need to discuss options with them to determine how you want to move forward with the property.

Ordering an Appraisal

Knowing the property’s value may be a significant factor when deciding whether to rent or sell the house. If the house was not appraised recently, it might be beneficial to learn how much the house is worth before you choose to do anything. If the property has some value and does not need extensive repairs, it could be the ideal situation for renting and earning a passive income.

Evaluating the Property’s Debts

Another essential step in this process is understanding debts. Does the house have debts against it? If so, how much is still owed? What are the payments? Knowing the property’s debts and comparing that to the home’s value should help you decide between selling or renting.

Should I Hire a Property Manager If I Choose to Rent the House?

If you decide that keeping the house and renting it out is the best option for you and your family, it can be a good way to earn additional income. However, it is essential to do it the right way to make the most of the situation. It is all too easy to make first-time landlord mistakes, especially when you are unfamiliar with the rental process and legal requirements.

For example, you may not know how to properly market your rental or reach potential tenants, which leaves the house vacant for longer than it needs to be. Additionally, you might not understand the tenant screening process and end up with tenants who fail to pay rent or repeatedly violate the rental contract.

RELATED: 6 Reasons Why Tenant Screening Is Important

Hiring a property management company means you have a professional on your side who has the experience and tools to streamline the rental process. If you would like to learn more about working with a property manager, contact our property management team at Black & Cherry to hear about our services!