Golden goose or impossible task: what to do with an inheritance.

9 Replies

Hello All, I am a total newbie to the real investing world. I’ve done some self education through Bigger Pockets, Meet Kevin, Dave Ramsey, and Rob Built. I’m also a masters nutrition student. Exciting but overwhelming at the moment. I am writing posting to see if I can get some responses from some knowledgeable real estate investors, possibly some experts. What follows is a possible scenario for my future inheritance of an estate plus some cash. I will also list my goals in real estate investing. 

Who hasn’t been impacted by the covid crisis? It’s still kind of scary out there. I knew before a global respiratory pandemic that my chronically sick father would have a health scare. He’s in his 70’s and has had chronic lung disease for 15 years. I’m overwhelmed in that area of my life but am currently letting my head take over my heart in realizing that there is little to no estate or inheritance planning for when my father passes. Here’s a profile of a possible inheritance. What would you do in my shoes? 

$50,000 life insurance policy. A home in Tulsa, OK valued at $175,000. An unknown amount of cash in a mutual fund (my dad has dementia). $0 in debt for my father. $27,000+ in the bank. 

My real estate goals: fix up my childhood home and start it as a rental property. Use those funds to pay for my living expenses while I get my masters, possibly a PhD. Start a short term rental business on Airbnb or Vrbo with $200,000 revenues (7-10 properties). Long term goal of $5million net worth through long-term and short-term rental properties generating income. 

Knowing your goals, what would you do if this situation was dropped in your lap? 

P.S. I am in a good place with my father’s coming passing and have sought grief counseling. 

@Dylan Mehsling welcome to BP! I'm sorry to hear about your father, but it's always good to look to the future and start planning. I guess my first question would be, how extensive would the repairs/updates need to be on the house in Tulsa? Also, what is you basing your $175k value on? The Tulsa market is pretty hot right now so it may be worth more than you think.

I can't speak much to the short-term rental business as I have no advice there, but regarding long-term rentals you'll want to assess the benefits of keeping the property and renting it vs an up-front cash gain of selling it. Run the numbers, do research on local rents in the area, budget for expenses (repairs and maintenance, cap-x, vacancy, etc). BP has a ton of resources and a lot of knowledgeable people, if you get lost/confused/stuck just ask additional questions or search the site, odds are someone has already asked it. Good luck!

Sorry to hear about your dad.  You should find out how his medical bills are being paid now.  If he is getting government assistance for the bills the government may have a claim for the equity in his house or his other assets.

Also, it may be impossible with him having dementia, do the best you can now to find out if you are listed as the beneficiary on the insurance, bank account and mutual funds.  The identified beneficiary for those items will supersede what a will states.  And once the beneficiary has a copy of the death certificate the funds are transferred fast.

And see if you can find a will he signed and who he is giving what to.  Often these items -beneficiary and wills--are very outdated.  They may list a deceased spouse or ex spouse.  If they are outdated you may be able to start getting the paperwork you will eventually need, divorce decrees, death certificates, etc.  The house may have to go through probate and that can take a long time and cost a lot of money, depending on where the property is located.

Do you have Power of Attorney for him?  If so, you may be able to put your name on the deed as joint tenants.  That will help avoid probate.

I would recommend that you transfer everything that is going to you first, wait a year and really think through your options.  Have it, hold it, manage it as a safe investment such as money/cds for a year.  Know it is yours.  Get used to that first, then manage it as a more intense investment.  Many people blow their inheritance and when its gone it is gone.  My brother went through 1/2 a million in 3 months with not much to show for it.  Each time he got the money from something he blew through it.  Don't do that!

@Dylan Mehsling

Just so I follow the math. $200,000 in income from 7-10 properties? Is the assumption or plan to continue to be debt free?

I’m not sure 7-10 properties could do that in Tulsa with or without debt / leverage but it’s a noble goal! Perhaps near some of the lakes or down by Broken Bow .. since you mentioned VRBO... I’ve heard of CRAZY rent numbers down there.

Your plan seems good I’m just hoping to understand if you want to avoid debt or not. If a conservative amount of risk and leverage aren’t worrisome to you, you likely could be able to pull some equity out of the free and clear property and use to to expedite things.

Sorry for what you are going through, too.

Hello @Kevin S. I'll answer your questions in a quiz format to be concise.

I guess my first question would be, how extensive be would the repairs/updates need to be on the house in Tulsa?

It's hard for me to gauge repair/update costs through information my dad could provide due to his dementia. I lived in the house for 16 years. I will get an inspection when the time comes. Doing some fast research, I've found that for this size house (3 beds 1.5 baths) I shouldn't be going over $30,000 for remodel/updates. 

Also, what are you basing your $175k value on? The Tulsa market is pretty hot right now so it may be worth more than you think. 

Some short internet research via Redfin and Zillow shows that comps in the area are around $175,000. I'm aware that the Tulsa housing market has gone up by about %15 year over year. 

Thank you for the time and resource suggestions. Are there any books you would recommend that BP offers? 

@Lynnette E.  

His diagnosis was COVID-related so his medical bills were covered from the recent hospital visit/health scare. He is covered under Medicare due to age and disability (emphysema 15+ years). I am fairly confident he won't have medical bills but I will look into it. He has updated his will in the last two years with me receiving every bit of his assets. He's 72. I am the Power of Attorney.  

I plan to create something with my inheritance that will build wealth over time. Part will go to my master's level schooling which will fuel my passions and career as a registered dietitian. 

@Nate Sanow Those numbers are my goals, yes. The goal of the 7-10 properties would be to spread them out across the country, specifically near state parks and high trafficked areas. Rob Built seems to have the schematics for pulling that off. I want to start first and run a successful short-term rental/airbnb in Tulsa first. 

I would like to use as little debt as possible but I am not against it. The goal is to use my inheritance to fund my first short-term rental and create a snowball effect with income funding other ventures. 

@Dylan Mehsling 7 years ago, I used 100k to purchase one property all cash and rent it out - which was fine, but I didn’t know anything about real estate investing and didn’t understand I could have gotten so much more with the power of leverage.

Fast forward to last year, I sold said property and used the same 100k as down-payment on a commercial blanket loan and acquired 14 units in a better market.

I tripled my cash flow; from netting approximately 300-400 usd per month to 1000-1200 usd per month after all expenses were paid.

Hope this provides some inspiration - if maximizing cash flow is your goal, so you can pay all living expenses etc from rental income, then smart leverage is your friend.