Property received in an inheritance?

You don't need to worry about letting your property or wait forever to sell. There is a far better alternative. Rent and sell at the same time!

You are the lucky one to receive the property in inheritance. What are you going to do with it is the question. Most people sell. But what is the benefit of it? Ok, you get some money in a bank but what are you going to do with that money. And do you need the full amount?

Apart from sales people look at renting. Renting is correctly not an option in most cases - risky, little and not guaranteed money, potential damage to the property, agency overcharging, maintenance to mention just a few. Rent to Buy seems like a great option for many. It is a combined sale with rent. Typically the buyer exchanges a contract today with a deposit payment and rents the property for a few years before buying it for a higher price. We will explain the figures and advantages below. When receiving an inheritance each person needs to look in detail into their circumstances and financial aspects. From a financial point of view, you don’t need to sell the property to have some cash. If for any reason, you need some cash (pay off any debt or substantial expenses) but not the full market value of the property then it makes sense to simply remortgage the property. The advantage is that you still own the property and can benefit from both rental income and capital gain. Let’s look at the example.

With moving to live together with the other person each person needs to look in detail into their circumstances and financial aspects. From a financial point of view, you don’t need to sell existing property. And even if you decided to be a joint mortgage holder in a new property, lenders don’t have a problem with you having another property with the mortgage as well.

You inherited property worth £200k. But let’s say all you need is £100k for debt repayment and some expenses. You simply take out the mortgage for £100k to do it and keep the property in your name.

Let’s look at the risk and cost of selling the inherited property.

1. The sale price of your inherited property. It is obvious you have property from probate and because of it, buyers are likely to offer less than the market value. Some of the buyers are not looking into the property from probate at all because it typically means a major refurbishment. You are likely to lose the best clients who wish to pay the highest premium on gold quality properties. On the typical property worth £200k you expect the offers of £185-195k so let’s say it is a £10k loss.
2. High real estate fees. Around £2-3k
3. Family disapproval. Some of your members may not like the idea of you simply selling and cashing in inherited assets within a family property. When to decide to keep it and make a bit more money it is likely to work better with them and you get more respect.

Why Rent to Buy with the remortgage to get some money out would be a great option for this scenario.

1. The price you are likely to get is slightly ABOVE MARKET VALUE. It is due to completion taking place in a few years. So instead of selling property for £190k, you sell it for £205k.
2. Over a few years, you receive rent which not only pays off your mortgage but leave you with a surplus. Let’s say it is around £300 a month so £10000 in 3 years.
3. You also save money as you don’t pay any estate agent fee for the sale. It is another at least £2k.
4. You also save money as you don’t pay any estate agent fee for the sale. It is another at least £2k.

So total savings are £27k in this particular case. And there is fairly little to be done to benefit from it.