Beginner InvestorsWhat Happens If You Inherit a Rental Property? by Holly Welles June 18, 2019June 17, 2019 by Holly Welles June 18, 2019June 17, 2019When a person passes away, they typically will their assets to their family members and loved ones. Perhaps the biggest item to leave behind is a home or rental property that the person has gathered over the years.Now, you have found yourself the recipient of such an inheritance. You have the deed for someone’s rental property, and you’re not quite sure what to do next. Inheriting a home isn’t quite the same as receiving money or collectibles, so you might not know where to start. If so, read on to find out what will happen next, and what you should do now that you’re a property owner.1. Consider the Tax Implications of Selling, Renting or Moving InThe value of the home or property you inherit counts as part of the total value of the estate of the person who passed away. The person responsible for executing the will has to make sure that all taxes and debts owed by the deceased have been paid before they can divvy up the remaining assets. Your inheritance will be part of this process.Once you have the property, you have to decide what you want to do with it. If you decide to sell or rent it, you will have to pay taxes on your profits. Even if you wait to sell for any length of time, you will have to pay a capital gains tax when you do.Fortunately, if you decide to keep the property as a rental, you have a slew of tax deductions that will work in your favor. In California, for example, most expenditures made on your rental property can become a tax write-off, so long as you don’t hire a property manager to oversee the place for you.With your debt settled, you might also think to stay in the home or keep it as a second residence. The mortgage will have been paid by the estate, but you should still consider the property taxes and other expenses that come with the property. If you can afford them, then you can consider this option.If you keep the place as a secondary residence, you will have to make a declaration as to which of your properties will be your primary home. In selling your main abode, you get a break in the aforementioned capital gains tax, so keep that in mind if you inherit a rental property.2. Deal With the TenantsPerhaps you’ve inherited a rental that has occupants. You will have to consider their agreements with their former landlord — if they have a lease, you typically have to abide by the terms of it, even though one signee has died. Otherwise, they may have had a month-to-month agreement. You can stick with it, or you can terminate the lease with a 30-day notice, as that’s all that’s required of such a setup.To that end, you should receive the security deposit(s) of those living in the property — regardless, you will have to hand over this money if and when the tenant leaves. And, once you show proof of ownership to your new tenants, they will begin mailing you their rent checks each month, thus making your transition to landlord a smooth one.After that, you have the option to stay on as the landlord and point of contact for the property’s tenants, or you can shift responsibility to a property management company. This option does come with tax implications in some states — once your property begins supplying passive income, you can only claim your expenses against the income you make from the property.But you might find it simpler to have someone else at the helm, especially if you’ve never been in the landlord role before. A property manager will take care of maintenance issues, find tenants for you, help with post-tenancy clean-up, etc. It could be a worthwhile expense.3. Hire Professional HelpOn the subject of hiring help, you might also want to consult professionals when you inherit a rental property — your loved one probably hired a lawyer to delineate the terms of their will and trust, after all.For starters, an accountant can help you decide on the most financially sound decision — buying, selling, renting, etc. They can help you to understand the taxes you’ll have to pay, as well as any money you might owe. On top of that, you can rely on an accountant to help you file your taxes when it comes time so you receive all tax breaks. They’ll help you file properly, too.You might also want to consult with a lawyer about such an inheritance. Obviously, they can’t help you with the financial side of things, but they can make sure you operate within your rights as a property owner. To that end, if you decide you don’t want to inherit a rental property for any reason, your lawyer can help you turn down the inheritance in the proper way. And, just as the deceased person did, you can rely on your lawyer to put your new property in your will and choose a new owner when it’s your turn to pass it on.Inheriting a Rental PropertyUltimately, there’s no right or wrong answer as to what you should do once you inherit a rental property. With the above information and tips from professionals, though, you can make an informed decision about what to do with your new home.This article has been contributed by Holly Welles from The Estate Update. Start Your Investment Property Search! START FREE TRIAL Guest Blogs 0FacebookTwitterGoogle +PinterestLinkedin Holly WellesHolly is a real estate blogger and an Upstate NY native. She currently runs her own real estate and home improvement blog, The Estate Update. After earning a dual degree in Economics and English, she has blended her love for writing with her interest in the real estate market to begin her freelance career. You can find her work published on Homes.com and ResumeWriterReview.net, Today's Homeowner, and other prominent places around the web. Previous Post How to Invest in Real Estate with No Money: A Beginner’s Guide Next Post 7 Ways to Find Distressed Real Estate Property Related Posts Buying Stocks or Real Estate for Investment Purposes: The Better Option The 6 Best Books on Real Estate Investing to Read in 2019 Can I Invest in Real Estate with a Full-Time Job? 33 Real Estate Quotes That Will Push You to Invest Today 10 Best Real Estate Books to Read in 2020 How to Get into Real Estate with Little Money and No Experience Contingent vs Pending in Real Estate: What’s the Difference? 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