5 considerations to make when you are bequeathed a property
When a relative passes away, it is usually a distressing time, both emotionally and financially. The pressure of organising the funeral and the deceased’s estate according to the will is real. Combined with the sense of loss felt, the result is a maelstrom of emotional stress. It’s hard to decide what to do for the best, especially where the deceased’s home is concerned. The eventual decision, assuming the heir decides not to live in an inherited house, is whether to sell or let.
The first quarter of the year, when the weather is generally at its most harsh, is the period that sees most deaths in the UK. During January to March 2018, there were 164,574 deaths registered in the UK. That’s around 15% to 20% more than the next worst quarter (October to December). With this in mind, this article will help anyone who has inherited a house to decide whether they should sell or let.
1. Do you live near the property?
The first thing to consider is how near to the property you live. Whether you are considering selling or letting, distance will impact your ability to either prepare the property for sale or to manage it as a rental property.
2. Do you want the responsibility of being a landlord?
Next, if you are considering letting the property, you should consider whether you are prepared to accept the responsibilities of being a landlord. From people management to property management to financial management, if you decide to self-manage there is a lot of work involved (and plenty of laws that you will need to adhere to – read our article “178 reasons the law causes buy-to-let landlords such stress” for the latest list of them).
Of course, you can reduce the workload by using professionals to take on your landlord responsibilities. Our investment property management services will help find great tenants and manage them, as well as manage the property, collect rent, produce legal and updated tenancy agreements, etc.
To make sure your finances stay on track, and that you invest with tax efficiency too, you should use an experienced accountant.
3. What condition is the property in?
The condition of the property will impact you whether you let the property or sell it. It must meet certain standards to be let. For example, it will need to have a minimum energy rating and have an Energy Performance Certificate. It will also need to be fit and habitable. Older homes may need a considerable amount of work to get them up to scratch.
If the work required is too expensive or will take too long to do, then selling the property may be the best solution. Dressing a property for the sales market can usually be done at a reasonable cost and reasonably quickly. However, you may need to be patient to achieve a good price, especially in the current market.
4. How do the numbers stack up?
Now we come to the financial considerations. You’ll need to do some research and number crunching, and consider:
- The cost of any upgrade work that may be needed
- Its rental value
- The market value
- Whether there is a mortgage outstanding
- Your current financial situation
If the property is mortgage free, the rental income from it could be life-changing. It could help you reduce your hours at work, pay for a memory-filled holiday each year, and even retire earlier (perhaps even now?).
You should sit down with specialists who will help you decide what the best choice may be for your personal financial situation, and how to own the property if you decide to let it so that you minimise any tax liability.
If you have inherited a property in a good area where the rental market is strong, the income it produces could be the same as a pension pot valued at hundreds of thousands of pounds. If you are already in your forties or older, you probably wouldn’t be able to build such a pension fund. Plus, over the long term, the value of the property may rise and the rental income is likely to be inflation-proofed.
5. What is the location of the property like?
You should also consider the location of the property, and how the area fundamentals may affect future-property values and rental prices. Here are a few questions to start:
- Are there shops and leisure facilities nearby?
- What about restaurants, cafés and bars?
- Is the property within the catchment area of good schools?
- Is the location benefitting from investment into infrastructure and regeneration?
- What is the local economy like? Does it rely on a single employer or industry, or is it diverse and better protected against recessions?
- What is the local transport system like? Are there good road, rail, bus and other travel connections available?
The answers to these questions and more will help you decide whether the value and rental prospects are more conducive to selling or letting in the short, medium and long term.
We’re here to help
We understand that losing a loved one is a desperately difficult event.
When you inherit a property following the death of a parent or other family member, making the right decision is hard. You probably won’t be in the frame of mind to concentrate on the advantages and disadvantages of each course of action. Should you let your property and create a passive income stream, or should you sell to benefit from a sizeable lump sum?
Just over half of people who have inherited a property decide to sell it. Around a third decides to let it out and benefit from long-term capital growth and inflation-proofed passive income. The remainder either leave the property empty (never a good decision) or move into it themselves.
If you have inherited a property, feel free to contact our team at Ezytrac on +44 0 1522 503 717. We’ll explain your options, help you weigh up all the factors and pros and cons, and help you make the best decision for you – whatever that decision should be.
Live with Passion,