Should i sell my inherited house or rent it out?

Inheriting a property can feel like a mixed blessing. It can represent a cherished family home with lots of amazing memories you definitely want to keep around. However, it can also become a financial windfall. It can bring in a lot of responsibilities, decisions, and emotions, which is rather tricky to navigate. Whether this is your first time dealing with an inherited house or not, there are a couple of choices you need to make, and those choices can be overwhelming.  

You might be asking yourself: should I sell my inherited house? Well, there is more to this question than just its sentimental value. There are a lot of practical aspects you should consider. For example, there are legal obligations like probate, inheritance tax, and ongoing maintenance costs.  

No matter the decision, it will definitely include both pros and cons. It all comes down to your long-term goals. You can make it so you earn a steady rental income or maybe a lump sum from the sale instead. Understanding how the market works is important in this case.  

Renting out your inherited house can definitely provide you with a steady income, but it is not that easy sometimes. Are you familiar with landlord laws, property management, and potential tenant risks? That’s what we are here to discuss. So, if you are unsure of whether you should sell your inherited house or rent it out, we are here to tell you more about both choices. So you can make an informed decision! 

Is it worth renting out an inherited property?

Whether you should sell, keep, or rent out your inherited property will depend on a couple of factors. These will be unique to each individual situation, so here are some things you might want to consider.  

The rental market conditions  

The UK rental market is still strong in 2024. There is a high demand for rental properties, especially in urban areas. The average cost of rent has increased since the demand is high, and there are not that many options out there. This is what makes renting out properties a good idea. However, market conditions can vary depending on location, so make sure that you do proper research.  

Costs and responsibilities  

When you become a landlord, there are certain expenses that you are expected to always provide. For example, maintenance, property management fees, and compliance with regulations like the EPC (Energy Performance Certificate). As of 2024, all properties must be rated “C” or above for a property to be rented out, which means costly upgrades.  

Taxes  

Did you know that rental income is subject to income tax? Not to mention that you need to consider inheritance tax as well. There are capital gains taxes when selling the property later on, as well as potential changes to mortgage and interest tax relief. These factors can affect whether renting your property is financially viable.  

Long-term goals  

If you would like to get a regular income, then renting out is a good idea. Of course, this is only a good idea if the property is already in good condition and is in a good location. If not, renting your property might seem like more of a hassle than anything else. That said, if you prefer a lump sum or you want to avoid the responsibilities of being a landlord, then you should consider selling instead. This is where The Property Buying Company can help. We’ll buy your house in as little as 7 days!

In the end, this decision should be based on the potential of your property to be rented, your financial goals, and your ability to manage responsibilities.

Is it better to keep for myself or sell an inherited property?

Deciding whether to keep or sell your inherited property is an important choice. It will impact your financial future and sometimes affect you emotionally. Balancing the decision between the sentimental value and the practicalities of maintaining and utilising your inherited property is not easy.  

Sometimes, an inherited home could represent a cherished family memory or a financial asset, but you should not let your emotions make a decision. You need to consider a couple of factors before deciding whether you want to keep or sell your inherited property.  

Financial considerations  

• Inheritance tax and costs—The inheritance tax threshold is £325,000, so estates worth up to £325,000 won’t be subject to inheritance tax. The RNRB offers an additional £175,000 allowance when a property is passed to direct descendants. Thus, when using the standard nil-rate band and the RNRB, the total inheritance tax goes up to £500,000. If your inheritance exceeds this limit, the inheritance tax can apply.  

• Ongoing expenses—If you decide to keep the home, you will have to deal with maintenance costs, insurance, council tax, and probably mortgage repayments if the property is not fully paid off. All these costs can easily add up, especially if your property is not generating income.  

• CGT—When you sell property at a later date, you can trigger CGT if its value has increased and it was not your primary residence. You should be aware of all these taxes before making a decision.  

Property condition and location  

• Condition—What condition is the property in? Is the inherited home move-in ready, or does it need extensive repairs? Don’t forget that renovation costs can be high, especially if upgrades are necessary to meet modern standards.  

• Location—A property in a desirable area might be a good place to live and have excellent resale value. However, in a less sought-after area, you might struggle to sell.  

Personal use or investment?

• Personal use—Does the property suit your lifestyle and needs? If so, retaining your residence could save you from having to purchase a home elsewhere.  

• Investment potential—That said, selling the property could provide you with a substantial sum to fund other investments, such as paying off debt or pursuing personal goals like starting a business. Renting out the property can provide you with a steady income, but it does come with its own set of challenges.  

Emotional value  

• Family legacy—By keeping your inherited home, you may feel as though you are preserving a family legacy.  

• Emotional burden—Holding onto an inherited home can be mentally and emotionally draining for many. This is particularly true if the home reminds you of a loss or unresolved issues.  

In conclusion, there is no one-size-fits-all answer. It depends on what you can and/or want to manage. Therefore, it is always wise to weigh the pros and cons of keeping or selling inherited property before making a decision.  

What are the pitfalls of renting out inherited property?

Renting out inherited property can seem like the ideal way to generate a steady income. However, renting comes with its challenges as well. The UK market remains robust in 2024, making becoming a landlord a viable choice. However, you should be aware that landlords do far more than simply find tenants and collect rent.  

There are numerous unexpected costs, tenant issues, and other potential pitfalls you should consider. Furthermore, renting property can also carry emotional and financial implications. The property may hold sentimental value, which can be difficult for those wishing to convert it into a rental. If you would prefer to sell the home rather than deal with any of this, you can contact us. We will provide you with a cash offer and purchase your house quickly.  

With ongoing costs, the financial rewards may not always be profitable. Understanding these challenges is crucial before deciding to become a landlord. Here are some of the most noteworthy pitfalls of renting property and the reasons you might want to reconsider.  

1. Compliance and Landlord Regulations  

Renting out property in the UK comes with strict legal responsibilities. Failure to comply with these can result in fines or legal action.

You need to stay on top of these regulations, which can be time-consuming, may require expert advice, and can add complexity and expenses to being a landlord.  

2. Ongoing Maintenance Costs  

Every property requires upkeep; this includes rented homes.

If you neglect proper maintenance, your tenants may leave or demand reduced rent, which will impact your overall income.  

3. Financial risks  

Renting out a home can be perceived as a lucrative business, but it is not always guaranteed to provide you with an income.

4. Emotional burden  

Does the inherited home hold any sentimental value? If so, renting it out can be emotionally challenging. 

Balancing the practical aspects of renting an inherited home with emotional considerations can be overwhelming, especially if you are dealing with grief or loss.  

5. Time and effort

Becoming a landlord is not easy. This requires significant time and effort. If you do not have experience, it can be very challenging.

If you already have a busy lifestyle, managing an inherited property can become a source of stress with insufficient income.  

6. Market Volatility  

Government policies, economic conditions, and local demand all influence the rental market. This can affect your rental income. 

7. CGT considerations  

If you choose to rent property instead of selling it immediately, you might face a tax increase when you decide to sell it in the future.

So, if you are wondering: Should I sell my inherited house or rent it out? These are the main issues you should consider. Becoming a landlord is not that easy. It is time-consuming and can often be overwhelming.

Can I rent out a house before probate?

Probate is the legal process that grants you authority to manage the deceased person’s estate. This includes selling, transferring, and renting out property. Therefore, you cannot legally rent out a house in the UK before probate is granted. Before this process is complete, the property remains part of the estate, and nobody has the legal right to rent it out.  

Without completing this process, entering into a rental agreement is not only legally questionable, but it might also create other complications. For example, the tenancy agreement can be seen as invalid, which will cause you to face a lot of legal issues with tenants or the estate.  

Can you rent a house that is going through probate?

Yes, you can rent out a house that is going through probate, but it comes with strict legal conditions. Renting out during this period is allowed as long as the executor has the authority to act on behalf of the estate. An interim grant of probate gives this authority, and certain actions can be taken before the probate is actually completed.  

To rent the property during probate, you need to ensure that everything aligns with your duty, acting in the estate's and its beneficiaries' best interests. This will include property management and ensuring all rental agreements comply with UK tenancy laws. The income you receive from the rental will be declared as part of the estate and used to cover estate costs or distributed to beneficiaries when the probate is complete.

Do you pay inheritance tax on rental income?

Inheritance tax or IHT does not apply to rental income. IHT is charged on the total value of the deceased person’s estate, which includes property, at the time of their death. When the property is inherited, any applicable IHT has been paid.  

That said, if you want to rent out the inherited property, the income received from rent will be subject to income tax. This means that you have to declare the rental income to HMRC, and it will be taxed along with other earnings based on your personal income tax rate. You can deduct certain allowable expenses, like maintenance costs, but the tax on rental income is completely separate from inheritance tax.  

So, if you decide that renting out inherited property is not for you, The Property Buying Company can help you sell it instead! We are cash buyers, and we will always provide you with an offer. Not to mention that we can work incredibly quickly!