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What Happens if You Inherit a House – Is it Better to Rent or Sell?


Although inheriting a house is typically accompanied by the loss of a loved one, suddenly finding yourself with a property can pose several opportunities. For example, if you want to make money from your inheritance, you have options to do so. If you want to know what happens if you inherit a house and how you can potentially start a rental business, just keep reading. 

What Happens If You Inherit a House? 

If you’re unsure what happens if you inherit a house, you have several choices. For instance, you can live in the house if you want. Otherwise, you could sell it to someone else for profit or rent it out to tenants to earn income. Both of these options are profitable and attainable. 

However, the value depends on the property. Therefore, it’s crucial to thoroughly analyze the home and determine how much it’s worth. Then, research the current housing market to determine where your property lands in terms of pricing. 

Once you’ve learned how much the home is worth as it is, your next mission is to find out if it would be a good rental property. Here are a few factors in determining if your property would make an excellent rental home. 

Factors to Determine If It’s a Good Rental

Not every property makes a good rental home. Unsuccessfully renting out a property can cost you more money than you’d earn. That said, before advertising your property for rent, it’s crucial to decide whether it will benefit you or not. Here are some factors that can make a good rental property


  • The Property Meets Market Demands
  • The Size, Type, and Condition of the Property
  • Favorable Rental Rates
  • Up-and-Coming Location

The Property Meets Market Demands

If your property has what renters want, it won’t be hard to find tenants. Most renters look for amenities like new appliances, modern upgrades, and a location near schools and job opportunities. Additionally, a property in a desirable area can charge more competitive rates and experience less vacancy. If you think the property you inherited adheres to what tenants look for, you may want to consider renting it.

The Size, Type, and Condition of the Property

Additional factors to consider while determining whether or not a property would make a good rental are the property size, type, and condition. For example, is it a single-family home? Multi-family property? How many bedrooms and bathrooms are included? Has the property been upgraded or remodeled recently? These factors play a significant role in the desirability of a rental home, so it’s crucial to consider the property’s size, type, and overall condition.

Favorable Rental Rates

Researching the rental rates in the location of your property can also help determine if it would be a good decision to rent rather than sell. Most property owners set a goal to set rental rates that are worth at least 1% of the investment. For instance, if the property is worth $170,000, you could charge around $1,700 each month for rent. That said, several areas offer opportunities for higher rental rates. So, if you’re in a favorable location, you may be able to charge favorable rates. 

Up-and-Coming Location

Clearly, location plays a huge role in the success of rental properties. As such, an up-and-coming property location is best. When you have real estate in up-and-coming locations, property owners can make strategic improvements and profit quickly. Additionally, as the area improves and evolves, rental rates will likely increase as demand increases. 

Advantages and Disadvantages of Renting

Like any investment strategy, there are some advantages and disadvantages to renting a property. Even though you didn’t initially invest money in the property, the goal is to earn a steady income from renting it out. However, it’s not always as simple as that. Here are some of the pros and cons of renting. 

Pros of Renting

  • Rental owners can earn a steady monthly rental income. 
  • Real estate owners benefit from appreciation. 
  • You can set rental rates according to demand and location. 
  • You can rent the property out as a vacation rental on Airbnb or use it as a second home if you want. 
  • Owners can hire Philadelphia property management to help with day-to-day tasks. 

Cons of Renting

  • Maintaining a rental takes a lot of time, work, and patience.
  • Your property may need renovations or work before turning it into a rental. 
  • Rentals can experience vacancies, which means you’re not bringing in any income. 


What If Your Property Wouldn’t Make a Good Rental? 

As stated above, not all real estate makes excellent rental properties. So, what happens if you inherit a house that wouldn’t make a suitable rental property? Luckily, there are other options–like selling it. Otherwise, there are a few alternatives you could explore. For instance, you sell it and reinvest the money into a more desirable property to earn rental income. 

Otherwise, you can live in the home you inherited. Or, if you think that the home you currently live in would make a better rental, switch things up. Of course, you can always live in the home you inherited and rent out your current home if you want to start earning rental income. 

Advantages and Disadvantages of Selling

If you’ve determined that your property wouldn’t succeed as a rental, you may want to consider selling it. Although selling it is a quick and easy way to make a lot of money. However, that doesn’t mean there aren’t any disadvantages. Here are the pros and cons of selling an inherited property. 

Pros of Selling

  • You can make a large sum of money right away.
  • There’s no need to fix up the property or handle tenant concerns.
  • You have the opportunity to invest the money into something else. 


Cons of Selling

  • Completing a property sale can take a long time, meaning you might have to pay holding costs. 
  • Renting a property can be more profitable, depending on the location. 
  • Selling an inherited home can be difficult, especially if you have attachments to the home. 

Tax Implications For Renting an Inherited Home

While there are some obvious benefits to renting an inherited home, it can be costly when the time comes to sell it. Unfortunately, you can expect capital gains tax when you sell your inherited house. When you eventually sell your inherited home, you’ll have to pay capital gains tax on the difference between the original purchase value and the current sale price. That said, if you have a rental property, it’s crucial to maximize tax deductions and track finances accurately. 

Get Help Managing Your Rental Home

Investing in real estate and starting a rental business is a strong investment strategy. But, what happens if you inherit a house? You have several ways to earn income! Whether you decide to sell or rent, both options pose benefits and disadvantages. For instance, selling a home can be a long and frustrating process. But, on the other hand, renting a home can take a lot of work and can eat up a lot of your free time. 

As such, many rental investors hire property management to help with the day-to-day tasks of owning a rental property. Bay Property Management Group provides top-notch comprehensive management services to busy landlords. Contact BMG today if you need rental management services in Baltimore, Philadelphia, Northern Virginia, or Washington DC.