Should I Sell or Rent Out My Inherited Phuket Property?
There are financial reasons to sell rather than rent an inherited Phuket property, as well as basic factors to examine before deciding to sell or become a landlord. Understanding what it takes to manage a rental property, from number-crunching to landlord responsibilities, can help you decide if renting an inherited home is worthwhile.
What exactly is the 1% Rule?
When assessing property as an investment property (whether inherited or not), the one percent guideline is a decent place to start. The 1 percent rule states that a property's rental revenue should be equal to one percent of the home's purchase price each month. As the property value exceeds $500,000 USD, this regulation becomes less relevant.
If the property does not meet the 1% criterion, it is most likely not generating real rental revenue each month after accounting for property management, all expenditures, repairs, and general upkeep. When doing the figures on investment property, you should not prepare for appreciation, which is why this 1% rule is so essential.
How to Work Out Rental Income
Property management and upkeep are required for rental properties. These tasks may be performed by the owner or leased out and controlled by the owner. A reasonable rule of thumb is to account for property management at 10% of the rent and maintenance at 10% of the rent. Subtract these figures from the rent amount, along with the PITI (principal and interest on the mortgage, taxes, and insurance) (s). Don't forget to include any CAM costs, if any.
Does the value you're left with adhering to the one-percentage-point rule? Provided this is the case, renting an inherited home may be a good investment if you are prepared to accept the burden.
Other Factors to Consider When Renting an Inherited Phuket Property
If you are an out-of-state inheritor, your property management and maintenance expenses are likely to rise since a property management business is required — the precise cost of the property management firm must be accounted for when running the numbers on the inherited home. Expensive repairs must also be included in the calculations since the inherited house cannot be occupied until it is rentable.
Should I rent out my inherited Phuket home?
If, on the other hand, your inherited home is in a vacation or high-demand location, you may anticipate a lower vacancy rate and higher rent (although you should still be conservative when doing initial calculations). Inheriting a property in a high-demand area opens up the possibility of effectively marketing on vacation rental platforms such as Airbnb rather than simply bringing in long-term renters.
The emotional connection to the house is the last consideration when renting an inherited property. If you want to take care of the house and have renters, renting will enable you to retain the house while earning money.
Should I Sell My Phuket Inherited Property?
Consider the expense of selling as well as your circumstances and the work needed on the property when choosing whether to sell or rent an inherited house. Selling inherited property may possibly relieve you of a burden and free up funds and time for other ventures, but it may also lead you to lose out on possible gain.
Selling an Inherited Home with a Phuket Real Estate Agent
If you want to get the maximum money for your Phuket home, listing through a real estate agent is usually the best choice. However, this entails making repairs and preparing the property for sale, which your situation may or may not make more difficult (e.g. out-of-country inheritance).
Should I Sell My Phuket Inherited Property?
When selling via an agent, the first step is to bring the property up to market standards. If you choose this route, be sure to obtain estimates on the cost of repairs from several companies. Consider how long it will take to complete the repairs.
Agent commissions are usually 3-5 percent, and they do not necessarily cover the expense of properly staging and marketing the property– these are things to ask an agent before choosing to sell the home with him/her.
The last expenditure for the seller is closing fees, which are usually one to three percent of the home's value (in a seller's market, these costs may be negotiated to be paid by the buyer).
When everything is said and done, selling the inherited home through an agent saves you about 8% of the sales price plus the initial contractor expenses. This may seem to be a lot, but if the property is in good to outstanding shape, dealing with a Phuket agency will earn you the maximum money for the inherited house (even after all the fees).
FSBO Selling Inherited Phuket Property
Selling your inherited property as a for-sale-by-owner (FSBO) will need the greatest effort on the part of the inheritor. You will, however, have complete control over the transaction and will be able to decrease the 3-5 percent agency fee. Selling FSBO is problematic if you do not live nearby or inherit a property with a mortgage since selling by the owner usually takes longer than dealing with an agency or investor.
Taking on the job yourself saves you the 3-5 percent fee paid by brokers, but there are still expenses involved if you want to obtain top cash on your Phuket home. A flat price listing ($300/month), professional photographs ($350), an attorney for the sales contract ($250), and staging if required ($1500/month) are examples of these expenses. Closing fees will also range from 1-2 percent of the home's value.
An Inherited Phuket Property Is Being Sold to an Investor
Another alternative for selling the inherited property is to sell it to a local real estate investor who would purchase it for cash in as-is condition. Working with an investor is free; however, if the inherited property is in great shape, you will not get the highest offer.
If your inherited property needs repairs or you reside out of state, working with an investor may save you time and money on agency fees or charges, as well as any repairs.
Other Factors to Consider When Selling an Inherited Phuket Property
If your inherited home is in a high-demand area, selling via a real estate agency enables you to cash out if you don't want renters. But what if you find yourself in a more complex position, such as inheriting a home that requires costly renovations or having many inheritors? When deciding whether to sell your inherited property, there are additional considerations to consider and choices to evaluate.
What if my inherited Phuket property requires costly repairs?
If the house you acquired needs extensive repairs, such as a new roof and HVAC system, or mold treatment, figure out how much the repairs would cost. When it comes to significant repairs, the money you invest into fixing the house will often not be reflected in the amount you sell the home for. You may avoid paying for repairs by selling to a local investor in your region, since investors will buy houses in need of expensive repairs as-is.
Is it possible to sell an inherited property at a loss?
Consider a short sale if the inherited property is worth less than what is owing. During this procedure, the lender agrees to let the property owner sell the inherited house for less than what is due in order to avoid the inheritor having to make up the difference. Because the inherited property is being sold "at loss," lenders must authorize these transactions.
Final Thoughts: Should I Sell or Rent My Phuket Inherited Home?
If you're debating whether to sell or rent your inherited property, the best method to determine which choice is best for you will depend on your particular circumstances, the home, and your objectives. Inheriting property can be both painful and stressful, as you grieve the death of the person who handed it on to you, and as you are left in control of what to do with the house. To determine what is best for you, assess your financial position and compare the benefits and drawbacks of selling an inherited home against renting.
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ABOUT ME: Hi, I'm Scott Paul, I've been living, working and enjoying Thailand for the last 18 years. My goal is to assist, educate and share my experiences with you in finding inexpensive real estate in Thailand. Reach out to me if you're looking for something considered a "bargain" property, bank repo, distressed property, etc. My connections in Real Estate across Thailand are extensive. I'd love to hear from you and if we can help you I'm happy to discuss it with you.
Email: scottriefler@gmail.com tel:+66800528082
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