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Sell or rent out using comparison calculators when inheriting
Have you inherited a property and are wondering what to do next? The decision between selling and renting has significant financial and tax implications. We'll show you how to make the right choice with a clear, data-driven approach.
With access to Google, BORIS, and Deep Research.
The decision between selling and renting out an inherited property depends on taxes (inheritance & capital gains tax), the property's value, the rental yield, and your personal financial strategy.
The 10-year speculation period, which begins on the purchaser's date, is crucial to avoid high tax payments on sale profits.
When renting out property, you can claim numerous expenses such as depreciation, interest, and maintenance for tax purposes, which significantly improves the after-tax return.
Inheriting a property is more than just an increase in wealth – it's a responsibility that often arises during an emotional time. Suddenly, you must make a strategic decision: sell or rent? This choice depends not only on the property itself but also on your personal life situation, financial goals, and tax conditions. A quick sale promises liquidity but can lead to high tax burdens. Renting offers regular income but also involves administrative effort and costs. This article serves as a practical comparison calculator to objectively weigh the pros and cons of both options and make an informed decision for your future.
Before considering selling or renting, you need a neutral data basis: the current market value. This value forms the basis for all further calculations, from inheritance tax to potential sales proceeds or rental yields. The tax office uses standardized methods for valuation, which, however, do not always accurately reflect the market value. An independent appraisal can identify discrepancies of up to 20%, potentially reducing your tax burden. The exact market value is your most important tool for strategic planning. A precise valuation of your inherited property protects you from misjudgments and creates a solid foundation for the next step.
The analysis of the condition is just as crucial. A high need for renovation can reduce the attractiveness for tenants and requires immediate investments often exceeding 20,000 euros. These factors directly influence the decision on whether an immediate sale is the more economically sensible option. With a clear assessment in hand, you can accurately calculate the tax consequences of both scenarios.
The sale of an inherited property promises a quick influx of capital, but the tax authorities have clear regulations. Two types of tax are relevant here: inheritance tax and speculation tax. Inheritance tax is payable on the value of the estate that exceeds your personal allowances. For children, this allowance is 400,000 Euros, and for spouses, it is even 500,000 Euros. For siblings or non-related heirs, the allowance is only 20,000 Euros. A property valued at 450,000 Euros would be taxable for a child (50,000 Euros to be taxed) but completely tax-free for the spouse.
Speculation tax as a decisive factor
The second hurdle is the speculation tax. It is applied if less than ten years have passed between the purchase of the property by the deceased and your sale. The profit is then taxed at your personal income tax rate, which can be up to 45%. The period starts not with the inheritance but with the original purchase date. If the deceased acquired the property 11 years ago, the sale is tax-free for you. An important exception exists for self-use: If the property was occupied by the owner in the sale year and the two preceding years, the tax also does not apply. A detailed checklist for property sales helps to verify these deadlines correctly.
Renting transforms the inherited property into a long-term source of income. You must declare the annual rental income in your tax return and tax it at your personal tax rate. However, the key advantage lies in the deductible advertising costs that can significantly reduce your tax burden. These include:
Depreciation (AfA): You can depreciate 2% of the building's value annually over 50 years (for buildings constructed after 1924).
Interest on loans: If you take out a loan for renovations, the interest is fully deductible.
Maintenance costs: All expenses for repairs and maintenance can be claimed.
Administrative costs: Fees for property management or account management are also deductible.
For rented properties, the tax office only considers 90% of the fair market value for inheritance tax, resulting in a direct tax advantage of 10%. This can be particularly important for properties near the personal tax-free allowance limit. Find out about all tax advantages of renting to fully exploit your potential.
Realistically evaluate return and costs
An attractive gross rent is only half the story. To determine the net return, you need to deduct non-apportionable costs. This mainly includes the maintenance reserve. As a rule of thumb, you should allocate between 9 and 11.50 euros per square metre annually for properties over 22 years old. For a 100 square metre apartment, this quickly amounts to over 1000 euros per year. These costs are borne solely by you as the owner. The administrative effort should also not be underestimated, as it can bind several hours of your time each month if you do not hire management.
Your personal situation is the most important factor in this comparison calculator regarding selling or renting an inherited property. There is no one-size-fits-all answer, but there are clear indicators to guide your decision. The decision becomes easier when you know your priorities.
The following reasons support a sale:
High and immediate need for capital: You need liquidity in the short term, for example, to pay out co-heirs or settle debts.
Poor condition of the property: The renovation costs are high, and you're unwilling to invest often more than 30,000 euros.
High tax burden: The value of the property significantly exceeds your inheritance tax allowances, and you can't cover the tax from other sources. An inheritance tax calculator can provide clarity quickly.
No emotional attachment or large distance: You live far away, making management difficult, and you have no personal connection to the property.
Unfavourable market conditions for renting: There is a high vacancy rate in the area, or the achievable rent is very low relative to the value.
On the other hand, these points support renting:
Long-term wealth building: You want to create a stable, inflation-protected source of income for your retirement.
Good condition and location: The property is in good condition and is located in an area with high rental demand, making a return of over 4% likely.
Taking advantage of tax benefits: You can claim depreciation and expenses, reducing your personal tax burden.
Expected increase in value: You forecast a positive development in the area's value over the next 10 years.
Low management effort: You have the time and knowledge to manage the property yourself, or you plan to include the costs of professional management from the outset.
If the estate consists of several heirs, an inheritance community automatically arises. In this case, you cannot decide alone. Every decision regarding the property – whether selling, renting, or renovating – requires the consent of all co-heirs. This often leads to conflicts in practice, as the financial goals and life situations of the individual heirs often differ greatly. While one heir might want to sell quickly to obtain capital, another prefers long-term rental. A third might want to move in themselves but cannot afford to compensate the others. These differing interests often block a quick and sensible solution.
The cleanest solution is often an amicable sale, with the proceeds distributed according to the inheritance shares. This creates clear conditions and dissolves the community. If an agreement is not possible, the last resort is often a partition auction, which usually results in a sale price 15-20% below the market value. Clear communication and a neutral valuation as a basis for discussion are essential to find the best way to sell a house from an inheritance community.
The decision to sell or rent an inherited property is one of the most crucial financial decisions you will make as an heir. As the comparison calculator shows, there is no one-size-fits-all solution. Selling offers quick liquidity but carries tax risks. Renting ensures long-term income but requires effort and careful cost calculation. Your best decision is not based on a gut feeling, but on a solid analysis of numbers, data, and facts.
Consider the market value, tax burden from inheritance and speculative tax, potential rental yield, and the condition of the property. Only when you know these four key figures can you make an informed choice. Get support to objectively determine this data. An AI-supported property valuation from Auctoa or a conversation with our ImmoGPT can provide the clarity needed to see the inherited property not as a burden but as an opportunity. Make a decision that aligns with your life plan.
The Bundesfinanzministerium offers comprehensive information on inheritance and gift tax in Germany.
A Wikipedia article provides a detailed overview of inheritance law in Germany.
The Deutsche Mieterbund provides important information on tenancy law.
How does the comparison calculator for selling or renting in the case of an inheritance work?
Such a comparison is based on juxtaposing the key financial metrics. On the selling side, you have the expected net proceeds (after deducting selling costs and taxes). On the renting side, there is the expected annual net yield (rental income minus non-recoverable costs, maintenance, and taxes). Your personal situation (capital requirement, time commitment) is also a crucial factor.
What role does the speculation period play in my decision?
The speculation period is one of the most important factors. If the 10-year period is still running, selling can become unattractive due to the high speculation tax on the profit. In this case, it might be more sensible to rent out the property until the period ends and then sell it tax-free.
What happens if I want to rent out as part of an inheritance community, but others want to sell?
In an inheritance community, all co-heirs must decide unanimously. If no agreement can be reached, no lease can be concluded, and no sale can be carried out. In such a case, a solution must be found, for instance, by one heir taking over the shares of the others. If this fails, any co-heir can apply for a partition auction, which often means financial losses for all.
Can I reduce the inheritance tax through renting?
Yes, indirectly. A rented property is valued at only 90% of its market value for inheritance tax calculations. This 10% valuation reduction can lower your tax burden, especially if the property value is close to your personal allowance.
What maintenance costs should I budget for when renting?
Plan for a maintenance reserve that cannot be passed on to tenants. Experts recommend between 7 and 12 euros per square meter per year, depending on the property's age. Another rule of thumb is to set aside one euro per square meter monthly. This reserve covers repairs to the roof, facade, heating, and other major components.
How does Auctoa assist me in making a decision?
Auctoa provides you with a data-driven foundation for your decision. With our AI-powered property valuation, you receive an accurate and unbiased market value. Our ImmoGPT can also assist you with initial questions about tax aspects and yield calculations, ensuring you make your choice based on hard facts rather than just a gut feeling.
