DC have inherited a flat! Sell or keep?

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A fabulous problem to have I know, but my two DC have unexpectedly inherited from a relative.

The property is a high rise flat in 60's style block on the edge of a busy city near very good transport links. It's an area they know well as it's not far from the family home. It has decent sized rooms and lovely views.

Dc are late teens/early twenties and just starting out in life. Both live away from home and have no plans to return.

There are three options:-

First is to keep it and rent it out so they can get some income from it. Neither have a property of their own. This is my least favourite option as I know I'll end up doing the practical stuff like getting a call at 3am from tenants to say the boiler is broken! We have no experience of letting, but I'm sure with all the rules and regulations it would be a nightmare.

Option two is to keep it and use it as a base for storing furniture and to use themselves when they come home for Christmas, etc. This has some appeal, but they'd have to think about paying service charges, council tax, etc.

Option three is to sell it.

It's very much their decision, but I would like your thoughts please as they're due here in a couple of days for the funeral (which I'm organising) and they want to discuss it.

Find out what the rules are re keeping it and renting it out, only to sell later (capital gains tax may be payable on any increase in value from the time they inherit / sell).

No CGT if they inherit and imeadatly sell and it's value when sold is in line with the value when probate was done.

"If its a flat you shouldnt have major maintebance costs as you are just leaseholder, but you need to check the service charge and what you are responsible for. Using it for storage is a crazy idea, your insurance would be sky high for a vacant property."

Not true - it's the leaseholders who pay all the costs! I sold a flat in a high-rise and by amazing coincidence it was two weeks before lockdown when we completed - no one knew anything about covid at that time, just a weird illness in Italy and China. But the poor new people not only couldn't use it as a holiday home due to lockdown, but five months later got hit with a huge bill for major maintenance on the outside and new lifts on the inside. Again, none of these were known, the certificate we had to get from the management company in order to sell just said we were paid up on all our service charges and maintenance charges. no one renting paid anything towards the charges, only the leaseholders paid, and it ran into thousands.

I dodged a bullet there! I had inherited the flat and opted to sell immediately as it was on the coast but not convenient for me. I used the profit from the sale to do some major repairs and install a downstairs accessible shower room and a wheelchair ramp in our house as the council said we didn't need it yet as DH can still walk - he can, just about, but has to sit down halfway up the stairs.

Really - seriously - avoid leasehold if at all possible, it's a licence to bleed the leaseholders dry, and you have no say in how the management company wants to spend your money. Plus besides the regular service charge, there will be unusual expenses you are liable for like lift maintenance, roof repairs etc, it's never ending. And they bleed you still more when you come to sell, the solicitors will want all sorts of costly forms, LPE1 for example. And as the lease runs down, the charges go up!

I'm so glad OP has decided it will be better for her DC to sell the flat.

Start up a property company in the children's names, rent it out, the rental money gets paid in to the property bank account, anything that goes wrong, there is money from the rent to pay for such incidences. Once they are in a position to want a place of their own, there may be enough in the business account for a deposit, or there is the option to sell it then. Don't get a management company to run it, they will take your money and do nothing. Should anything go wrong, you employ your own tradesman to carrybout the task.

How do you know that?

I would definitely be inclined to look into renting it out - only via a full management agent though.

For me, assuming it's in a good enough state of repair that it could be rental market ready with minimum fuss & spend, ideal scenario would be to run it as a rental for a few years until they are ready / close to ready to buy. Then it will have a) made them a bit of money in rent in the meantime, and b) have increased in value so they'll get more out when they do eventually sell it.

Find out what the likely rental income vs costs would be (service charges, letting agents fees, insurance etc etc). Research tax implications. Look at the sale prices of similar properties over the last ten years or so to give you a bit of an idea how much the value might increase over the next ten years. See if you can find out any likely law changes around landlords due to the new government.

I would be reluctant to simply sell now and then find the money gradually disappears and they don't have a lot to show for it in ten years, and can't get on the property ladder themselves.

Have they actually inherited the flat or the estate of the deceased? Maybe an important distinction for ability to access things like help to buy in the future. If the answer is to sell then it would be better for the estate to make the sale rather than transferring the ownership as such to your children.