Renting out a house you inherit can be a viable option, providing a steady income stream and potential long-term appreciation in property value. However, it’s essential to understand the legal and financial responsibilities that come with becoming a landlord.
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Can You Rent Out a House You Inherit?
When you inherit a rental property, you step into the shoes of the previous landlord, inheriting all the obligations and responsibilities that come with it. This includes adhering to relevant regulations and laws, such as tenancy agreements, health and safety standards, and financial responsibilities like mortgage payments and taxes.
Legal Responsibilities
As a landlord these will be your legal responsibilities:
- Tenancy Agreements: Review existing tenancy agreements to understand the terms and conditions. Ensure you honour these agreements and communicate any changes to your tenants in writing.
- Health and Safety: Ensure the property meets all health and safety standards, including regular gas safety checks, electrical safety standards, and fire safety measures.
- Deposits: Check that tenants’ deposits are held in a government-approved tenancy deposit scheme.
- Licensing: Some rental properties require a landlord licence. Check with your local council to determine if your property falls under this category.
Financial Responsibilities
- Mortgage Payments: If the property has an existing mortgage, you will need to continue making payments or consider refinancing options.
- Taxes: You will be liable for income tax on rental income and potentially capital gains tax if you decide to sell the property. Consult with a tax advisor to understand your tax obligations.
Deciding Whether to Keep or Sell the Property
One of the most significant decisions you will face is whether to keep the property and continue renting it out or to sell it. Each option has its benefits and drawbacks, and your decision will depend on your personal circumstances and financial goals.
Keeping the Property
Keeping the inherited rental property can provide a steady stream of income and potential long-term appreciation. Here are some factors to consider:
Rental Income: Assess the rental market to determine the potential rental income. Consider whether this income aligns with your financial goals.
Property Management: Decide whether you have the time and skills to manage the property yourself or if you need to hire a property management company. Professional management can ease the burden and can be offset against your tax liability.
Long-Term Investment: Consider the long-term appreciation potential of the property. Property values in desirable areas often increase over time, providing a solid return on investment.
Managing the Property
After inheriting the property, the new owner(s) must decide what to do with it. They may choose to live in the property, rent it out, sell it, or otherwise dispose of it. If the property is rented out, the new owner(s) become responsible for managing the tenancy agreements, collecting rent, and maintaining the property.
Selling the Property
Selling the property can provide a lump sum of money that you can invest elsewhere or use to meet immediate financial needs. Consider these factors:
Market Conditions: Evaluate the current property market. Selling during a seller’s market can maximise your return.
Capital Gains Tax: Be aware of the potential capital gains tax liability. The amount of tax will depend on the property’s value at inheritance versus its sale price.
Emotional Attachment: Inheriting a family home can be emotionally challenging. Weigh your sentimental attachment against financial practicality.
Implications of Each Decision
Both keeping and selling the property have significant implications. Here’s a closer look at each:
Keeping the Property:
Pros: Regular rental income, potential property value appreciation, and retention of family heritage.
Cons: Ongoing maintenance responsibilities, landlord obligations, and possible financial risks if the rental market declines or tenants default.
Selling the Property:
Pros: Immediate access to a substantial sum of money, no landlord responsibilities, and the ability to invest or use the funds as needed.
Cons: Potential capital gains tax, loss of rental income, and emotional impact of selling a family asset.
Steps to Selling an Inherited Property
- Clear the Property: Remove personal items and clean thoroughly.
- Get a Valuation: Obtain valuations from multiple estate agents.
- Prepare for Sale: Make necessary repairs and improvements.
- List the Property: Choose the best method (estate agent, auction, or property-buying company).
- Negotiate Offers: Work with your chosen method to complete the sale.
Insider’s Tips
- Tax Efficiency: Consult a property tax specialist to choose the most tax-efficient ownership structure.
- Regulations: Ensure compliance with over 150 pieces of legislation, including health and safety regulations and energy efficiency standards.
- Insurance: Arrange specialist landlord’s insurance, as standard home insurance won’t cover a rental property.
- Maintenance: Regularly inspect the property to prevent costly repairs.
Can I rent out an inherited property without fixing it up first?
While you can rent it out as-is, it’s best to ensure the property meets safety and habitability standards to avoid legal issues.
What are my options if someone else is living on the property?
If someone is already living in the property, you will need to double-check the will of the deceased to see if they outline who has property rights. If there is nothing written in the will, you will need to come to an agreement with the other inheritor.
What are my options if the inherited property is mortgaged?
You can pay off the rest of the mortgage with your savings, sell the property and use the sale to pay off the rest of the mortgage, or rent out the property to cover the monthly mortgage payments.
Renting Vs Selling
These are your options as an Executor or a beneficiary:
| Option | Pros | Cons |
|---|---|---|
| Renting | Regular rental income, potential property value appreciation, retention of family heritage. | Ongoing maintenance responsibilities, landlord obligations, possible financial risks. |
| Selling | Immediate access to a substantial sum of money, no landlord responsibilities, ability to invest or use funds as needed. | Potential capital gains tax, loss of rental income, emotional impact of selling a family asset. |
Ditch the Stress
Selling a property through traditional methods like estate agents and auctions can be a stressful and time-consuming process. Estate agents often come with hefty commissions and no guarantee of sale, leaving homeowners in limbo for months. Moreover, the process is filled with viewings, valuations, and endless paperwork, which can be overwhelming and emotionally draining.
Auctions, on the other hand, present their own set of challenges. The risk of underpricing or overpricing your property, dealing with problematic tenants, and navigating complex legal packs can be a nightmare. Not to mention the emotional toll of watching your property go unsold at auction, only to be left with the uncertainty of what to do next.
At Property Saviour, we offer a hassle-free alternative. As genuine cash buyers, we provide certainty and speed, allowing you to sell your house quickly and effortlessly. We pay £1,500 towards your legal fees, complete the purchase in as little as 10 days, and ensure that the price agreed is the price you receive – no fees, no re-negotiating, and no delays.
Request a call back today and let us take the stress out of selling your property. Simply complete our online form, and we’ll be in touch at a time that suits you. Take the first step towards a stress-free sale with Property Saviour.
Property Saviour Price Promise
- The price we’ll offer is the price that you will receive with no hidden deductions.
- Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
- These valuations or surveys result in delays and price reductions later on.
- We are cash buyers. There are no surveys.
- We always provide proof of funds with every formal offer issued.
We'll Pay £1,500 Towards Your Legal Fees
- No long exclusivity agreement to sign because we are the buyers.
- You are welcome to use your own solicitor.
- If you don’t have one, we can ask our solicitors for recommendations.
- We share our solicitor’s details and issue a Memorandum of Sale.
Sell With Certainty & Speed
- Our approach is transparent and ethical, which is why sellers trust us.
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- If you have another buyer, you can put us in a contracts race to see who completes first.
- Complete in 10 days or at a timescale that works for you. You are in control.
