I just inherited my parents rental property and don’t know what to do sell, be a landlord, managers?

by | Indy Anna, Real Estate Investing

I just inherited my parents rental property and don’t know what to do sell, be a landlord, managers?

If you inherit a rental property you need to know your options, you can sell, keep renting, refinance, etc.  Here’s how to pick which option is best for you and what to do about it next.

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I just inherited my parents rental property and don’t know what to do sell, be a landlord, managers?

Indy Anna Explains…

– Options for keeping the property

– Items to make sure are covered before deciding what to do

– One quick fix to help solve your issues nearly overnight (in some cases)

Here’s the question that came in;

“My family has a rental property that’s been in the family for decades. The rent isn’t much, and the upkeep is becoming a hassle for my parents.  I know nothing about real estate investing. I’m considering taking control of the property, but wanted to see if it’s a good idea to use a property management company that will handle finding renters and upkeep. Thoughts?”

There are a couple of different ways that you can go with this situation. If there are repairs needed, your parents can consider selling, either ‘as-is’ with an agent, or finding a wholesaler who would create an assignable contract and ‘assign’ it to an investor to buy.

You have a few options with investors and buyers.

The investor would then either make it a fix and flip situation (based on it being in need of repair) or (if minimal repair) make it into another buy and hold investment.

Another thing you might consider is doing a lease with option purchase with the current tenants in place and have it written in the contract they are to pay for repairs. This usually works okay if they’ve been there a long time and already consider it home. 

The terms are important.

The terms on this would usually be a down payment (the upfront money – plus they may have a tax refund they want to use as a down payment if setting this up in Q1), money over time (terms of the contract, usually two years), then payment on the backend of the deal (when they qualify for traditional financing {as most renters will use this time to improve credit} and the house is officially purchased).

One more thing to consider (if this has been held a long time in your family) is it a case where rent is below market value, >$30K or so would make drastic improvements and rent would be significantly increased and worth holding onto- this would be a ‘micro flipping’ situation.

Well not really micro-flipping…

That covers the options possible in this case- well most of them, and I’ll get to the one quick fix (may not be ideal for all people/situations) soon. For now, moving onto things to consider;

If you decide to hold onto the property, I would at minimum reevaluate the situation by getting a market value analysis (probably a good idea anyway for inheritance purposes and verifying with a CPA/Elder or Family law attorney to ascertain what to do about avoiding inheritance tax if possible.

Single?

One more thing here is idk if you’re single or not, but in most states property acquired through means of inheritance would not be considered joint property if dissolution of marriage were to transpire – who is going to be on the title and a great place for professional legal advice BEFORE you get into final decisions on what  do. This applies to siblings as well and who will be responsible for property, will it be an LLC then etc?

All of this info  should provide you with some information on what to do as far as your next step as well when you decide on leaving as is or doing a ‘micro flip’- by using this info with comps.

There may be a “quick fix”…

Now the ‘quick fix’ (again may not be what everyone wants but if you’re in a different state from the rental property and don’t know where else to go but want to keep it)- 

Find a property manager who can manage this property for you and take care of the day to day/as needed items – making you a very passive investor in the situation. Keep in mind the fee for a PM will usually range from 10-15% of the monthly rental income. 

So remember…

Use a tool (usually online free) to determine avg area rents then and go from there on what you will be paying a PM for either keeping it as is or updating- is it a microflip to be made?

Also, the biggest suggestion in working with a PM is to call past references and truly get a feel for their ability to work for you effectively. Do a background check on your PM just as you would any tenant in other words. I would also suggest verification of lease terms with current tenants and make sure everything looks up to speed there before assuming (legally) the responsibility of a lease.

So to recap we covered:

– Options for keeping the property

– Items to make sure are covered before deciding what to do

– One quick fix to help (in some cases)

If you find yourself in a situation like this in Indiana, or have other questions you need help with that this video didn’t answer email/text me below. 

Thanks! 

Make the universe SMILE.  = )

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Thanks so much!  = )

Make the Universe Smile.

~ Indy Anna
Love (at) BigReia.com
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