Inheriting a Home? Here’s How to Know if You Should Keep It or Sell It

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It’s important to make the right call. 

When family members pass away, they sometimes manage to leave behind a modest inheritance that helps their loved ones get on their feet or meet different financial goals. But what if your inheritance is something worth a lot more than a $10,000 check? What if you’re actually in a position where you’re inheriting a paid-off home?

In many regards, it’s an enviable position to be in. But it’s important to navigate your options carefully.

Occupy, rent, or sell?

If you’re inheriting a home, you generally have three options:

Move in and make it your homeKeep it and rent it outSell it and pocket the money

You’ll need to consider each option carefully before moving forward.

If you’re inclined to move into your inherited home, you’ll need to make sure you can keep up with the costs involved. Even if you’re not required to pay a mortgage, you may find that the cost of property taxes, homeowners insurance, maintenance, and repairs is beyond what you can swing on an ongoing basis.

In fact, as a general rule, your total housing costs should not exceed 30% of your take-home pay. So you’ll need to make sure you can stay within that limit in the course of moving into your inherited home.

If you’re not sure you can afford to live in the home you’ve inherited, or you simply don’t want to (say, because it’s in a different neighborhood or even part of the country), then you do have the option to hang onto it and rent it out. But there are considerations to account for there, too.

For one thing, do you have the time and capacity to be a landlord? And are you willing to take on that responsibility? Also, do you even live in close enough proximity to manage that role? If not, you can outsource the job to a property management company. But you’ll pay a fee that will eat into your rental income.

And also, if you keep your inherited home and rent it out, you’ll ultimately be responsible for expenses like property taxes, homeowners insurance, maintenance, and repairs. You’ll need to make sure you’re okay with that.

Finally, you may decide you’re better off selling an inherited home and using that money for other purposes. There may be tax implications involved, so it’s best to sit down with an accountant or financial professional and see what you’re looking at.

A big decision to make

Inheriting a home might put you in a position where you have some difficult choices to make. The good news, though, is that all of the above choices have some upside.

If you decide to keep your inherited home and live in it, you’ve just gained a roof over your head. If you decide to keep that property as a rental, you’ll have ongoing income to look forward to. And if you decide to sell, you could end up with a heaping pile of cash, even if you end up losing some of that money to taxes and a real estate agent’s fee. So all told, you stand to come out a winner no matter which route you take.

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