When you inherit real estate after a parent passes, it can feel like a weight drops onto your shoulders overnight. Suddenly you are staring at multiple properties, multiple decisions, and the worry that one wrong move will be permanent.
The first thing to keep in mind is this: there is no urgency in this decision. If you have liquidity outside of the real estate, and it is not breaking the bank to hold the properties while you evaluate them, that is a huge advantage. It gives you time to make a thoughtful decision instead of a reactive one.
The second thing is that you cannot treat a portfolio like this as one single asset. You are dealing with different property types, and each one belongs in a different part of the decision tree.
Start by separating the properties into categories
In a situation like this, I would separate the portfolio into three buckets:
- The rental properties
- The primary residence
- The family vacation home
The reason this matters is simple. The rentals are usually the least emotional. That makes them the cleanest place to start, because you can evaluate them as investments without the personal overlay.
Step one: Evaluate the rentals as pure investments
With the rentals, I would approach this the same way an outside investor would.
Start by getting a realistic sense of current market value. Talk with an agent. Look at comparable sales. Understand what you could likely sell them for in today’s market.
Then look at ongoing net operating income. In plain English, that means:
- What rental income do the rental properties generate?
- What are the real, ongoing costs that come out of that income?
Those costs include taxes, insurance, maintenance, and any other recurring expenses.
Then add the part most people ignore: capital expenditures. Roofs, HVAC, appliances, updates inside the units. There is a big difference between a property where major items have already been replaced and one where you are about to absorb a series of big-ticket repairs. If you do not include this, you are not comparing apples to apples.
Once you have that full picture, ask the key question.
If you did not inherit these duplexes, would you go out today and buy them?
If the answer is no, because you do not want to invest in real estate, because the properties will require work, because they are not local and management will be a pain, then that alone is a reason not to keep them. Just because you already own something does not mean it is a good fit for your portfolio.
One other practical point: if the inheritance was recent, there is likely a step-up in basis. That often means you do not have embedded gains hanging over the decision. That makes it easier to sell without turning it into a tax problem.
Step two: Treat the primary residence differently than a rental
The primary residence is usually the least attractive as a pure rental investment. Not because it is a “bad house,” but because primary residences are typically built and maintained at a different standard than investment properties.
The money that goes into finishes, appliances, renovations, and upkeep in a primary residence often does not translate into a clean rental return. The quality of upgrades that make sense for a home you live in is different than what makes sense in a property you hold strictly for income.
So if we assume it is not a great rental candidate, the decision becomes more about personal connection and purpose.
If you want to hold it for a period of time because it matters to you emotionally, and you can comfortably afford the holding costs, that can be fine. But be honest about what it is. In that case, you are holding it as a choice, not as an investment.
Then weigh that against the opportunity cost. Could the value tied up in that home be put to better use in the rest of your portfolio? If you like real estate exposure, this still may not be the real estate exposure you would choose if you were starting from scratch.
Step three: The vacation home is a hybrid decision
The vacation home is the one that often carries the most emotional weight, and also the most ambiguity.
It is not unusual for someone to inherit a vacation home and think, “Now this is our vacation home.” If it is in a location your family genuinely wants to return to, and it fits your lifestyle, it may be worth keeping.
If you want to rent it out occasionally to offset costs, that can be an option. But I would be very cautious about relying on rental income to make the decision work. Make sure you can hold the property with your own finances first, then treat rental income as a bonus rather than the foundation.
There is also another key point that helps simplify the decision.
You do not have to inherit the location.
You can inherit the value of a vacation home and choose a different location that your family will use more. Selling a vacation home and buying another one elsewhere is still a way of preserving what was inherited, while making it fit your life.
A simple order of operations
If you want a straightforward path through this, here is the order I would follow:
- Start with the duplexes and decide whether you would buy them today as investments.
- Then evaluate the primary residence as a personal asset first, and an investment second.
- Finally, decide whether the vacation home is a place your family will truly use, or whether you would prefer the flexibility of converting it to a different vacation-home plan.
And throughout all of it, remember the first principle: if you have enough liquidity and breathing room, you do not need to rush. You can hold the portfolio long enough to make a good decision and take all the factors into account.
This post is adapted from a recent episode of the Scholar Wealth Podcast. For more perspective on inherited real estate, concentration risk, and making long-term decisions with illiquid assets, listen to the full podcast episode here.