Property Valuation
Renovation Potential Report
Inherited a house in need of renovation, what to do next?
Inheriting a house in need of renovation presents complex questions and high costs. However, by taking a structured approach, you can protect your assets and make the right decision. This guide shows you in four clear steps how to tackle the challenge.
With access to Google, BORIS, and Deep Research.
Check within the 6-week period whether you accept the inheritance and report it to the tax office within 3 months.
Clarify the statutory renovation obligations in accordance with the GEG, for which a 2-year deadline applies and non-compliance may result in fines of up to €50,000.
Make your decision (sale, rental, personal use) based on an impartial valuation and cost calculation.
The news of an inheritance is often emotional – but what if it involves a property that needs renovation? Suddenly, you're faced with costs, legal obligations, and strategic decisions that can be overwhelming. Many heirs underestimate the financial burden, which can quickly reach six figures, or overlook the legal renovation obligations with their tight deadlines. This article serves as your digital guide. It leads you through the four crucial phases: from legal protection, cost analysis, to choosing the right strategy for you – whether to sell, rent, or move in yourself.
If you inherit a property in need of renovation, a race against time begins. First, you must decide whether to accept the inheritance. You only have six weeks to make this decision. Within this period, you should review all relevant documents such as the land register excerpt, energy performance certificate, and building plans. Particularly important is the examination of any debts that may be registered since you will inherit these as well. At the same time, you must inform the tax office of the inheritance within three months. A certificate of inheritance, which proves you as the rightful owner, costs between 700 and 1,500 euros depending on the value of the property. These initial steps lay a solid foundation for everything that follows.
If you are acting as part of an inheritance community, immediate coordination is required. All decisions regarding the property usually have to be made unanimously, which can lead to deadlock if there are conflicting interests. A neutral, data-driven evaluation of the inherited house provides an objective basis for discussion and prevents conflicts before they arise. This ensures that the right course is set from the start.
With the inheritance, you also take on responsibility for the energy status of the house. The Building Energy Act (GEG) mandates specific renovation measures for new owners, which must be implemented within two years. Violations can result in fines of up to 50,000 euros. This mainly affects properties built before 1 February 2002. An exception is made if you, as the heir, already lived in the house before this date.
The following measures are often mandatory:
Heating replacement: Boilers that are over 30 years old (mostly oil or gas) must be replaced.
Insulation of the top floor ceiling: Uninsulated ceilings to unheated attics must achieve a U-value of a maximum of 0.24 W/m²K.
Insulation of pipework: Heating and hot water pipes in unheated areas such as the basement must be insulated.
Many heirs are unaware of these immediate obligations. A professional individual renovation roadmap (ISFP) not only provides you with a clear overview but is also a prerequisite for many subsidies. Analysing the obligations is the next logical step after legal clarification.
The question, "What should be done with the inherited house in need of renovation?" is primarily a matter of cost. The expenses are often significantly underestimated. A complete energy-efficient renovation can cost between €70,000 and €150,000, depending on the condition. In the case of a full renovation, including electrics, plumbing, and interior finishing, costs can quickly reach €500 to €1,200 per square metre. For a 120 m² house, this means an investment of €60,000 to over €144,000.
Here's an example cost breakdown per square metre:
Roof: A new roof covering, including insulation, costs between €200 and €400.
Facade: Facade insulation with a thermal insulation composite system costs €100 to €200.
Windows: Modern triple-glazed windows, including installation, cost around €500 to €800 each.
Heating: Switching to a heat pump can cost between €20,000 and €35,000.
An accurate cost estimate is hardly possible without a surveyor. Use digital tools to obtain an initial estimate of renovation costs. This calculation is the basis for your strategic decision-making in the next step.
With clear figures on obligations and costs, you can now make an informed decision. Essentially, you have three options if you have inherited a house in need of renovation and are considering what to do next. Each has specific financial implications. Your choice should be based on a data-driven analysis, not a gut feeling.
Here are the three core strategies:
Direct sale in its current condition: This is the quickest option with the least effort. You avoid renovation stress and costs but achieve a significantly lower sale price. The discount can be 30% or more of the value of a comparable renovated property, depending on condition.
Renovate and rent out: This strategy requires a high initial investment but can create a long-term income source. You must compare the renovation costs to the expected rental yield. A yield of less than 4% is often considered unattractive.
Renovate and use it yourself: This is the most emotional, yet also financially demanding choice. You can save inheritance tax if you, as a child or spouse, live in the property yourself for at least 10 years (for children up to 200 m²).
To assess the profitability of each option, an accurate valuation is essential. A sell-or-rent calculator can provide initial insights here. For a final decision, an AI-supported appraisal from Auctoa or a conversation with our ImmoGPT offers the necessary assurance. We analyse all relevant market data for you and provide an objective basis to make the most of your inheritance.
Inheriting a house in need of renovation is a challenge that, with a clear plan, becomes an opportunity. The process—from accepting the inheritance, reviewing the renovation obligations, to making the final strategic decision—requires diligence and careful calculation. The key to success lies in making every decision based on valid data rather than being guided by emotions. A professional assessment is not a cost, but the most important investment in the future of your assets. Act thoughtfully, protect yourself, and transform the inherited property into a sustainable value.
Bundesministerium der Finanzen: Here you will find comprehensive information on inheritance and gift tax in Germany.
Statistisches Bundesamt (Destatis): Access current data and analyses on construction prices and real estate price indices.
KfW: Provides information about funding programmes for energy-efficient refurbishment of existing properties.
GEGPortal des BBSR: Offers detailed information on the energy certificate requirement in accordance with the Building Energy Act (GEG).
Umweltbundesamt: Provides important information on handling asbestos and its health risks.
Bundesanstalt für Arbeitsschutz und Arbeitsmedizin (BAuA): Here you will find the Technical Rules for Hazardous Substances (TRGS 519) for the safe handling of asbestos during refurbishment work.
Wikipedia: Offers an overview of building law in Germany and its essential aspects.
Verbraucherzentrale: Explains important aspects and tips for the energy renovation of buildings.
What happens if I ignore the renovation obligations for my inherited house?
If you do not fulfill the renovation obligations set out in the Building Energy Act (GEG) within the two-year period, the responsible authority can impose a fine of up to 50,000 euros.
Do I have to pay inheritance tax if I live in the house myself?
Under certain conditions, no. As a child or spouse of the deceased, you can inherit the property tax-free if you move in immediately and live there for at least ten years. For children, there is a limit of 200 square meters of living space.
What is a community of heirs and what does it mean for the property?
A community of heirs arises when there are multiple heirs. All heirs are joint owners of the property and must make decisions (e.g., about sale or renovation) unanimously. This can lead to conflicts, making clear communication and an objective valuation basis crucial.
Is it worthwhile to renovate before selling?
It depends on the case. Renovation can significantly increase the selling price but also carries the risk that the costs invested are not fully covered by the higher proceeds. A cost-benefit analysis based on a professional property valuation is essential here.
How do I know which renovations are necessary for my inherited house?
A certified energy consultant can create an individual renovation roadmap (ISFP). This not only shows the legally required measures but also further sensible steps for value enhancement and energy savings. The ISFP is also often a prerequisite for government funding.
What government funding can I use for the renovation?
There are extensive funding programs for energy-efficient renovations. The KfW (Credit Institute for Reconstruction) offers low-interest loans (e.g., Programme 261) and the Federal Office for Economic Affairs and Export Control (BAFA) grants subsidies for individual measures such as insulation or window replacement.
