Inherited my Parents' house near Dayton, OH. Advice?

Question

My sister and I just inherited (50/50 split) our parents' house in Kettering (Suburb of Dayton), OH.   I live in Denver and she lives in Jacksonville.  She wants out quick and easy.  I want to maximize returns.

-House was not in a trust- as I understand we will need to pay taxes on gains (parents bought it for about 12k in 1969, zillow says about 150k today)

-House is not MLS-ready.  It definitely needs updating and might have some minor structure issues.  But it's not a disaster, for sure.  I will go there next week to see it again.

-There has not been a mortgage on it since the early 1990's.

-I'm open to anything (sell outright, BRRRR, seller financing, etc), but will not be able to be very hands-on with any construction.

Any advice appreciated.

Alan Asriants · Answer

Hey Jim, as a few pointed out there is no direct or right/wrong strategy here. It is really all about what you are comfortable with and willing to do.

If I were in your shoes, I would first evaluate the area, and if it fits my criteria and I know what kind of tenant I can put in there I would continue to the next step:

Finding out how much it would cost to rehab and what kind of rents I can achieve.

If the numbers makes sense, which likely they will since you inherited the property and there is no mortgage, then renting it out debt free could be a great move right now.

Maybe you rehab it, and simply pull out your rehab budget so that you can have an operating rental basically for free.

I think holding onto real estate is more beneficial than selling it. My 2 cents.

Good luck!

Shawn Parsh · Answer

Jim,

You need to get with a qualified CPA to go over the tax rules, hopefully, someone on BP will chime in as well. Do you have experience investing out of state? Do you currently have rentals? I am not a big fan of investing out of state, but I know a lot of people here on BP seem to pull it off with no issue. Once you go next week you should have a better idea of what someone would need to do to update and rehab the property.

For your trip next week I would try to meet with a few well recommended and qualified real estate agents to get their estimates on the homes current as is value. Don't think that you will not be able to sell it based on its current condition. I buy houses in bad shape all the time as do many here on BP. It is possible that you would clear more money if you rehabbed the property and then listed it, however, that is not a guarantee. Do you have friends/family in that area that could oversee any work you had done? Do you know trustworthy contractors that could complete the required work?

Depending on your skill set and time would you be able to go and knock out what is needed in a couple weeks? I'm not sure if you have a day job, but it may be worth taking some vacation time to make some improvements on the property to increase its value before you sell. If what you can do raises the value by several thousand it may be worth the trip.

Account Closed · Answer

You can sell to me😁.  Been here 2 weeks.  Bought 2 houses and would love to acquire another one specially in Kettering.   As is depending on price.

Basit Siddiqi · Answer

make sure to calculate the step up in basis when calculating depreciation.You may want to order an appraisal as support for your new depreciable basis calculation.

Tanner Cohen · Answer

@Jim Stanley,

@Alan Asriants is providing some strong feedback on 1st steps which you already are making happen by checking out the place next week. Finding out what market rents are in the area will quickly reveal if retaining the property as a rental even makes sense.

Personally, I would start by diving into recently sold (6months) properties within a mile that share similar characteristics to your home. This will get you a better idea of the potential fair market value of your home. I wouldn't rely on what zillow says, my experience is that they fluff value estimates.

Bring a local GC with you when you go so they can get a rough idea of a bid for renovation. I'd show that GC some renovation options for potential rehab strategies. This can give you a spectrum of costs that you can cross reference to your comparable sales research. You will then have a range of your homes potential value which can aid you in deciding which investment strategy to implement.

I know your sister wants a quick exit, but you get to show her what the best investment strategy should be. All of the above research is what you can share with her and present via pros and cons list.

Lastly, If you decide to keep the property, you will want to dialogue with lenders who will be able to finance the property AND construction (if you go that route). It can be tricky with recently inherited property, especially with no debt. A lot of lenders will require you to have owned the place for a certain amount of time. Referred to as "seasoning". Leveraging OPM will be be crucial if you do more than sell the property as-is.

Like Alan i think holding onto the property is the best option. But I deviate from Alan's feedback here, as I think accessing the equity of the property is the best route to take. I wouldn't try to rent the property without any debt on it. That equity is extremely valuable, arguably more valuable than the potential monthly cash flow that you'll split 50/50. That's tax free money and if you structure things right you can acces the equity, have a cash flowing asset, and use the depreciation of the home to write off against some of your income. The numbers have to make sense.

Good luck Sir!

Samantha Fedor · Answer

Hi Jim, just sent you a message. No matter the route you go, I'm sure I, or someone on here could help direct you to the people you should be talking too. Buyers, realtors, lenders, contractors.

I haven't ran into too many CPAs on here, that I can think of. I might have someone that could help though. He is a CPA in Cincinnati, although since it is still busy season for him he might not be freed up for a few months.

Inherited my Parents' house near Dayton, OH. Advice?

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