You Inherited a Home with No Mortgage – What Now?
Well, you may have some questions about what the next steps are. I’m going to talk out some of the steps. I specialize in selling houses, and often times that means I’m selling properties people have inherited… But I’m not here to talk to you about selling. I’m here to talk about things that you need to consider before you make a decision whether to sell or not. When deciding to hold it or sell it, every situation is different. I’m assuming your property is in California, and here we are at the end of 2020, beginning of 2021, and a new proposition, Proposition 19 is passed, which will affect you in your situation of inheriting a property. Unless, you make that inherited property your primary residence. If you hang on to it, the property taxes will be reassessed at the current market value, and that can be a significant difference compared to what the previous owner was paying. If they have owned that house for, 10, 20, or 30 years the market value will really affect the monthly cost to holding on to that property.
So number one, understand if it’s going to be your primary residence or if you’re going to keep it as a rental, what the property tax impact will be.
If it’s your primary residence one the biggest things that I encourage people to do is evaluate the property in its current condition. I highly recommend getting a termite inspector at a bare minimum, maybe even a home inspector, both combined will be about a $700 cost you. But, you will know exactly what’s going on in that house, what kind of deferred maintenance, if there are any active termites what the shelf life of appliances are that are currently in place; it’s worth the $700 investment. And not all inspectors are created equally to, please reach out to me, for my recommendations, they’re fabulous, but that’s the first thing to do. You’ll also need to evaluate what needs to be updated.
I have fantastic vendors for anything from handyman to floor guys to painters. My list is fantastic, so don’t hesitate to reach out for information. if you decide to keep it as a rental, again, I encourage you to still get the inspections done just to get a baseline of what property you’re actually taking on. Don’t just think, Oh, the market’s so hot and Silicon Valley, we don’t really have to fix it up, we can just get a tenant as is, even though it’s dated, kind of not great shape.
You might attract tenants that will come and see the property really wasn’t updated or hasn’t been that well-maintained, and they’re going to treat it like that. They might not take very good care pf the rental property, even though there may not be a mortgage, plus with the increase in property taxes, you still might be enjoying some passive income, but they might be damaging the house even more and just causing new headaches you don’t need. So, I highly recommend if the property was not in great shape, I’m not saying make it a ten and update everything, but use me, have me come take a look at it and tell you what would be important as a rental to spend… I do know what people are looking for, and I want you to get a good quality tenant in a house that it looks like it’s been maintained and taken care of.I also have some fantastic property managers, if you need help with that.
Another thing to consider, if you are keeping it as a rental and if the house is already paid off, maybe you could even expand your real estate investment portfolio by pulling some of the equity out of the house, let’s say round numbers, the house is a million dollar home if you refinance it and pull 200,000 out, the mortgage will still be really low for you, but then you can take that 200,000 and buy another property.
I don’t care if it’s in California or somewhere else, think of the term, “the velocity of money”, using that money to increase your wealth. It is a fantastic option.
Then the last option is it just might makes sense for you to sell it. Just sell it and move on then you take the money and invest in other real estate somewhere else by your own primary resident, pay off your primary residents… I don’t know, but, a lot of things to consider before you put the house on the market.
I have other videos about that, but for now, I’m just keeping it simple. I really think some of the four things to consider or if you’re going to move into it as your primary residence, and the things you should think about before doing that too, if it’s going to be a rental property, what you need to think about.
If you’re going to keep it as a rental property, but it makes sense to do a refinance and take some of the equity out, so you can now buy another property, great option. Or if it just makes sense to sell. I really have some great resources to help you. I know sometimes it’s so overwhelming, you don’t know what to do. I’m not encouraging you just to sell if that doesn’t make sense for you, and I always encourage people to talk to a CPA, to look at the tax ramifications if you sell…
If you keep it as a rental, consider all those things and I have a great CPA, love my guy. If you want that referral too.
Until next time, have a great one.
If you have any questions, you may contact me directly here: [email protected]