If you stand to inherit a property, such as a family home or vacation condo, the gift presents a critical financial decision: whether to sell, rent or keep it.
While the inheritance itself may be a blessing, often it’s the result of losing a loved one, which could complicate matters from an emotional and practical standpoint. Do you wish to hold on to the property for sentimental reasons? Is it financially possible to maintain it if you already own or rent a residence? Do you own it outright, or is it a split inheritance with other beneficiaries whose own financial situations and priorities will need to be taken into account?
Sorting through these and other questions can feel overwhelming, but don’t let that stop you. As with most major decisions, it helps to start with the facts. Here are some steps to consider:
As you work through these actions, here are some other considerations that come with the decision:
Parting ways with a family home can be emotional – even when you know doing so is right. Give yourself time to prepare the home for sale. This way, you can sort through your loved one’s belongings and find closure at your own pace. When the time is right, a cleaning company, home staging service and real estate agent can help you put the property on the market. If you make a profit on the sale, apply the money toward your financial goals. The extra sum can help make your goals of retirement, college tuition for grandkids or estate plans a reality. Selling the home has tax implications that vary by state, so talk to a tax professional for guidance.
If renting the home is appealing to you, research the rental market in the area. Determine if a reasonable monthly rental price provides enough cash flow to cover upkeep costs. Hiring a management company to clean, make minor home repairs or manage the rental process may be attractive, particularly if the property is miles away from your primary residence. Additional tax considerations may apply depending on the number of days you use the home versus rent the space to others. Consult a tax professional to understand if, and how, your tax situation may change. You also should determine whether the property is subject to rental restrictions related to local ordinances and homeowner associations.
The ability to continue family traditions and have a future retirement space or a vacation getaway may make keeping the home the right decision. If you’re sharing ownership with a sibling or another family member, it’s critical to clearly communicate – ideally in writing – how you will split the financial and maintenance responsibilities. If you inherited the home outright, the choices are yours to make.
Consider the following financial steps as well:
Making decisions after the loss of a loved one can feel overwhelming. It’s OK to take your time and ask for help with choices along the way. Guidance from a Realtor, attorney and financial adviser may help you be thoughtful about how the inherited home fits into your lifestyle and financial plan.
Paula Dougherty is a certified financial planner and private wealth adviser with Achieve Private Wealth, Ameriprise Financial Services LLC in Springfield. She can be reached at email@example.com.
Plans for the Finley Ridge apartment complex in the growing community of Ozark call for four buildings, four stories apiece, with 48 units each for a total of 192, as well as a 1,500-square-foot shared community and fitness room.