Renting an inherited home can be an exciting new opportunity to supplement your salary or a money pit. Many people don’t consider renting their inherited homes despite the fact that it only supplements your income without entirely losing the home. Before renting an inherited home you need to consider all the legalities, fees and tax that is involved in the process.
When you inherit a home you have four options: sell, rent, occupy or disclaim the home. Among the many reasons that can make you disclaim, rent or sell a home is if the beneficiary has another home, it requires extensive repairs, disputes among siblings or the mortgages and taxes are beyond your budget. If you don’t want to completely disclaim or sell your inherited home renting it is your option. Here are the pros and cons of renting your inherited home to prospective tenants you must weigh carefully before making your decision.
Pros of Renting Out an Inherited Home
The home value is likely to appreciate. The cost of a home appreciates with time. Today’s selling price is lower than after five years. Apart from appreciation, you can rent your inherited home as you wait for the market to improve.
- You become a landlord
Renting your inherited home supplements your monthly income. Real estate is a good business, the tenants will be paying for your mortgage. After a couple of years, the mortgage paid by tenants can equal the cost of the home but you still own it. The rent paid by tenants is a good and reliable source of income. You become your own boss.
- Rent goes up with time
In most places the population is increasing, the demand for houses and homes is increasing day by day. The increasing demands have made rents to be going up each and every year.
- Tax deduction
Renting your inherited home provides you with many tax benefits including interests, depreciation, legal and professional fee, travels and repairs.
Cons of Renting Out an Inherited Home
- You are in charge of all damages done by your tenants.
- Eviction can be time-consuming and costly.
- You are required to refinance your inherited home with your own name.
- It is hard to get a new mortgage while you’re still carrying a mortgage for your inherited home unless your income is strong.
- When you convert your inherited home to a rental property you lose a tax break or exclusion.