Pros and Cons of Inheriting a House That Is Paid Off

Author: Cory Pinter
Date: December 30
Inheritance Advice
Pros and Cons of Inheriting a Paid Off Home

In this guide, we will examine the promising prospects and the challenges that come with inheriting a home that is already paid off.

You will learn about the options you have when deciding whether or not to keep your inherited property.

Continue reading to be better informed as you evaluate your options.

Benefits of Inheriting a House That Is Paid Off

You Can Sell The House

When you’ve inherited a house that is paid off, selling it gives you a lump sum of cash.

No mortgage means you have 100-percent equity in the property. So, when you sell, all the proceeds — minus taxes and selling and closing costs — go to you.

Depending on the property value, that could be a large cash influx. Regardless of the amount, that windfall allows you to pay down debt, add to savings, or purchase other assets.

You Can Rent It Out

Not having a mortgage opens the opportunity to turn your inherited house into a rental property more profitably. Additionally, you gain flexibility to keep your options open for the future.

With no monthly mortgage payment, your property expenses are lower. So, rather than just sell a house during probate for a lump sum, you can receive a steady income stream for years.

If you need to sell the property in the future, you’ll still be able to do it.

When you’ve inherited a house with no mortgage, you can also get tax benefits, such as expense and depreciation deductions.

Additionally, the property may increase in value while you hold onto it, adding to your monetary gains.

On the other hand, being a landlord is also time-consuming, as you need to collect rent and address maintenance requests. Decide if it is better to sell or rent an inherited house after weighing all the pros and cons.

You Can Move In and Stop Paying Rent

If you inherited a house free and clear while renting an apartment, this inheritance gives you a significant financial advantage. By moving in, you get the opportunity to live rent-free.

Since rent is a large part of what you spend each month, eliminating that obligation makes a substantial chunk of cash available to use in other ways.

For instance, you can save more or use the extra cash for other purposes, such as investing.

Moreover, the house is an asset with appreciation potential that provides an opportunity to increase your net worth. Paying rent does not.

You Can Live in Your Childhood Home

If selling your parents house after death isn’t necessary, you could choose to live in the property and reap the emotionally compelling benefits of residing where you grew up.

For example, moving back to familiar surroundings can provide comfort in a time of grief. That environment can be especially beneficial if you still have strong ties to the community.

Your childhood home is also a physical and emotional connection to the past and can promote a sense of belonging.

Likewise, with no mortgage payments to worry about, you can focus on preserving and creating memories and carrying on the family tradition.

Drawbacks of Inheriting a House That Is Paid Off

Hassles of a Real Estate Sale

While selling your property can be monetarily beneficial, the non-financial side of what happens when you sell a house you inherited comes with its own issues.

Potential challenges when getting an inheritance in the form of a paid-off house include those listed below:

  • Needed repair work: If the house isn’t in the best shape (e.g., you inherited a hoarder house), you could spend substantial time and money preparing it for sale.
  • Inspections and appraisals: These can take a lot of time to complete and may turn up issues that can lower the sales price or require an investment in additional repairs.
  • Price negotiations: Reaching an agreement on a fair price with buyers or between heirs can be complex and hard-won, especially if multiple heirs are involved.
  • Wait time for offers: Market conditions affect how long it takes to find a buyer. That time translates into ongoing carrying costs and possible price reductions.
  • Capital gains tax: If you sell inherited property, it is taxable if you profit from it. To learn more about reducing your tax burden, read our guide on how to avoid paying capital gains tax on inherited property.

You can avoid, or at the least mitigate, many of the hassles mentioned above by selling to a company that buys inherited houses directly from sellers for cash.

These investor cash buyers offer an efficient option for selling that comes with several financial and practical advantages:

  • Proceeds on the spot: You can sell heir property for cash to eliminate the need for mortgage approval, so there’s no uncertain wait. Instead, you get an upfront cash offer.
  • Simplicity and speed: Choosing a cash buyer lets you sell your inherited house fast with a streamlined process that facilitates closing in days or weeks versus months.
  • Commission-free sale: Because there’s no agent, you keep what would have gone to a sales commission in your pocket.
  • Sell without repairs: You can avoid the expense of repairs by selling an inherited house as is. With these investors, there’s no obligation to fix anything.
  • Closing costs covered: Many cash buyers take care of settlement costs, reducing your financial obligations.

If you’re ready to move forward, get a cash offer from our screened and approved local companies. Then choose the one that best suits your situation.

For other selling options, check out our article on how to sell an inherited house.

Ongoing Expenses

If you keep the property, you’ll have ongoing financial obligations, even without a mortgage.

For example, you must pay regular dues if the house is part of a homeowners association (HOA). These fees vary significantly based on location, amenities, and services.

Recurring monthly costs include utilities, such as electricity, water, and gas. Property taxes are usually due annually and can be substantial, depending on the property’s location and value.

If you rent out the property, you must report rental income and pay any taxes owed. Also, routine upkeep expenses are a given, and unexpected repairs may arise.

Maintenance

Keeping a house in good condition to retain value calls for regular upkeep and proactively addressing issues. Both require time and attention, and costs can add up quickly.

If you’ve inherited a house that needs work due to age or neglect, handling the home’s upkeep may be particularly challenging. Such properties often come with progressive plumbing, electrical, structural, or HVAC problems.

Additionally, if you leave the house vacant for some time, maintenance becomes even more critical as a preventative measure.

Renter Problems

If you inherited a house and decide to rent it out, be aware that you might encounter challenges with renters such as the following:

  • Late or missed payments: Tenants who don’t pay on time or don’t pay at all could cause you financial stress as a landlord.
  • Lack of cleanliness: Messy tenants can create unsanitary property conditions that could require professional cleanup.
  • Property damage: Some renters don’t prioritize property care. That can result in excessive wear and tear or property destruction.
  • Lease violations: Breaches of lease terms, such as subleasing without permission or causing disturbances, can require legal action to resolve.
  • Neighbor disputes: Renters who are noisy, disrespectful, or disruptive can cause problems with neighbors and your reputation as a landlord.

Cory Pinter

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About the Author

Cory Pinter is a seasoned real estate investor with a proven track record of closing hundreds of transactions. Since 2018, he has specialized in inherited properties, providing invaluable guidance and support to individuals managing inherited real estate. Cory's comprehensive knowledge of the real estate market, combined with his empathetic...

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