Is It Better to Rent or Sell an Inherited House? An important and potentially life changing question in different ways. Here we explore the pros and cons of each and hopefully make coming to a decision easier for anyone in that position.
So you’ve inherited a house, what next?
Deciding what to do with your new property can feel overwhelming, especially at a time when emotions may be running high. If you’re not sure whether to sell your inherited house or rent it out, take your time considering the pros and cons of both options before reaching a decision.
Selling an Inherited Property
Selling the property has the obvious benefit of providing a lump sum, which could make life a lot easier if you’re currently on a low income or struggling to pay off debt. Alternatively, the proceeds of the sale might allow you to make a long-held dream a reality, such as travelling the world or setting up your own business.
However, there are both pros and cons to consider when selling an inherited property.
The Pros
Allows you to move on emotionally
If the property belonged to a loved one, you’ll have memories attached to it. Selling could sometimes be the healthiest option.
A lump sum could make your financial position healthier
If you sell the house quickly, you will have a lump sum that can be used to pay a chunk off your mortgage, clear debts or help cover living costs for years to come.
The proceeds could fund a dream project
Have you always wanted to travel the world or build your own business empire? The proceeds from the house may be enough to kickstart your dream project.
There is no ongoing responsibility for maintaining and managing the property. This may be a significant factor if you already have a property, live far away or work long hours.
Sharing the proceeds is easier than sharing the property
If there are family members with whom you wish to share your inheritance, selling the property will give you cash to divide up as you please.
The proceeds can be used to upgrade your existing home
If you own another property, the money raised from the sale could be used to improve it, for example, adding a new kitchen or converting the loft. Alternatively, you could upgrade to a bigger house or one in a more desirable location.
You could make more out of your inheritance by investing
Once the property is sold, you could invest the proceeds in stocks and shares or a high-interest savings account, which will increase the value of your inheritance long term.
The Cons
You may have to pay inheritance tax
You could lose a chunk of the sale proceeds, up to 40% to inheritance tax if the property is worth more than £325,000.
There won’t be any benefit from any future increase in the property’s value
Over time, the value of most properties will increase. Selling as soon as you inherit could mean that you get less than if you sell in several years’ time.
You may be liable for capital gains tax
And yes, this would be on top of any inheritance tax owed! Capital gains tax is only payable on the amount of profit you make from selling the property. This might apply if you sell the house after completing major renovation works or waiting several years for the price to rise.
There is no ongoing source of income
Once the house is sold, the proceeds constitute your entire inheritance. If you spend it all on a luxury holiday, the money is gone. Keeping the house could provide an ongoing source of income that could afford you a good pension and an early retirement.
Selling a house can be time-consuming and stressful
Selling on the open market can take months, and currently, with fewer people wanting to view properties it can cause delays in finding a buyer.
Keeping the home could be difficult
If the deceased was a close loved one and the property is full of memories, keeping it might be upsetting and emotionally draining.
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Renting Out an Inherited Property
Setting yourself up with a long-term second income sounds very appealing, doesn’t it? You could reduce your work hours or even retire early.
But let’s consider the pros and cons of this choice.
The Pros
Renting provides a long-term, regular income
In the current climate having the security of an extra income would provide peace of mind. It could also give you a better work-life balance and allow you the luxury of early retirement.
You can profit from future house price increases
The housing market may not be favourable when you inherit the property. You could rent the property out and earn an income while waiting for the market to improve and the value of the property to increase.
The rental income could support multiple family members
If you wish to share your inheritance, splitting the rental income is easier than sharing a property (unless you choose to sell it and can then split the proceeds).
You will avoid inheritance tax
This only applies when an inherited property is sold (and only if its value exceeds the tax-free threshold). However, there may be different taxes due on a rental property.
Avoid the stress of selling
Unless you find a private cash buyer fast or use a quick house sale company, selling a house can be time-consuming and stressful.
You may be able to claim tax deductions
These include deductions for legal fees, repairs and depreciation. The government website or your local citizen’s advice bureau are good sources of information on this matter.
The Cons
You will be responsible for managing the property
Unless you pay for a property management company to assume the responsibility, which will eat into your monthly income, you will be at the beck and call of your tenants. If something breaks or there is an incident at the property, for example, a break-in, you will need to act quickly to resolve the situation. And SOS calls could come at any time of the day or night!
There will be income tax to pay
The money you receive in rent from your tenants will be treated as income by the government. This means you will be required to pay tax on it to HMRC.
You may have to invest in repairs before renting
The property may need repairs, renovation or updating before it can be safely rented out. It will be easier to find good tenants and achieve the income you want if the property is in good shape.
There is a lot of red tape to wade through
As a landlord, you will have a long list of responsibilities to fulfil, for example, arranging annual gas safety checks, making sure that wiring and electrical goods are safe, providing smoke alarms and much more.
The risk of unreliable tenants
No matter how much due diligence you do on prospective tenants, it’s impossible to know until they are in situ if they will look after the property and its furnishings, pay on time and generally make life easy for you. Difficult tenants could make your life hell, and once they are residents, it can be difficult to evict them legally.
There is no straightforward answer to the question, “Should I rent or sell my inherited property?”. The best choice for you will depend on your personal circumstances, the type of property you have inherited and your life goals. Consider all the pros and cons, discuss with your family and take your time deciding what’s best for you.
Is It Better to Rent or Sell an Inherited House? What do you think?
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There’s so much to think about when inheriting a house. Personally I think I would sell as I always imagine renting to be quite a lot of work.
Funny enough it’s not that bad and gives a steady income. I’d recommend renting it out if you can.
This is really interesting, I’ve always thought I’d live in my Dads house because I love it so much! But actually this has made me think about it more.
My dad is very much alive but we’ve talked about it a lot as he and Mum adored the house so much, I don’t think they’d want it to go… ever!
It all depends on your situation when they are no longer around. It would be lovely to be able to keep it but it depends on how you are financially.
I’m in same situation as you and can’t decide which way to go my dad loved his home so much
You’ve covered the pros and cons well. Personally, I think it’s better to sell an inherited property if there is more than one person inheriting unless it’s a vacation property!
There is so much to think about when it comes to inheriting a house! My parents inherited my great aunt’s home when she passed and they rented it out and did quite well that way, but it’s a lot of work. It really depends so much on your situation at the time!
Depending on where the property is located I would prefer to rent it out using a property management company and even use it as equity to acquire more properties so that I can have a group of properties rather than a single home.
I can imagine what a stressful decision it must be. It would ceratainly take a lot of thought and this info you have shared is so helpful.
This is such a useful guide. My instinct would be to sell but I now see that renting could provide a very useful income.
I’ve often thought about buying and renting out a house. I’ve not been in the position to make a decision about selling someone else’s so some great tips here. x
There’s a lot to think about if you are lucky enough to inherit a property from relatives.
Some interesting arguments for either side. We haven’t inherited houses but have benefitted from other members inheriting houses and I would always say to sell because renting at the minute seems to be a moneypit for the landlords I know!
If I inherited a home, I think I would sell it because I would struggle with the sentimental emotional baggage if that makes sense. I rented out my house when I lived abroad, and that wasn’t too bad because I used a managing agent but I hated doing the tax returns.
Oh gosh, that really is a lot to think about. A lot more cons that I would have thought. I guess it would all come down to what your circumstances were at the time.
I didn’t even know there were taxes involved when inheriting a house, but that makes sense. Whilst I’ve always wanted to own and rent out houses as that’s a great way to make money – although I know it wouldn’t be fun to deal with tenants, as you never know what they’re going to be like – it might be difficult to see other people living in that house, depending on who it previously belonged to. It’s definitely a case-by-case situation.
My grandad recently passed away and left his house to my dad and my auntie. hey are unsure what they are doing with the house at the moment, but this article as been really informative.
I’m so sorry to hear that Natasha. I’m glad you found the post helpful x
The inheritance tax and capital gains tax definitely make one pause for a moment but these are all important items to consider.
Some really great points here. I have to say when my SIL moved into my in-laws after they passed away it’s still weird going to visit. I still expect them to walk through the door. It’s comforting and eerie at the same time.
For me an inherited property is something to be kept. But if it is more beneficial to sell it, then it should be something to consider.
This is really weird. I’m actually just finalised selling my parents’ house. For me, the memory of the place wasn’t so great and it was best to sell the house.
Fortunately I haven’t been in that position yet but some great advice to consider when it happens as I hate to admit it but it will one day. I would find it hard to sell the house I think but like you say, it’s the healthiest option really.
I would recommend renting> that way you would have an ongoing income.
I wasn’t expecting much detail from the post before I read it but it is very good with plenty to think about. It is important to consider the emotional aspects as well as the practical and financial ones..
I would rather sell than rent it out. You can get some terrible people renting and once my friend had them strip the whole house of copper and left it in a right state then disappeared plus all the unexpected costs with having renters in. I would live in it or sell it.
That is shocking. If you screen people well though you can find great tenants.
It would be such a hard decision! If it was a well loved house it could be heart-breaking to see someone else living in it and potentially not looking after it but an ongoing income and not having to give it up completely would be beneficial in the long term.
It can be hard to part with a home especially a childhood home but then it doesn’t always work out that you can afford to keep it either. It can really depend on your circumstances. Keeping it to rent out would be a great way to earn an income from it.
Great arguments for both. I think I would sell it but my parents house has been left to me and my brother, so we’d both have a say.
It is harder when the house is left to more than one person. Hopefully, your brother will also want to sell to make life easier.
This would be a tricky situation. I’d probably sell in the end. It would be difficult, but I’d probably have another house that I was paying for and those funds could help with that.
I don’t think I would be a good landlord but it is good to understand the pros and cons should I inherit a home. Thanks for the eye-opening article.
So much to consider when inheriting a home. After reading this, it might be best for me to just sell my mom’s home.
There is certainly a lot to think about when it comes to this. I guess it really depends on the person and the house.
If I inherited a house I’m not sure I would be able to sell it. If I couldn’t live in it right away I would rent it out. Then it’s still technically mine.
definitely a decision that needs so much thought since there are multiple factors involved, including emotional attachments.. you have covered all the little things that we need to think of so it is so useful for anyone facing this situation
Thanks so much I’m glad you liked the post.
I think the answer for this question depends where the property is. The location is very important. I would like to rent the property first and think of selling it only if I have to!
It seems like there’s pretty equal take and give with risk and reward although renting out and potentially getting lucky with tenants could make for a profitable long-term solution.
Hey, thanks for sharing this insightful article on the considerations of renting or selling an inherited house! It’s a topic that many people find themselves navigating, and your tips and perspective are incredibly helpful. I
You have shared some great points in this blog post. My husband and I would rent it out. As long as those inherited properties are not stressing us out or causing any issues, there is no point of selling them immediately 🙂.
This is a great side by side comparison. I know that I would have trouble deciding what to do if I was in that situation.
I’m so glad you found my post interesting Christy.
I think I would sell it out than renting it out. Both have nice arguments though
There’s a lot to consider and think about. For me I think I would sell it out
There is a lot to think about here. One idea is to release the equity by taking a mortgage out on the property and that way you avoid taxes. If it’s rented out, that would cover the mortgage payments. It depends on everyone’s circumstances