More than one-third of U.S. households rent, according to the Joint Center for Housing Studies at Harvard University. In many areas, demand exceeds supply, which spells good news if you’ve just unexpectedly inherited property. Capitalize on your windfall by renting out the home using these do’s and don’ts as your guide.
Dos of Renting Inherited Property
- Make necessary repairs. Before you advertise the home, asses its condition and attend to any needed repairs. Use a contractor directory to find reputable, homeowner-approved service providers in the area.
- Clean up the property and take nice photos. Clean the home’s interior and exterior to show it off at its best. If you’re not nearby, you may want to team up with a realtor who can stage the house for you and bring tenants by at the perfect time of day.
- Screen tenants for peace of mind. When renting out inherited property, be cautious about the tenant to preserve the home’s integrity. AAOA (American Apartment Owner’s Association) screening packages can be very useful if you don’t have time to screen tenants yourself or if you don’t live near the rental property. You’ll also save yourself a lot of trouble (and money!) should a tenant have a bad history.
- Listen for red flags. If you’re showing the home to tenants, look out for red flags. Tenants who badmouth their former landlords, ask about your policies regarding drug use, or balk at authorizing the credit report have something to hide. If you develop a bad feeling about a potential tenants, listen to your gut and rent to someone else.
- Get your taxes straight. Renting inherited property can be a smart idea. It’s certainly not easy, and does come with some tax liability. If you manage the rental yourself, acting as landlord, you can write off any money spent on the property (i.e. making repairs, advertising the listing and performing yard work). If you use a property management company, you can only deduct the rental expenses against income.
Don’ts of renting inherited property
- Dismiss insurance on your inherited home. Insurance protects you and your investment in the event something goes wrong. Whether you live across town or across the country, protect your inheritance with property insurance from a trusted company like The Hartford, which covers loss of income, medical expenses, personal liability and home structure.
- Leave the family jewels in the closet. Before you rent the home, remove any valuables. Better to pay for a storage unit than find Grandma’s heirloom silver trashed.
- Take on a commitment you can’t handle. Evaluate whether you have time to market and manage the property. If you realistically have several hours a week you can devote to property management, be a landlord. However, if you work 60+ hours a week or live remotely, do yourself a favor and find a property management company.