Should You Keep Your Parents' House After They Move Out or Pass Away?
When we speak with families who have recently learned that they will need to make big decisions about the “family home”, it’s very common for them to consider keeping it as a vacation home or rental property. We get it… the thought of another family living in the home can be upsetting, plus the idea that siblings could leverage the property to create shared income could avoid conflict and the finality of a sale.
While many people initially feel a pull to hold onto the family home—whether for sentimental reasons or as a potential income source through renting, it doesn’t always make sense. So as you weigh your options, consider the complexities involved.
Our Advice: Speak to an Elder Care Attorney
The first and most crucial step is consulting with an estate, trust or elder care attorney. These legal specialists can help you create a plan that protects your parents’ assets and optimizes their financial well-being while safeguarding your own liability. There’s a surprising amount of poor advice circulating that may sound plausible but could lead to costly errors. The right attorney can tailor a solution to fit your specific situation, giving you clarity on tax implications, Medicaid considerations, and more.
Our Advice: Evaluate the Risks and Realities of Renting
Renting your parents’ home might seem like a great way to generate income to cover assisted living costs or other expenses. However, being a landlord—especially if you have just one rental property—comes with risks that shouldn’t be underestimated. Consider these typical situations:
Tenants and Legal Issues
Renting means navigating tenant selection, and unfortunately, not every renter will be respectful or reliable. A bad tenant can cause significant damage or withhold rent, leading to a potentially grueling and protracted eviction process, depending on your state’s laws. Recovering damages and rent arrears can be difficult, and it often leaves landlords frustrated and financially strained.
Profitability Challenges
Profit from a single rental property can be elusive. Experienced landlords often point out that profitability usually hinges on owning multiple properties, as losses from one unit can be offset by gains from others. With only one property, unexpected costs or vacancies can quickly make a dent in your finances.
Hiring a Property Manager
While hiring a property management firm might ease some burdens, it comes at a cost that eats into your profit. Not all firms are equal in their ability to vet tenants, respond to issues, or manage a property with the care you might give.
Hidden Costs
Beyond tenant management, you’ll still need to budget for property taxes, insurance, maintenance, and possibly some utilities. Ask yourself: is the potential income worth the headache and risk? The answer will vary based on your financial needs and risk tolerance.
Our Advice: Consider the Option to Sell
Selling the family home outright may provide a simpler path forward. It can free up cash to fund care needs, settle estate obligations, or support other financial goals. However, here’s what you need to weigh:
Tax Implications
Capital gains tax could significantly impact what you keep from a sale. Consulting with a tax professional can help you evaluate your options and reduce liabilities where possible.
Matters of Timing
The state of the real estate market can influence your decision. Selling in a strong market can maximize returns, while holding out during a downturn might be more prudent.
The “Emotional Weight”
Letting go of a family home is a deeply personal and emotional decision. Take the time you need to ensure everyone in your family is ready for this step.
Our Advice: Take Your Time
Moving to assisted living is a major transition for your parents. Rushing to make permanent decisions about their home could lead to regret later. Give them (and yourself) a chance to adjust before selling or renting the property.
Decluttering and Preparation
While you wait, consider beginning the process of cleaning and decluttering. This will make any future decisions about the property easier, whether you choose to rent or sell.
Every family’s situation is unique. Renting or selling your parents’ home can have both financial and emotional repercussions. Be sure to arm yourself with expert guidance from legal, financial, and real estate professionals. Carefully weigh your options, think long-term, and make decisions that bring peace of mind and respect your parents’ legacy.
Regardless of the choices you make, you’re going to need help from experienced professionals who understand the risks and have the local knowledge to address all of your concerns. Search our directory of local downsizing and senior move specialists in your town as your first step.
