Do you find yourself with a piece of real estate that you did not buy yourself?
Inheriting a house can be a significant life event. Whether the property comes from a parent, a grandparent, or another loved one, it often brings with it a mix of emotions. You might be experiencing grief if you’ve inherited a house that belonged to someone who has died. You might feel nostalgia if it’s a home you grew up in or raised your own family in. Most people who inherit homes also feel a good dose of gratitude, and, sometimes, quite a bit of confusion.
Some of the new owners we have worked with will ask themselves this most basic question:
What should I do with this house?
There are several options. When you’ve inherited a home, you can move into it, sell it, or rent it out.
If you’ve never owned rental property before, the idea of becoming a landlord might seem intimidating. But for many accidental landlords, turning an inherited property into a rental home becomes a surprisingly rewarding financial decision.
As property managers who work with inherited properties all the time, we want to walk you through all your options, and explain why turning your inherited home into a rental may be the smartest and most lucrative move you could make.
Taking the First Steps: What to Do Immediately After Inheriting a House
Before you make any decisions, there are a few administrative and legal steps to address as you take possession of this inherited property. First, you’ll have to understand the legal status of that property. Confirm the title transfer has occurred or is in the process of being moved to you. Determine whether the property is in a trust, a will, or in probate.
If the inheritance process is confusing to you, talking to an estate attorney can help.
Next, you’ll want to assess the outstanding debts on the property, such as a mortgage. You’ll also need to check into any liens that might be in place. How much is owed on the mortgage? Are the property taxes up to date? Were any home equity loans taken out? This may require some time-intensive research, but you need to gather all of the information you can. Not only are you inheriting the house, you’re also inheriting any financial obligations that come with it.
Check out the property condition. If you have not been inside the property yourself, it’s time to visit. You might also want to hire a home inspector to conduct a full assessment. Make a list of necessary repairs and immediate safety concerns.
Once you’ve handled the logistics, you’re ready to explore your options.
If the home is in good condition and located in a desirable area, you might consider moving in yourself. You might find this especially appealing if:
The home is larger or better located than your current residence.
You’re looking to downsize, or the home has sentimental value.
You want to avoid capital gains taxes that might apply to a sale.
When you move into the home yourself, you won’t have to pay any rent. If the house is paid off, you won’t have a mortgage, either. You might also eventually qualify for homeowner tax benefits. If this is a property that’s been in your family for a while, you’ll also enjoy the emotional connection and family legacy.
This option does not work for everyone, however. If you are considering that you might take up residence in the inherited home, you’ll find that moving can be costly and disruptive. You may also need to renovate to make the house livable or aligned with your personal tastes. Also, the location might not be ideal for your current life needs (job, schools, etc.).
Option 2: Sell the Property
Selling is often the go-to option for heirs who aren’t emotionally attached to the home or don’t want the responsibilities of homeownership. There are several good reasons to sell. You’ll receive a lump sum of money, which can be used to pay off debts or invest. You can avoid the hassles of maintenance and repairs. And, with a stepped-up cost basis, you may pay little or no capital gains tax if you sell quickly.
But, the housing market may not be working in your favor. Will you get the asking price you think you deserve? Selling can take time and involve realtor fees and repair costs. You also lose the long-term financial upside of owning property.
If your priority is immediate liquidity and you’re not interested in becoming a landlord, this might be the best option. But there’s another path worth serious consideration, and that brings us to the next option.
Option 3: Turn It Into a Rental Property
Becoming a landlord may not have been part of your plan, but turning your inherited house into a rental could be the most financially advantageous option in the long run. Here’s why.
1. Create a New Stream of Passive Income
Monthly rent checks can provide a consistent cash flow. If the property is paid off, or even if there’s a reasonable mortgage, your net profit could be substantial.
2. Build Long-Term Wealth
Real estate typically appreciates over time. While you earn rental income, you’re also benefiting from property value growth.
3. Tax Advantages
Rental properties come with numerous tax deductions. You can write off mortgage interest, property taxes, repairs and maintenance, depreciation, and property management fees. Consult a tax professional to maximize your deductions and understand how your new rental affects your tax liability.
4. Preserve a Family Asset
Keeping the property in the family can offer emotional value. Renting it out allows you to generate income while still holding onto the legacy.
5. Flexibility for the Future
Life changes. Maybe one day you’ll want to move into the house yourself or sell it when the market is stronger. Renting gives you options that selling does not.
Key Considerations Before Becoming a Landlord
If you’re leaning toward renting, here are important factors to evaluate:
Location
Research the average rental rates in the area and take a look at local vacancy rates. You’ll want to understand what types of renters the neighborhood attracts. If the home is in a desirable location, you’ll likely have no trouble finding tenants.
Property Condition
Does the home meet rental standards? Many inherited homes need updates before they can be rented legally or safely. You may need to update electrical and plumbing systems, replace outdated appliances, install smoke detectors and carbon monoxide alarms, and address things like mold, pests, or structural issues.
Understand Local Landlord-Tenant Laws
Familiarize yourself with your state and local housing laws regarding lease agreements, security deposits, eviction requirements, and maintenance obligations.
Many municipalities also require rental licenses or inspections.
You’ll want to hire a property manager. Accidental landlords rarely want to handle tenant issues, repairs, or rent collection. A property manager can be a huge asset. We will work with you to market your property, screen your tenants, handle maintenance requests, and ensure legal compliance.
Most importantly, your property manager will help with:
Screening Tenants Thoroughly
One bad tenant can cost you thousands in damages and missed rent. Your property manager, during the screening process, will look at background checks, credit reports, employment verification, and references. We can tell you that being selective upfront saves headaches later.
Set a Fair (But Profitable) Rent Price
Property managers have accurate data sources that can tell you what similar homes to yours are renting for. That’s going to save you the time you’d have to spend checking listings and looking for the right rental price.
Manage Maintenance
Repairs are inevitable. We recommend that landlords set aside 10–15% of your monthly rent income for maintenance, vacancies, or unexpected issues. Count on your management partner to schedule the work, liaise with vendors, and partner with tenants to ensure your rental property is well-cared for.
Renting isn’t the right fit for everyone. You might be eager to sell or you might be planning your move into the inherited property already. But if you do choose to become a landlord by inheritance, you’ll find that it is a potentially powerful step toward building wealth, securing passive income, and preserving a family legacy.
By taking the time to assess your situation, explore your options, and approach the rental process with a strategy, you can turn an unexpected inheritance into a long-term financial plan.
So if you’ve inherited a house, don’t rush to sell. Step back, assess the potential, and consider becoming a landlord—even if by accident, it might be the best financial move you ever make.
We can help you get started, whether you’re sure you want to rent out the home or it’s just something you’re considering. Let’s explore the options in a more detailed way, taking into consideration your own circumstances and goals.
Contact us at Doud Realty Services, Inc. We provide expert property management in Norfolk, Portsmouth, Hampton Roads, as well as surrounding areas such as Virginia Beach, Suffolk, Chesapeake, and Newport News.