Inheriting a house that needs renovation presents you with 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 how to tackle the challenge in four clear steps.
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The topic briefly and concisely
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 according to GEG, which are subject to a 2-year deadline and a penalty of up to €50,000 for non-compliance.
Make your decision (sale, rental, personal use) based on a neutral valuation and cost calculation.
The news of an inheritance is often emotional – but what if it involves a house in need of renovation? Suddenly, you find yourself facing costs, legal responsibilities, and strategic decisions that can quickly become overwhelming. Many heirs underestimate the financial expenditure, which can rapidly reach six-figure sums, or overlook the legal renovation obligations with their short deadlines. This article serves as your digital guide. It leads you through the four crucial phases: from legal security and cost analysis to selecting the strategy that’s right for you – selling, renting, or moving in yourself.
Step 1: The legal and financial assessment
When you inherit a house in need of renovation, it begins a race against time. First, you need to decide whether to accept the inheritance. You have only six weeks to do so. Within this period, you should review all relevant documents such as the land register extract, energy certificate, and building plans. It is particularly important to check any registered debts, as you 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 establishes you as the rightful owner, costs between 700 and 1,500 euros depending on the value of the property. These first steps create a solid foundation for everything that follows.
If you are acting as part of an inheritance community, immediate coordination is necessary. All decisions regarding the property usually need to be made unanimously, which can lead to stalemates if there are differing interests. A neutral, data-based valuation of the inherited house provides an objective basis for discussion and prevents conflicts before they arise. This ensures that things are set on the right track from the start.
Step 2: Check legal renovation obligations according to GEG
With the inheritance, you also take on responsibility for the energy condition of the house. The Building Energy Act (GEG) prescribes specific renovation measures for new owners, which you have a period of two years to implement. Violations can be punished with fines of up to 50,000 euros. This mainly concerns properties built before 1 February 2002. An exception exists if you, as the heir, have already lived in the house yourself before this date.
The following measures are often mandatory:
Heating replacement: Boilers over 30 years old (usually oil or gas) must be replaced.
Insulation of the top floor ceiling: Uninsulated ceilings to unheated attics must achieve a U-value of no more than 0.24 W/m²K.
Insulation of pipes: 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 grants. The analysis of obligations is the next logical step after clarifying the legal situation.
Step 3: Realistically estimate renovation costs
The question “What should be done with the inherited house in need of renovation?” is primarily a matter of cost. The expenses are often massively underestimated. A complete energy renovation can cost between 70,000 and 150,000 euros, depending on the condition. For a comprehensive renovation that also includes electrics, plumbing, and interior work, costs quickly range from 500 to 1,200 euros per square metre. For a house measuring 120 m², this means an investment of 60,000 to over 144,000 euros.
Here's a sample cost breakdown per square metre:
Roof: A new covering including insulation costs between 200 and 400 euros.
Facade: For facade insulation with an external thermal insulation composite system, costs range from 100 to 200 euros.
Windows: Modern triple-glazed windows, including installation, cost approximately 500 to 800 euros each.
Heating: Switching to a heat pump can cost between 20,000 and 35,000 euros.
An accurate cost estimate is hardly possible without an expert surveyor. Use digital tools to obtain an initial estimate of renovation costs. This calculation forms the basis for your strategic decision in the next step.
Step 4: Choose the right strategy – Sell, rent, or self-use?
With clear figures regarding 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 consequences. Your choice should be based on data-driven analysis, not on a gut feeling.
Here are the three core strategies:
Direct sale in current condition: This is the quickest option with the least effort. You avoid the stress and costs of renovation but achieve a significantly lower sale price. The discount can be 30% or more of the value of a renovated comparable property, depending on the condition.
Renovate and rent out: This strategy requires a high initial investment but can create a long-term income stream. You must weigh the renovation costs against the expected rental yield. A yield of less than 4% is often considered unattractive.
Renovate and occupy: This is the most emotional but also financially demanding choice. You can save on 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 guidance here. For a final decision, an AI-supported evaluation by Auctoa or a conversation with our ImmoGPT offers the necessary assurance. We analyze all relevant market data for you and provide an objective basis to make the most of the inheritance.
Conclusion: From Liability to Asset
Inheriting a house in need of renovation is a challenge that becomes an opportunity with a clear plan. The process from accepting the inheritance, examining 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 factor but the most important investment in the future of your assets. Act thoughtfully, protect yourself, and transform the inherited property into a sustainable value.
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Additional useful links
Bundesministerium der Finanzen: Here you will find comprehensive information on inheritance and gift tax in Germany.
Federal Statistical Office (Destatis): Access up-to-date data and analyses on construction prices and property price indices.
KfW: Provides information about funding programmes for the energy-efficient renovation of existing properties.
GEGPortal of the BBSR: Offers detailed information on the energy certificate obligation according to the Buildings Energy Act (GEG).
Federal Environment Agency: Provides important information on asbestos handling and its health risks.
Federal Institute for Occupational Safety and Health (BAuA): Here you will find the Technical Rules for Hazardous Substances (TRGS 519) for the safe handling of asbestos during renovation work.
Wikipedia: Provides an overview of building law in Germany and its key aspects.
Consumer Advice Centre: Explains important aspects and tips for the energy refurbishment of buildings.
FAQ
What happens if I ignore the renovation obligation for my inherited house?
If you do not fulfill the renovation obligations stipulated in the Building Energy Act (GEG) within the two-year period, the responsible authority may impose a fine of up to 50,000 euros.
Do I have to pay inheritance tax if I live in the house myself?
Not under certain conditions. As a child or spouse of the deceased, you can inherit the property tax-free if you move into it immediately and live in it yourself for at least ten years. For children, there is a living space limit of 200 square metres.
What is an inheritance community and what does it mean for the property?
An inheritance community arises when there are multiple heirs. All heirs are joint owners of the property and must make decisions (e.g. about selling or renovating) unanimously. This can lead to conflicts, which is why clear communication and an objective basis for valuation are crucial.
Is it worth renovating before selling?
It depends on the individual case. Renovation can significantly increase the selling price, but it also carries the risk that the invested costs may not be 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 highlights the legally required measures but also suggests further sensible steps for value enhancement and energy savings. Additionally, the ISFP is often a prerequisite for government funding.
What government grants can I use for the renovation?
There are extensive subsidy programmes available for energy-efficient renovations. The Kreditanstalt für Wiederaufbau (KfW) offers low-interest loans (e.g. Programme 261), and the Federal Office for Economic Affairs and Export Control (BAFA) provides grants for individual measures such as insulation or window replacement.
