You Just Inherited Vacant Land: What Should You Do Next?

If you’ve experienced a recent death in the family, you may have inherited a plot of vacant land. Dealing with the legal and practical requirements of inheritances are complicated, and can be especially stressful when you’re in mourning. But after the dust has settled and you’ve come to terms with your inheritance, you’ll need to make some important decisions with what to do with the land—and you may not know where to start.

Inheriting a house usually comes with a straightforward selection of options; you could potentially move in, sell the house, or rent it to someone else. But vacant land is more perplexing. To make the right decision, you need to know what your options are, and which ones are most likely to help you achieve your financial goals.

Costs and Taxes of Inheriting Vacant Land

Claiming the vacant land may require you to pay taxes in some situations. For the most part, inheritances aren’t considered taxable at the federal level. However, there are six states that currently impose a state-level inheritance tax (Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania). In addition, if you end up selling the land for a profit (i.e., selling it for more than its value), you may end up owing a capital gains tax. It’s best to consult an attorney to figure out exactly what you might owe.

Mortgages and Outstanding Loans for Vacant Land

If the original land owner used a mortgage or loan to finance their purchase of the land, you’ll need to figure out whether the loan has been paid back in full. If the loan is still outstanding, you may be required to pay off the balance before claiming ownership of the land. In some cases, you can assume the loan (accepting financial responsibility for it), and in others, you may be able to refinance. There are several options here, but the bottom line is that if there’s still money owed on the property, it needs to be addressed.

Understanding Recurring Costs of Inherited Vacant Land

You also need to consider the recurring costs of holding onto the land. If you have plans for the land, or are holding onto it merely because you’re indecisive, you can expect to pay ongoing fees, including:

• HOA fees. If the vact land is located in a neighborhood with a homeowner’s association (HOA), you may be required to pay HOA fees. This is unlikely, since most HOA-oriented neighborhoods only feature properties with developed houses, but it’s still a possibility. These fees can range up to several hundred dollars a month, and if you’re not using the property actively, it’s essentially wasted.
• Property taxes. You’re also going to be responsible for paying property taxes on the land, for every year you continue owning it. The taxes you’ll owe will vary depending on your city, but you can expect a few hundred to a few thousand dollars a year. Again, if you’re not actively using the land, this money is going to waste.
• Some vacant properties will require ongoing maintenance. If you want the land to stay in good condition, you may be required to mow the grass, tend the weeds, or check in on it to make sure it isn’t being abused. You may be able to do this work yourself, but you’ll be paying for it in time and/or money no matter what.
• It’s also a good idea to have insurance on your property, and if you still owe money on it, you may be required to. Insurance can cost hundreds to thousands of dollars per year, making ongoing ownership even more expensive.

The Benefits of Holding Vacant Land

So why would you hold the land in the first place?

There are a few possible motivations here:

• Increases in value. Land is a finite resource, and in response, on average, land prices tend to rise. Even questionably placed properties, or those in the middle of nowhere, will likely increase in value if you hold them long enough. However, these increases aren’t a guarantee, and may not exceed the upkeep costs you face on a recurring basis.
• Developmental opportunities. You could also keep the land if you plan on developing it. For example, you may wish to build a house on the land if you like where it’s located, or may choose to develop it for a business opportunity. The potential value here varies greatly, depending on your experience with such ventures and the nature of the property.
• Sentimental value. It’s also possible to keep the land for sentimental value, such as if you shared an experience on this land with your loved one, or if your loved one specifically wanted you to have this property. In this case, the monetary value doesn’t particularly matter.

The Benefits of Selling Your Inherited Vacant Land

Unless you’re experienced with owning and developing land, it’s likely that your best option is to sell the property. Because you’ve inherited the land, you can sell it for a reasonable discount and still make a substantial profit—and because there are so many avid land investors out there, you can probably sell the property in a matter of days, if not hours.

Selling the property isn’t just about turning a profit. It’s also about making your life easier. Managing the ongoing costs and maintenance required of vacant land are annoying, and can eat into your profits—assuming you stand to make any profits in the first place. Selling your land means saving time, and simplifying your inheritance.

Sell Your Inherited Land Today!

If you’ve recently inherited land, and you’re interested in selling, get in touch with us at EstateInvesting.com today! We connect land owners and land investors to make sure both parties get exactly what they’re looking for. If you aren’t sure what to do and you want to make things easier on yourself, you can list your property for sale—and hopefully get an offer in a few days to a few weeks after listing.