Inherited a House? Sell It, Rent It, or Keep It

By Matthew Whitaker, founder of Evernest.

Quick disclaimer: I am not your CPA or your attorney. Estate, tax, and landlord-tenant rules vary by state and by situation. Talk to your own attorney and tax professional before you act on any of this.

If you just inherited a house, maybe your mom's or your dad's, and you're not sure what to do with it, this post is for you. I'll walk through your three real options, which are to sell it, rent it, or keep it, and how to pick. I'm Matthew Whitaker, founder of Evernest. Our local teams manage homes for people just like you in markets all over the US, and I wrote the book How to Rent Your Home.

The short version

The short version: You have three options: sell, rent, or keep the house for the family. Don't rush, but don't let it sit, because an empty house costs money and gets worse. Handle four practical steps first: confirm who can legally sign, call the insurer, deal with any mortgage, and plan the cleanout. Then run three questions on the numbers, check the tax picture with a CPA, and put any sibling agreement in writing.

First, take a breath

You don't have to decide this week. If you're grieving, that comes first. Most of the big mistakes with inherited houses happen in a rush. Somebody sells it too cheap just to be done with it, or signs a lease before the paperwork says they can.

But there's another side. An empty house is not free. Say taxes and insurance run $400 a month, and utilities, lawn care, and upkeep run another $200. That's $600 a month, or about $7,200 a year, for a house nobody lives in. And empty houses have their own problems. Nobody notices the slow leak under the sink. Nobody is there when a pipe freezes. Empty houses attract break-ins.

I've talked with owners who left a parent's house sitting empty for years. Touching it felt like losing them all over again. I understand that. But the house doesn't stay frozen in time. It slowly gets worse. Give yourself time to grieve. Just don't let not deciding become the decision.

Four practical steps before you pick a path

These come first, no matter what you decide.

Step one: find out who can legally sign. Until the estate is settled, the house may not be yours yet, even if the will says it's going to you. Usually the person with the authority is the executor, sometimes with a court's approval, and the rules change from state to state. Before anybody lists the house or signs a lease, ask an attorney one question: who has the legal right to sign?

Step two: call the insurance company. Don't assume your parent's policy still covers an empty house. Many homeowner policies limit coverage once a house sits vacant for a certain amount of time. Tell the insurer what happened and ask exactly what you need. If you rent it later, you'll need a landlord policy too.

Step three: if there's still a mortgage, keep paying it and call the lender. In general, the bank can't demand the whole loan back just because the owner passed away, but the payments still have to get made.

Step four: the cleanout. This is the hard one, because every drawer is a memory. Pick a date, take what matters, and let a professional cleanout company handle the rest.

Path one: sell it

Selling is the simplest path. There's one closing, and the money splits cleanly among the heirs. It fits when nobody wants to be a landlord, when the family is spread out, when the house needs a lot of work, or when somebody needs their share.

Plenty of inherited houses sell as-is. You trade some price for a lot less hassle. Selling is not letting your parents down. In the book, I tell owners to be willing to land on sell. That's a perfectly good answer for a lot of situations.

Path two: rent it

Renting keeps the house in the family and turns it into monthly income. If the house is paid off, the math can look a lot better. But be clear about what you're signing up for. If you rent it, you become the owner of a rental: residents, repairs, renewals, all of it.

The house also has to be ready. Your parents' house might have a 20-year-old water heater and a tired roof. In the book, the rule is simple:

• Fix anything that's a safety issue.
• Fix the old stuff before it breaks.
• Paint it neutral and clean it top to bottom.
• Skip the big remodel. Owners spend $15,000 on upgrades and get maybe $25 to $50 more a month. That takes years to earn back.

Path three: keep it for the family

Maybe a sibling moves in. Maybe it's where everybody comes home for the holidays. That can be a beautiful choice, but it still costs that $600 a month. Somebody has to pay it and somebody has to take care of it. If a family member lives there, decide now whether they pay rent, and who pays for the new roof when it comes.

How to pick: three questions

In the book, I give every owner three questions.

Question one: does the rent cover all the costs? That means taxes, insurance, vacancy, management, and repairs. I tell owners to set aside 1% of the home's value every year for repairs. On a $300,000 house, that's $3,000 a year, or $250 a month. Also plan for about one month empty every year. If the rent clears all of that, renting is on the table.

Question two: can you handle a bad month? The water heater dies. The resident moves out early. If a bad six months would really hurt you or a sibling, renting is a stretch right now.

Question three: can you let go? This one hits different with a parent's house. A resident won't treat it like your mom's house. To them, it's a rental, because it is.

Here's the simple version. If the rent doesn't cover the costs, sell. If all three answers are yes, renting deserves a hard look. And if you can't let go, you have two honest choices: sell it, or rent it and hire someone to stand between you and the house.

Taxes on an inherited house: don't get scared too early

When you inherit a house, its value for tax purposes usually resets to what it was worth on the day your parent passed. That's called a stepped-up basis.

Say your mom bought the house in 1985 for $80,000. The day she passed, it was worth $300,000. You generally don't owe tax on the whole $220,000 jump. Your starting point is about $300,000. Sell it soon for about that and the taxable gain is often small. Sometimes it's close to zero. Selling an inherited house often costs a lot less in tax than people fear.

Renting first and selling later changes the math. Any growth after that date can be taxed when you sell. And while it's a rental, you'll take depreciation on your taxes. When you sell, some of that can come back as a tax.

So here's the move. Get an appraisal for the date of death and keep it. Then see a CPA before you decide, not after.

If you inherited with siblings, get it in writing

With brothers and sisters, the house usually isn't the hardest part. The agreement is. Settle three things before anything happens:

• Who manages it? Pick one person.
• How does the money split? Rent in, costs out, and who covers the big repairs when they hit.
• How does somebody get out? If your sister wants her share in three years, what happens then?

Put it in writing. Even if you all get along today, and especially if you all get along today, a one-page agreement now can save a lot of hard holidays later.

Distance: who takes the 2 a.m. call?

You probably don't live near the house. Say you inherited your mom's house in Huntsville and you live in Denver. Your brother lives in Atlanta. Who handles the 2 a.m. call when a pipe bursts? Who answers when the resident calls? Who sends the plumber? Who decides how much money to spend?

If the answer is "I guess me, from Denver," that's not a plan. That's hope. You have three real options: a trusted local person, hiring out just the pieces like leasing and repairs, or full property management. I don't recommend self-managing a rental that's more than 30 minutes away.

"I can't sell Mom's house"

The pushback I hear more than any other. I want to say this gently: that feeling is real, and that's okay. Renting can be a respectful middle path. The house stays in the family, another family gets a good home, and you keep the option to sell later when it hurts a little less.

But renting is a business decision. It's not a way to hold on to her. The first time a resident sends you a photo of a scuff on a wall she painted, it's going to sting. If renting is just a way to avoid the decision, it can make the grief harder, not easier. Sometimes selling is the kinder choice for you. And remember this: the memories aren't in the drywall. They're in you. Whatever you decide about the house, you keep those.

Quick recap

• Don't rush, but don't let the house sit.
• Handle the practical steps first: who can sign, insurance, the mortgage, and the cleanout.
• Pick the path that fits your family, and run the three questions.
• Talk to a CPA before you decide, and get a date-of-death appraisal.
• Put the sibling deal in writing and decide who takes the 2 a.m. call.

Frequently asked questions

Should I sell or rent an inherited house?It depends on the numbers and on you. Ask whether the rent covers taxes, insurance, vacancy, management, and repairs, whether you can handle a bad month, and whether you can let go. If the rent doesn't cover the costs, sell. If all three answers are yes, renting deserves a hard look.

How long do I have to decide what to do with an inherited house?You don't have to decide this week, and rushing causes many of the biggest mistakes. But an empty house costs money, for example about $600 a month in taxes, insurance, utilities, and upkeep in our example, and it can slowly get worse. Give yourself time to grieve, but don't let not deciding become the decision.

Do I pay taxes when I sell an inherited house?Often less than people fear. The house's tax value usually resets to what it was worth on the day your parent passed, called a stepped-up basis. Sell soon for about that value and the taxable gain is often small. Get a date-of-death appraisal and talk to a CPA before you decide.

What changes if I rent an inherited house before selling it?Any growth in value after the date of death can be taxed when you sell. While it's a rental, you'll take depreciation on your taxes, and some of that can come back as a tax at sale. See a CPA before you decide, not after.

Can I rent out an inherited house right away?Not necessarily. Until the estate is settled, the house may not be yours yet, even if the will says it's going to you. Usually the executor has the legal right to sign, sometimes with a court's approval, and the rules change from state to state. Ask an attorney who can sign before anyone signs a lease.

Does homeowner insurance cover an inherited house that sits empty?Don't assume it does. Many homeowner policies limit coverage once a house sits vacant for a certain amount of time. Call the insurer, tell them what happened, and ask exactly what you need. If you rent the house later, you'll need a landlord policy too.

How do siblings share an inherited rental house?Put a one-page agreement in writing covering three things: who manages the house, how the money splits (rent in, costs out, and who covers big repairs), and how someone can get out if they want their share later. Do it even if everyone gets along today.

Where to go from here

If you want to know what the house would really rent for, start with a free rental analysis. If you're still working out what to do, my book, How to Rent Your Home, walks through the whole decision, including when selling is the right call. It also comes with a set of landlord checklists, including a rent ready checklist.

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