Inheriting a property can bring mixed emotions. On one hand, it's a significant asset that can potentially provide financial stability and security for the future.

On the other hand, it can also be overwhelming and raise numerous questions about what to do next. Whether you decide to sell, rent, or keep the property, it's important to make an informed decision that aligns with your personal circumstances and goals.

In this article, we will explore the following:

Deciding whether to keep, sell, or rent the property
Inheriting a house that is paid off by parents or grandparents
Capital Gains Tax on inherited property
Managing any disputes or conflicts among siblings
Guaranteed Rent from Stayful
Renting Your Inherited property on Airbnb through Stayful

No matter your intentions, understanding your options and seeking professional guidance can help ensure that you make the best decision regarding your inherited property. So, let's dive in and discover what to do with an inherited property and how to navigate this often complex process.

What Happens When You Inherit a House?

Inheriting a house can be a bittersweet experience. While it can provide financial security and stability, it can also come with a range of legal, financial, and emotional challenges.

When you inherit a property, the first step is to understand the legal process and your rights and responsibilities as the new owner.

The process

The process of inheriting a house typically begins with the probate process. Probate is the legal procedure that oversees the distribution of the deceased's assets, including any real estate.

During this time, the will (if one exists) is validated, and the executor or personal representative is appointed to manage the estate. As the heir, you will likely need to work closely with the executor to ensure a smooth transition of ownership.

Access the current condition

One of the key considerations when inheriting a house is the condition of the property. The house may require repairs, renovations, or maintenance, which can add significant costs.

It's important to conduct a thorough inspection of the property and assess the extent of any necessary work. This information will be crucial in determining whether to keep, sell, or rent the inherited property.

Property Valuation

It is important to get a valuation of the property especially if their is an existing mortgage, this is especially important so you can understand just how much equity is in the property and any potential capital gains or inheritance tax is due., you can do this by going to any mortgage adviser or estate agent.

Inheriting A Property With A Mortgage

When you inherit a property with a mortgage in the UK, you will be responsible for the mortgage payments, even if you do not live at the property. You should contact the mortgage lender asap to inform them of the previous owner’s death, as they may have a grace period for mortgage repayments, to learn more about inheriting a property with a mortgage you can click here.

Deciding Whether To Keep, Sell, Or Rent The Property

Once you've navigated the initial legal and logistical steps of inheriting a house, you'll need to decide what to do with the property.

This decision will depend on a variety of factors, including:

Your personal circumstances,
Financial goals
The overall condition of the house.
If their is an existing mortgage
Other parties that have also inherited the property such as siblings

If you are keeping

If you decide to keep the property, you'll need to consider whether you want to live in it yourself or rent it out. Living in the inherited house can provide a sense of continuity and nostalgia, but it may also require significant time and financial investment to maintain and update the property.

Renting the house, on the other hand, can generate a steady stream of passive income, but it also comes with the responsibilities of being a landlord, such as finding and managing tenants, handling maintenance and repairs, and complying with local rental laws, Stayful can help with this and we will cover this part later in the blog.

If you are selling

Selling the inherited property is another option to consider.

This can provide a lump sum of cash that can be used to pay off debts, invest in other assets, or fund your retirement.

However, it's important to be aware of the potential capital gains tax implications, which we'll explore in more detail later in the blog.

Inheriting A House That Is Paid Off By Parents Or Grandparents

If the inherited house is fully paid off, it can provide a significant financial advantage.

What to do with a mortgage free property

Without the burden of a mortgage, the property can be a valuable asset that can be leveraged in various ways. For example, you could choose to live in the house rent-free, rent it out for passive income, or sell it and use the proceeds to fund other financial goals.

Used for collateral on a loan

One of the benefits of inheriting a paid-off house is the potential to use the property as collateral for a loan.

This can be particularly useful if you need to access funds for a large expense, such as a down payment on a new home or a major home renovation.

The equity in the inherited property can be used to secure a loan with more favourable terms than a traditional personal loan or line of credit without putting down a deposit.

The benefit of this is you can keep your property to be used as the following and use the equity for a down payment and good loan terms on a house you do want.

Higher rental income when rented out

Additionally, if the inherited house is in good condition and located in a desirable area, it can be a lucrative rental property. The lack of a mortgage can translate to higher net rental income, making it an attractive investment opportunity. However, it's important to carefully consider the responsibilities and potential challenges of being a landlord before pursuing this option.

Capital Gains Tax on inherited property

One of the key financial considerations when inheriting a property is the potential capital gains tax liability. Capital gains tax is a tax on the profit you make when you sell an asset, such as a house, for more than its original cost basis.

When it comes to inherited property, the cost basis is typically the fair market value of the property at the time of the previous owner's death, rather than the original purchase price.

This is known as a "step-up in basis." This means that if you sell the inherited property for more than its fair market value at the time of the previous owner's death, you may be subject to capital gains tax on the difference.

The tax rate

The capital gains tax rate can vary depending on your individual tax situation, we are going to cover a few here

Property is over £325,000 - Tax rate is 40%.

If you was gifted the house 7 years before passing - the tax rate is 0%.

Inheritance tax on a property with commercial use such as a farm - The tax rate is 10%.

Property is under £325,000 - Tax rate is 36%.

To learn more visit the government site here.

Managing Any Disputes Or Conflicts Among Siblings

Inheriting a property can sometimes lead to disputes or conflicts among siblings, especially if the property was not explicitly addressed in the deceased's will or if there are differences in financial circumstances or personal preferences.

It's important to navigate these challenges with empathy, open communication, and a focus on finding a mutually agreeable solution.

Getting a will made

This is something that needs to be discussed and created before assets are inherited, then proper legal proceedings can take place without conflict as everything is already in writing, this is by far the best solution.

If their is no will

One of the first steps in managing sibling disputes over an inherited property is to have an open and honest discussion about the situation.

This may involve reviewing the will or other legal documents, discussing the current condition and value of the property and exploring each sibling's individual needs and goals.

It's crucial to approach these conversations with a spirit of cooperation and compromise, rather than confrontation.

If an agreement can’t be made and their is no will

If the siblings are unable to reach an agreement on their own, it may be necessary to seek the guidance of a mediator or legal professional.

They can help facilitate constructive discussions, identify potential compromises, and ensure that the property is divided or managed in a fair and equitable manner.

This may involve options such as selling the property and dividing the proceeds, one sibling buying out the others' shares, or jointly owning and managing the property.

Guaranteed Rent from Stayful

If you've decided to rent out your inherited property, one option to consider is partnering with a property management company like Stayful.

Stayful offers a "Guaranteed Rent" program that can provide a steady and reliable stream of rental income, even during periods of vacancy or unexpected tenant turnover.

Benefits

With the Stayful Guaranteed Rent program, the company will pay you a fixed monthly rent, regardless of whether the property is occupied or not.

This can provide a level of financial stability and predictability that can be particularly valuable when managing an inherited property, as it eliminates the uncertainty and potential headaches associated with finding and retaining reliable tenants.

Renting Your Inherited property on Airbnb through Stayful

Another option for generating income from your inherited property is to list it as a vacation rental on platforms like Airbnb. Stayful can help facilitate this process by managing the entire Airbnb rental experience on your behalf.

Stayful's Airbnb management services include creating an attractive and compelling listing, pricing the property competitively, handling guest communications and bookings, and ensuring the property is cleaned and prepared for each new arrival.

They also handle the financial aspects, such as collecting rental payments and remitting the proceeds to you on a regular basis.

Renting your inherited property as a vacation rental can be a lucrative option, particularly if the property is located in a desirable tourist destination.

It's important to carefully consider the potential challenges, such as the need for more frequent cleaning and maintenance, the potential for damage or wear and tear, and the potential impact on the local community. Stayful can help navigate these considerations and ensure that your Airbnb rental is a seamless and profitable experience.

Free Airbnb Income Calculator

Find out how much your inherited property could make on Airbnb using our free calculator here.

What To Do With An Inherited Property