Sell or rent out inherited house?

Yazmina

My mum died in November and I am the sole beneficiary of her estate.  There is no mortgage left on the house.  I know that my options are:

1. Live in the house.  I don't want to as I still expect to see my mum every time I go there, especially when it is quiet in the evenings.  My husband doesn't fancy this either as he'd rather live in his own house.

2. Sell the house.  This is my preferred option as I think it's worth c. £500k (valuation report due soon).  My mortgage is around £196k, so I could clear this and do a lot of other things with the proceeds of the sale. 

3.  Keep the house and rent it out.  I feel like this is the option I should take.  A few people have said to me don't sell the house, use it to pay your mortgage.  I get that ultimately I would own two freeholds, and that would be a great position to be in.  I could carry on paying my mortgage and invest the rent in something.   I could charge £1800 per month.  However, I'd have to pay IHT (plus interest), additional income tax, possibly CGT in the future.  

I just think that selling is less complicated and gives me more freedom, but I should be aiming to build a property portfolio.

getmore4less

Yazmina said:

My mum died in November and I am the sole beneficiary of her estate.  There is no mortgage left on the house.  I know that my options are:

1. Live in the house.  I don't want to as I still expect to see my mum every time I go there, especially when it is quiet in the evenings.  My husband doesn't fancy this either as he'd rather live in his own house.

2. Sell the house.  This is my preferred option as I think it's worth c. £500k (valuation report due soon).  My mortgage is around £196k, so I could clear this and do a lot of other things with the proceeds of the sale. 

3.  Keep the house and rent it out.  I feel like this is the option I should take.  A few people have said to me don't sell the house, use it to pay your mortgage.  I get that ultimately I would own two freeholds, and that would be a great position to be in.  I could carry on paying my mortgage and invest the rent in something.   I could charge £1800 per month.  However, I'd have to pay IHT (plus interest), additional income tax, possibly CGT in the future.  

I just think that selling is less complicated and gives me more freedom, but I should be aiming to build a property portfolio.

How will you feel if the tenants trash the place?

Have you run a lettings business before?
try reading some of the links here
https://forums.moneysavingexpert.com/discussion/5180214/tenancies-in-eng-wales-guides-for-landlords-and-tenants#latest


Is the property a suitable let

Why do you think there is IHT if you let it out?

£1,800pm is gross yield 4.3%  how much will be left after the costs of running the business and taxes?


My husband doesn't fancy this either as he'd rather live in his own house
My mortgage is around £196k, so I could clear this 

#confused do you have a house each or should that be our mortgage?

what would you do with your house if you moved into mums?

Flugelhorn

If you feel mum is still there, you will hate it if anyone else in the house ie tenants, particularly if they don't respect it

Do you want to be a landlord?  (PS won;t make a difference to IHT) 

Just sell it - I sold, said goodbye to my parents house and bought a holiday house with the proceeds - love it. 

Mojisola

getmore4less said:

How will you feel if the tenants trash the place?

This ^

Never rent out a property that you have an emotional attachment to.

If you really want to become a landlord, sell your mother's house and buy an ideal-for-renters property.

Yazmina

getmore4less said:

How will you feel if the tenants trash the place?

I'd be pretty angry about that.

Have you run a lettings business before?
try reading some of the links here
https://forums.moneysavingexpert.com/discussion/5180214/tenancies-in-eng-wales-guides-for-landlords-and-tenants#latest

Not a business but I bought my first flat in 2008 and let it for a while.  No problems.

Is the property a suitable let
Mainly, yes.  I'd need to do some cosmetic updating.  However mice have always been a problem.  The house is mid terrace.  My mum did all she could to fill in holes in cupboards and behind the washing machine etc, but they still come back.  Any tenant would need to bring a cat. 

Why do you think there is IHT if you let it out?
The overall estate (house, savings, shares etc) is over the threshold.

£1,800pm is gross yield 4.3%  how much will be left after the costs of running the business and taxes?
I estimated £1,375.


My husband doesn't fancy this either as he'd rather live in his own house
My mortgage is around £196k, so I could clear this 

#confused do you have a house each or should that be our mortgage?
We just have the one house, and we'd both rather stay here.

what would you do with your house if you moved into mums?
Don't know, rent it out I guess.  That would be hard as it's our first house together and have put our stamp on it over 4.5 years.

Grumpy_chap

I'm sorry to hear of your loss, OP, but another way to think about this is if you had inherited £500k from your mother, would you chose to buy a rental property or do something else?

Reading the thread as a whole, the following comments seem very pertinent in the decision:

Yazmina said:

2. Sell the house.  This is my preferred option 

I just think that selling is less complicated and gives me more freedom

Yazmina said:

getmore4less said:

How will you feel if the tenants trash the place?

I'd be pretty angry about that.

As for:

Yazmina said:

I should be aiming to build a property portfolio.

Why?

Savvy_Sue

 As for:

Yazmina said:

I should be aiming to build a property portfolio.

Why?

This! It may be right for some people, but when our financial adviser suggested it to us, it took me very little time to decide against it.

If it's right for you, FAR better to sell and buy another. It's not fair on your tenants, and it won't be nice for you because this won't be your mum's house any more. 

BTW, you realise you may have as much as £1m to play with before IHT is due?

theoretica

Yazmina said:

I just think that selling is less complicated and gives me more freedom, but I should be aiming to build a property portfolio.

Why a property portfolio rather than any other sort of portfolio?

getmore4less

Yazmina said:

getmore4less said:

Why do you think there is IHT if you let it out?
The overall estate (house, savings, shares etc) is over the threshold.

But why different if you let it out? 
It was only mentioned for option 3.


as for 
However mice have always been a problem.

If you were never able to fix it it will become a nightmare as a landlord.


£1,800pm is gross yield 4.3%  how much will be left after the costs of running the business and taxes?
I estimated £1,375.

Do you work?  will adding ~£20k to your income put you into 40% tax?
Even with 20% you are down to £1,440   £65pm/£780pa won't go far with the maintenance mouse clearing and other costs


Not a business but I bought my first flat in 2008 and let it for a while.  No problems.
that was a business,  a lot has changed since 2008  not so simple these days.

BooJewels

I'm with everyone else - just sell it.  Especially as the market is still buoyant and may start to downturn soon. I've just been in the same position and we considered renting it out, as it would be reasonably profitable as there are no mortgages involved for the property or beneficiaries and we'd still have the equity of the property - but it would have needed some work first.  But having read some of the tales about bad tenants on here and the legal complexities of being a landlord, it didn't take us long to decide against it - for all the reasons already covered above and more.

I'm actually relishing the idea of being done with it totally (we just need the buyers to actually complete) and not having it hanging over my head - it's just one responsibility too many.  I know our buyers are planning a massive scheme of work on the property (we sold it priced as a development project), but that bothers me not one bit - I'd love to see it fulfil its potential - totally changing it when it's theirs is a whole different matter than someone trashing it when it's still mine!

If you want to develop a portfolio, use your improved position to buy to let - with a property you have no emotional attachment to.

Yazmina

I think I should hold on to the house because people bang on about property so much, like it's the Holy Grail.  

My mum wasn't married so I think the threshold is £325k + £175k.  IHT would be due whether I sell or rent it out.

The rental income would take me to the brink of 40% tax.  I wouldn't see any real benefits from increases in pay in my day job, or from increasing the rent in future.