Should I rent out or sell an inherited property?

Inherited property feels like a blessing filled with nostalgia and memories. But beyond the sentiment, it also comes with financial and legal responsibilities. From property taxes and maintenance costs to deciding whether to sell, rent, or move in. An inherited home isn’t just an asset- it’s a major financial decision.

And here's what many people don't realize- inheriting a house isn't always as simple as getting the keys and deciding what to do next. There's probate (the legal process of validating a will), potential mortgage considerations, and often co-inheritors to deal with.

The big question: What do I do with this house?

1. Sell it: Take the money and move forward.
2. Rent it out: Turn it into a source of income.
3. Move in: Make it your own home.

But if you’re like most people, your mind is probably spinning. “What if I sell it and regret it later? What if renting is too much of a complication? What if I move in and it just doesn’t feel right?”

Selling an Inherited Home

An inherited home can be valuable, you'll eventually need to decide whether to sell it, live in it, or rent it out. For most situations, selling the property and distributing proceeds among heirs is often the most practical solution. 

Let me help you take a walk through it.

Whom Is It Ideal For?

Renting can be a viable option for those with stable finances who can manage occasional repairs, but is it the right choice for you? It offers passive income and tax benefits. Along with that, it also offers long-term financial growth, especially in desirable locations. 

However, being a landlord comes with challenges. May be its a smart investment but at the same time, it requires careful planning and commitment.

As a landlord, you control rental pricing and tenant selection, but the responsibilities that come with it, such as maintenance, repairs, and legal compliance, can be demanding. Hiring a property management company can help but will cut into your profits. Additionally, rental income is taxable, and legal eviction processes can add further stress.

On the other hand, selling is a better option for those seeking quick cash without the burdens of ownership. It’s ideal for individuals who live far from the property, have no interest in becoming landlords. Selling also eliminates the ongoing costs of maintenance and property taxes. Thus, making it a practical solution for those looking to avoid financial strain. 

Reasons to Sell your Inherited Home

There are many factors to consider while you are taking the route of selling your inherited home for quick cash which are as follows:

1. Vacant Properties Generate Expenses

Even without a mortgage, an empty house accumulates costs: property taxes, insurance, utilities, and maintenance. Without regular care, the property deteriorates over time, potentially decreasing significantly in value.

2. Renting Isn’t as Simple as It Seems

While renting might seem like a good way to generate income, becoming a landlord requires time, effort, and financial investment. Managing tenants, handling maintenance, and keeping up with legal responsibilities turn it into a full-time commitment rather than a passive investment.

3. Inherited Homes Often Need Major Repairs

Many inherited properties are in less-than-ideal condition, often due to aging homeowners who struggled with upkeep. Before you can sell, rent, or move in, costly repairs may be necessary. Even if you find a reliable contractor, unexpected issues can arise, adding to your stress and expenses.

4. The Probate Process is Time-Consuming and Costly

When someone passes away, their property usually goes through probate- a legal process that settles their estate. This can take months (or even years), and the legal fees, court costs, and administrative tasks can be overwhelming. Selling the house quickly can help you bypass lengthy delays and financial burdens.

5. You Could Benefit from Tax Advantages

Selling an inherited property sooner rather than later could mean significant tax savings. The home’s tax basis is adjusted to its market value at the time of the original owner’s passing. This means if you sell quickly, you likely won’t owe capital gains tax on its appreciation. Waiting too long, however, could result in a larger tax bill down the road.

Read the full list of perks here.

Capital Gain on Inherited Property

Before proceeding further, let's talk about some numbers. One of the biggest benefits of inheriting property is the "stepped-up basis".

For example: Say your parents bought their home for $100,000 in 1980. By the time you inherit it, the home is worth $500,000. If you sell immediately for $500,000, you pay NO capital gains tax because your basis (the value used to calculate gain) is "stepped up" to the market value at the time of inheritance.

However, if you wait a year and the house appreciates to $550,000, you'd pay capital gains tax on that $50,000 increase. The tax rate depends on your income and how long you held the property after inheriting it.
This tax advantage is a compelling reason many choose to sell inherited properties quickly rather than holding them as rental investments.

Pros and Cons: Rent vs. Sell

There’s no universal “right” answer. The best decision is the one that fits your life, your finances, and your emotions. So, take a moment. Sit with your thoughts. Take into consideration each and every advantage and disadvantage matched with that decision. 

Imagine your life a year from now- where do you see yourself? What feels right in your gut? And remember: This house is a gift. No matter what you choose to do with it, it’s still a part of your story.

I hope this blog has given you clarity on whether to rent or sell your inherited property. If you're leaning toward selling and want to explore an option with less complexities, we'd be happy to walk you through the process.

Contact us to discuss your specific situation and see what options might work best for you.