Inheriting a property can be bittersweet. You may still find yourself dealing with loss and grappling with grief. Yet at the same time, you have also acquired a large financial asset that could set you up for life. Deciding what to do with it is imperative. Generally, the options are to sell or rent it out. But how do you determine which is for you?
Consider Your Personal Goals
The right path will be different for each person, and it depends mainly on your financial and personal goals. The big question is, do you want to increase your income, or do you need cash for other goals? These may include pursuits such as dream vacations, new belongings like cars, paying off your current mortgage or even investing money elsewhere.
Selling an Inherited Property
If it is a split inheritance, you may be forced into selling a property. You should be aware that there are solutions when questioning how to sell your house quickly without having the long traditional estate agent process. This involves using a company that will make a fast, cash offer. With designated closure days often turned around as quickly as a week, it can be much easier when going through a grieving process.
The downside is that you will lose long-term profits. Rental is a steady income, and property accrues value over time. You must also pay capital gains tax, which can take off a lot of the final price.
Luckily, there are many benefits to selling. You get liquid capital that can be used for other pursuits or just left to mature in a bank account. You don’t have to pay maintenance costs on a property, and you don’t have the burden of managing it. This can involve getting certificates and resolving disputes with tenants. If this is on top of a full-time job, it can be draining.
Renting an Inherited Property
Renting is a great way to boost your monthly income. Rental yields are currently at a high. As you probably won’t have a mortgage, after tax, this is all more disposable income. You will also gain money through appreciation. This is the value a house gains over time as prices rise. As the capital gains tax is not imposed until you sell, holding it for longer will defer having to pay this amount.
The downside to renting is that property maintenance is hard work. It takes money, time and resources. You can pay for a management company to do it all for you, but this is something else that will cut into your yield. You must file an income tax return each year, too, and this will also take away from the monthly income.
There are also upfront costs to consider. If a property needs renovation, then this must be paid for so the house is habitable.
Thus, the decision lies with you. There is no reason you can not try renting it out and sell it at a later date. With this method, you get the benefit of rental income and see the value appreciate. In any eventuality, you now have an asset that will prove invaluable in any form.
