Getting our feet wet

[Scott Baker]

My wife and I just inherited 50% of a family homestead when her father passed away here in Spokane in March. We are new to the idea of a rental and trying to gauge our ability to execute on it. The house is paid off and clear, but her brother owns 50% of it. My thoughts are with the rehab the house needs I should get an appraisal on its current state.... buy him out with it current value then my sons and I would put in the work to rehab the place to turn into a rental. I think maybe setting up an LLC to buy out my brother in law might make sense? Then I have a solid baseline to start the rehab. Thoughts? Thanks in advance!

[Brad S.]

First of all, sorry for your loss.  :(

A few things here prior to making any decisions:
* Get an idea of what it's current value is now, both rental and sale value?  ...talk to an experienced local realtor/broker, etc.

* Assess what rehab work needs to be done and assess the potential rehab costs. There are still materials and maybe some other specific trades, which you and your sons may not be able to do.

* Ask that same real estate professional above, if it is worth doing the rehab, if you decide to sell? In some markets and at certain times, it may not make a significant difference compared to the time and money you would put in to do the rehab.

* To the same real estate professional, find out their opinion of the area and the current and potential growth and appeal of your property and the neighborhood (market) to potential buyers and renters. You may also want to call local property management companies to get their estimated rental amount and their feel for the rental appeal of your property in the area, etc.

* Talk to your tax professional and find out what your tax implications are from inheriting the property to buying out your brother and putting it in an LLC, etc.

* Also find out if the property's tax assessment changes with any of the scenarios above. In my state, CA, there are drastic property tax changes which need to be accounted for.

* Get an insurance estimate for a landlord policy, to put into your rental equation.

Basically, you want to assess the current situation prior to making any actions, and decide what the best avenue is for you. You may find that the equity is best put into a rental in a different market, more inline with your goals, or maybe it makes more sense to sell and put the money into dividend stocks until the market/s are more favorable to future appreciation, etc.