A Guide to Turning an Inherited Home into an Investment

classic victorian house for real estate investing

An inherited home is a property passed down to an heir through a will or estate plan. Inheriting a house can be a significant financial windfall, but it can also come with some challenges.


Inheriting a home can be a wonderful gift, but it’s essential to be prepared for the challenges that come along with it. With some planning and foresight, you can make the most of your inheritance and ensure that your new home is a source of enjoyment for years to come.


In today’s article, let’s find out how you can make the most of an inherited home by turning it into an investment. Here’s what you need to know:


Learn its True Value 


If you’ve recently inherited a home, you may wonder if you should keep it as an investment or sell it. The first step to making this decision is to learn the home’s true valuation. This will help you determine if the home is worth keeping as an investment or if it would be better to sell.


You’ll need a professional appraiser to get an accurate home valuation. The appraiser will consider many factors in determining the home’s value, including its location, condition, size, and amenities. Once you have the appraiser’s report, you can compare it to the current market value of similar homes in the area to get a good idea of the home’s worth.


Figure Out What Improvements to Make 


Making improvements to an inherited home can turn it into an excellent investment. But, before making any improvements, it’s important to figure out what will add the most value to the property.


Some common improvements that add value to a home include:


  • Updating the kitchen
  • Adding or updating bathrooms
  • Finishing unfinished space
  • Improving curb appeal


Know About the Current Mortgage


The first thing you need to do is to find out about the current mortgages on the property. You need to know how much is owed and to whom. You also need to find out the interest rate and terms of the mortgage. This will help you decide whether you want to keep or sell the property.


If you decide to keep the property, you must make sure you can afford the mortgage payments. You may need to get a new mortgage or refinance the existing mortgage. You will also need to make sure that you have enough money to make any necessary repairs or renovations.


What Type and How Much Taxes to Pay


There are two types of taxes you’ll need to pay on an investment property: capital gains tax and income tax.


  • Capital gains tax is a tax on the profit you make when you sell an asset, such as a property. The amount of tax you’ll pay depends on how long you’ve owned the property and your marginal tax rate.


  • Income tax is a tax on the rent you receive from your tenants. The amount of tax you’ll pay depends on your marginal tax rate.


The best way to reduce the amount of taxes you’ll need to pay is to ensure you take advantage of all the deductions and tax breaks available to investment properties. 


What to Do With the Property (Long-term rental or short-term rental or sell)


Inherited property can be a great asset, but it can also be a burden. If you’re unsure what to do with inherited property, here are a few options to consider.


First, you could keep the property and live in it yourself. This can be a great option if the property is in good condition and you can afford the maintenance and upkeep.


Alternatively, you could rent out the property to generate income. You could do either short-term or long-term rentals. This can be a good option if you don’t want the hassle of dealing with tenants but still want to make some money from the property.


If you decide you don’t want to keep the property, you could always sell it. This is often the simplest option, but it may not be the most profitable.


Whatever you decide to do with your inherited property, make sure you do your research and consider all your options before making a decision.


The Bottom Line


The benefits of inherited property are many. When you inherit property, you receive an asset that can be used in many ways. You can use the property to generate income by renting it out or selling it. You can also use the property as a home for yourself or your family. Inherited property can also be used as collateral for loans.


If you are interested in investing in real estate, we are here to help you. Evergreen Investments connects homeowners to wealth-building opportunities from their residential real estate assets. Real estate investing is a journey, and we at Evergreen Investments aim to help clients reach their goals and gain financial independence through homeownership and investing. 


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