When demand is high, professional brokers filter out suitable prospective buyers and clarify, for example, whether the property fits within the buyer's budget before arranging a viewing.
Keep the property, exchange it for a new one, or convert it back into capital?
When a large sum of money is inherited, the question quickly arises as to what should be done with it so that it is invested in the best possible way—the best case scenario is always to let the money work for you. However, in recent years in particular, the low interest rate policy pursued by banks has meant that simply investing money is no longer quite as lucrative as it used to be. If the estate includes inherited real estate, this does not necessarily mean sudden wealth, as not all properties are automatically suitable as a long-term investment. Many people are unable to assess whether and when the inherited property would be worthwhile as an investment. In the end, your calculations will not add up – in the truest sense of the word.
Real estate as a family inheritance: Why investing in real estate early on is worthwhile
Many people invest in real estate at an early age when it comes to securing assets for their heirs. And this is not only for emotional reasons, such as leaving their children a roof over their heads: When inheriting real estate, the surviving dependents benefit from significantly higher tax allowances than if they were to inherit the capital in cash. However, due to blocking periods, you have to decide early on.
What is the property worth today and in the future?
In order to know what value you can actually plan with, the current market value of the inherited property should be determined. To do this, data about the property, its condition, location, rentability, and market situation and development are evaluated and used to make a forecast for a sale price. With this information at hand, the next steps can be planned: Is it worth selling, or would it be better to continue renting? Another question that a real estate specialist is best placed to answer is: Would it perhaps make more sense to sell the existing property and use the proceeds to purchase a more modern property?
Is my property rentable or saleable?
In many cases, inherited property has been in the family for decades and only the most necessary maintenance work has been carried out. If you want to use the property as an investment for re-letting, you should check whether it is suitable for letting or selling. This includes not only the question of whether it complies with all building regulations, but also whether it can meet the modern requirements of potential tenants or buyers.
Nevertheless, just because a property is a little older does not mean that it is automatically in poor condition or even difficult to rent or sell.
The best person to assess whether it is worth renovating or modernizing an inherited property is a specialist. They can advise you on the basis of an evaluation and, if it makes sense, suggest possible modernization measures. In some cases, however, it may turn out that it is more worthwhile to sell the property.
Do I have to finance modernization from my own pocket?
Everything that serves to secure income from a real estate investment in the long term, including repairs, maintenance, and expansion, is taken into account by the tax authorities. The interest expense on a rented property can also be offset against income for tax purposes—the law provides a number of options and assistance in this regard. Before deciding whether to invest in real estate, it is therefore essential to consult a tax advisor with experience in real estate who is familiar with the tricks and pitfalls.
When all else fails: capital restructuring
If it turns out that modernizing or repairing the property is not worthwhile, the asset value can be transferred to another property—a so-called real estate swap. Here, an existing property is exchanged for a property that better fits your financial planning. The value of the existing property is then included in the purchase price of the new property or can even finance it entirely. Converting a property into monetary capital can be a good idea in other situations as well. It is also a solution in inheritance disputes that is often considered satisfactory for all parties
When the heirs argue
If you are not the sole heir but are part of a community of heirs, it may be a sensible solution to convert the value of the real estate into a purely monetary value. In most cases, the surviving dependants find themselves in such an emotionally charged situation that disputes over the estate are inevitable. It is not uncommon for the community of heirs to be unable to agree on who should receive the property, in which case the decision is made to sell the property and divide the proceeds among the heirs. After all, nothing can be distributed more accurately and fairly than monetary values. This is because in a community of heirs, the inherited assets must be divided up, even if it is a property. The reason for this is that there are statutory compulsory portions—partners always inherit 50%, children always 25%—which cannot be changed by the last will and testament. This legal provision is intended to ensure that the persons closest to the deceased are financially secure in all cases.
Have you inherited a property and are unsure whether you want to invest in it or not?
Whether you want to keep the property, exchange it for a new one, or convert it back into capital, we will be happy to advise you and work with you to develop a strategy that best suits your personal situation. With over 20 years of experience in the regional real estate market and our own investments, we know the opportunities and risks of investment properties. Trusted contacts with tax advisors, financiers, and appraisers expand our comprehensive network of reliable service providers, with whom we would be happy to connect you.
Contact us and tell us about your ideas and goals. We will be happy to take the time to get to know you and your property