Need Advice on Inheriting a Property

[Josh Darley]

Hi BP,

Looking for some advice regarding a property I will be inheriting.  My 85 year old father recently had a stroke and will be unable to return to his home.  He is divorced, has no other kids, and I am the executor of his estate.  He will be headed to a rehab center and eventually assisted living which will be costly.  The home I helped him purchase 6 years ago is roughly worth ~240k and he owes ~130k.  Thankfully we were able to buy at the right time.  He doesn't have any signifcant savings (~10k), and his only income is social security and a small pension which comes out to a total of ~3k a month.  I assume his income will not cover the cost of assisted living roughly estimated at 5-6k per month and I will have to figure out how to cover the monthly deficit.  Not knowing how long he will need this I am unsure on what to do.  He is not in great health overall even prior to the stroke. 

First option is to sell the house immediately and utilize those funds (~100k) to supplement the cost.  The issue I have here is that once those funds are gone in a few years, we will then have to cover the entire cost myself (~3k) for an indefinite period of time.

The other option is convert it to a rental. The rent for the house would bring in about $2,000 a month and PITI is roughly $900. Its a small home, not in need of any capital improvements, so I can assume it would bring in roughly $800 monthly after reserves. We own/manage several properties in the area so managing it would not be an issue. With this option we would be incurring a monthly debt immediately which we can afford, and wouldn't significantly impact our lives. This debt will eventually end at some point in the future. We would then be left with the asset that he intended to pass on his kid and grandkids.

What are the pros and cons of each approach?  If we chose to convert it to rental, and keep all that money completely seperate from our personal finances, do we do it all in his name?  I have a General Power of Attorney.  I know there would be many other factors on how to manage the money here.

It's a difficult time, just trying to formulate a plan.  Once a decision is made I will go talk with a real estate attorney for further guidance.

Thanks,

Josh