The HIDDEN COST of Getting a FREE HOUSE

One thing a lot of younger people my age and younger are saying right now is I'll never be able to afford a house with my salary and how much homes cost these days, especially if home prices continue to go up. So a lot of people are saying the only way I'll ever own a house is when my parents pass away and they hand the house down to me. Well did you know that when you inherit a house it can actually be a giant hassle? There are a lot of problems that come along with inheriting a house and that's why about 70% of homes that get inherited are turned around and sold because most people either don't want the house, can't afford to keep the house, or don't want to be a landlord. So let's get into how inheriting a house can actually be a much bigger problem than you might think. There's this woman who inherited a house, her father passed away and the house was fully paid off, didn't even come with a mortgage. So right away that would be for a lot of people just like hitting the lottery. But here's the thing, her and her father didn't really have the greatest relationship. In fact before he passed away they weren't even on speaking terms, which is pretty awful. You know you really never want to get to that place with family but things happen and that's just how it went. So her father passed away and she didn't really have any desire to move back into the house, especially with memories that she had there weren't very good. So she said you know what I don't want this place. The thought of turning it into a rental briefly crossed her mind until she realized that yeah I don't want to be a landlord, which was probably pretty smart on her behalf because I think a lot of people don't really think about how much work that's going to be if you were going to be a landlord. It's not just one two three, this place is going to be a rental and you're not going to have anything to deal with. Can it be done? Can you have a more hands-off approach with it with a property manager? Absolutely, but it still takes a lot of legwork to get it going. Also because she inherited the house she also inherited all of the stuff inside of the house. Things like antique furniture, sentimental items, clutter, you name it. All the things you can imagine that come with a house that's been lived in for many years. So of course what she decided to do is she actually sold the house and she sold it to a neighbor who helped care for her father later on in his life. They sold the house for only $200,000 which is well below the going rate in the neighborhood. She said she was happy to sell it to somebody who felt like family rather than selling it to a developer or an investor. Who knows what they're gonna do with it, right? They could have just been playing a game the whole time. But you know if she felt right about it then that was the person to sell it to. Now keep in mind this house was sold in 2020 so this was before the big boom in home prices. So if she would have just held on to it a few more years she could have made a killing probably. But hey nobody knew that would have been the case. So then of course you inherit a job also because now it's your job to go through everything in the house and decide what you want to keep. If you have siblings you have to go through it with them in many cases and kind of figure out who gets what unless there's a will already deciding who gets what. That can take months if not even years if there's a disagreement. So there's that aspect to it. And then also just the time that it consumes to do that, right? You have to spend your time getting rid of things and hiring the dumpster company or calling Salvation Army to come and pick things up and donate it. Like all that takes time. And then actually getting the house listed and negotiating offers and getting it sold. So is there no payoff at the end? Of course not. You're gonna make a large sum of money once you sell that house but it doesn't come without work. And I also just wanted to reiterate here that here's somebody who inherited a mortgage-free house that didn't turn into a cash-flowing rental and they didn't move in so they could have no mortgage. They decided they would sell the house and take the cash. That is what most people do. And that's why once the baby boomer generation starts to die off we are gonna see the largest uptick in home inventory probably in the history of America. The oldest baby boomers in the United States are on the precipice of turning 80 years old this year and they're gonna be leaving behind the largest amount of real estate that anybody's ever seen. And also inheriting a house is not a guarantee that you're gonna get a big financial windfall either because depending on the person's financial situation they may have been living off the house. They might have a reverse mortgage that they've been using to pay their bills. They might have a lot of medical debt and medical expenses that need to be paid off once the house gets sold. There are things that can happen that can really eat away into the potential equity that somebody might get if they inherit the house to where you're left with a lot less than you think especially after all the costs of selling the house. And one thing that's still very common unfortunately is a lot of parents just don't want to have that tough conversation with their children about what happens when I die? What's gonna be the plan? Like who's gonna get what? How is this gonna go? Like there's a lot of lack of estate planning for everybody. You know people just kind of put it off and put it off and think oh I'll have more time and then next thing you know you're dead without a plan. And the reason I know there's gonna be a record amount of real estate hitting the market as baby boomers pass away is because right now they currently own 19.7 trillion worth of US real estate which is 41% of the country's total value. So literally almost half of the value of real estate is going to be turned around within the next 20 years most likely. And even though Millennials now make up a larger share of the US population to put in their perspective they only own about 9.8 trillion worth of US real estate or about 20% of it. And baby boomers even today as of 2024 still account for the largest share of homebuyers in America. Just last year they accounted for 42% of all of the homes that were purchased according to the National Association of Realtors whereas Millennials only accounted for 30% of all homes purchased last year. So it's not even close. It's not even a contest. Here we have a house that was sold back in 2013 for $1,075,000 and they actually listed it for sale back in 2020 for as high as $6.5 million and then back in 2024 they listed at as high as $9.5 million for this house. Now fast forward to today it's listed for $8.75 million but still it is basically a waterfront mansion here in Miami Shores. But is anybody gonna pay this much for the property? I don't know. Especially when you're talking a current property tax bill of over $31,000 a year the new owner is gonna have a six-figure property tax bill guaranteed when they buy this house. And that's one of the other reasons that we'll get into in a little while here that a lot of people who inherit these homes are not going to hang on to them. It's because of the sheer cost. If you already have your own home and then hanging on to another home and paying a second mortgage, a second property insurance, second property taxes things like that, who wants that? Most people are just gonna take the cash and run. But to give you an idea of what the projections are they're saying right now between 2025 and 2035 so just over the next 10 years that about 15.6 million baby boomers are going to pass away and also are going to pass along their belongings including their real estate. And between 2035 and 2045 it's expected to there's another 23 and a half million baby boomers that are expected to pass away during that time frame. You're talking over 40 million Americans here that are gonna have to leave their house to somebody else if they own one. That's a tremendous amount of inheritance and it's a tremendous amount of homes coming to market. Now are all of them coming to market all at once? Of course not. It's gonna be slow and steady over the next 20 years. But look at the real estate trends we're seeing right now without a major loss in the baby boomer population. It's already dire straits for the housing market today in terms of getting homes sold. The houses that are getting listed are not selling. People are having to lower the price to get it sold. Imagine what this markets gonna look like throughout the next 20 years as we see this entire situation we're seeing right now amplified by a lot. Imagine what home prices would have to be right now if all of a sudden within the next couple of years the inventory on the US housing market were to double or even triple. The prices would sink to the floor because buyers would have an abundance of choice and not know what to do with it. And one of the other reasons that people sell the home instead of living it or turn it into a rental is because there's usually just too much to be done. You know the house is not in the same condition that the person inheriting it would like it to be in. So there's a lot of work that would need to be done. Maybe the house isn't in the right location. Maybe it's in a different state away from where they're raising their family and their children and moving into it simply isn't an option. Let's face it if you already have a busy life inheriting a house and inheriting another part-time job dealing with it is not really gonna be what most people are looking for especially in your late 40s or 50s. And let's say you're a younger millennial that inherits a home right now. You might not even be financially ready to inherit a home like that because you might not be able to swing it. Say you want to move in but there's still a mortgage tied to it. You might not be able to afford all the costs associated with that house. And a lot of times a transfer of title will constitute a reassessment which is going to trigger your property taxes to go up significantly once you take ownership of the house. So just because your parents might have paid a lower amount for the house doesn't mean you're gonna inherit their property taxes as well. In many cases you won't. One thing though that a lot of people should be considering especially if you're somebody older who is gonna pass your home down to your adult children one day or somebody is you want to wait until you actually pass away to transfer that ownership of that house to your adult children. The reason for that is because let's say you pay $200,000 for a house and now it's worth a million. Well once you die and you pass the home along to your adult children they'll have what's called a stepped-up basis when it comes to paying capital gains taxes on that property. So if they choose to sell it then the house will be valued at what it's supposed to be valued today as their cost basis versus what you paid for it 20 or 30 years ago. So that can save a huge amount in taxes by just waiting until your death to pass the property along to somebody else. So between being able to save a ton of money on capital gains taxes and not having the ongoing expenses of having another home to maintain and care for you're just gonna see most people turn around and sell these properties and that's why you are gonna see so much inventory come up over the next 20 years. And we're already in a situation right now where there's no housing shortage guys. There is no housing shortage at all. There might be in some regions of the country but nationwide on a nationwide inventory basis there is no shortage. We are back to pre-pandemic levels of inventory right now. And really anybody who's in their later stages of life that's going to be passing down a lot of their belongings especially real estate should speak with some kind of estate planner or a state lawyer and get your house in order before it actually happens because it's gonna make it a lot easier on your loved ones once it actually does happen. There will be a lot less guesswork and everything that they need to do will be spelled out for them clearly and will also save them time and money and legal issues down the road. It's also tough if you have parents that are getting older and don't want to talk about this topic like a lot of them just want to avoid it and then you sound like you know the bad guy bringing up their death and how things are gonna be handled once they die you know. So it's a touchy subject for a lot of people but it really shouldn't be because it's gonna help everybody out in the end if it's something that's just taken care of before it's too late. Let's talk about foreclosures for a minute because it turns out that one of the main reasons that a lot of people are losing their homes to foreclosures these days is because of flooding. Flood damage is causing a lot of people to go into foreclosure even if you don't have direct flood damage on your home surrounding flood damage can lead to still going into foreclosure even if they weren't the ones affected by it and this is how this works. Here's a guy that bought a house in summer of 2020 right in the middle of the pandemic for $209,000 and in May of 2023 a flash flood hit his neighborhood wiped out the house and messed up its entire foundation and even filled his basement with seven feet of water. He was told that the repairs on the house would cost just as much as the house itself because the foundation was heavily damaged and he would potentially have to lift the house and replace everything underneath it and he said if he would have sold the house right before the flood hit he would have made about a hundred thousand dollar profit and of course he didn't have flood insurance because he lived in what's called a low flood risk area and decided not to get it and rightfully so a lot of people do that right they think I don't need flood insurance because I don't live in a flood zone so none of this damage that happened from the water damage was covered so what this guy ended up doing instead is he filed for chapter 7 bankruptcy as it was pretty much his only way out of the situation and the lesson learned here is no matter where you buy a house you should have flood insurance on it and listen if you live in an area that's like not considered a flood zone that's a blessing for you because that means you can get flood insurance at a very very cheap price because a lot of these FEMA flood maps are just simply outdated and that's what these insurance companies use to gauge your risk or they use prior flooding in the neighborhood to gauge risk and if you're in an area that's considered low flood risk then you should buy it five hundred thousand dollars a year to be money well spent if something like this were to happen to you you know people that actually need to have flood insurance that are required to have it like a lot of places here in Florida don't have a choice but they have to pay an arm and a leg for it because their risk is much higher but truthfully anywhere you live could potentially flood no matter how unlikely it may seem it's probably worth having because the more unlikely it is the cheaper the insurance is going to be and according to the latest research they're finding out that properties that were flooded in an extreme weather event face a higher foreclosure rate than unflooded homes nearby which is not really a shocker but it also affects the surrounding properties which is a shocker even if your property wasn't flooded and the reason is because of the rising homeowners insurance and flood insurance premiums they contribute to the surrounding foreclosure risk in the neighborhood so even homeowners who don't experience a natural disaster firsthand are affected by them because the insurance companies are going to raise the premiums and the average homeowners insurance premium has gone up sixty-one percent over the past five years to a little over twenty three hundred dollars nationwide right now and the research is clear and it shows that when your insurance premiums just go up a $100 per month then it increases the foreclosure rate in the area by six point nine percent so all these extra added costs directly affect everybody who owns property in the area whether you realize it or not because as all these expenses to own a home increase it puts more strain on the household budget and people's finances and makes them one step closer to financial ruin if something were to happen so it makes people like that more susceptible to delinquencies and ultimately defaults which lead to foreclosures so just something to keep in mind that if you live in a flood zone obviously you don't have a choice but if you don't and you say well I'm not gonna pay for flood insurance it's a waste of money well that's exactly what this guy thought as well he lived in Idaho so not really a huge risk for flooding out there because you're in the Mountain West you know and they don't get that much rain there's also typically higher elevations things like that and people think well you know if I'm a hundred feet above sea level there's no way I can have my house flood which is just not true now we talked about the massive wave of houses that are gonna come up for sale in the next 20 years from baby boomers but what about right now who's selling houses right now well it turns out pretty much everybody that's been tired of waiting to sell people that thought that prices were just gonna continue shooting up which they have not people who thought that mortgage rates were going to come down people who are tired of postponing you know their life changes after staying put for longer than they wanted to even people that have a 3% mortgage rate right now are selling because life goes on you know you cannot just hang on to a property solely because you have a 3% mortgage rate that's just not good enough in many cases there's also a lot of competition from the home builders right now they have more inventory for sale this year than they did last year and they are offering aggressive incentives to get these homes sold so anybody that's been waiting to sell their house kind of missed the boat in a lot of instances does it mean that it's too late and you can't sell no it just means that it's not going to be as easy to sell and you might not get as much money as you would have a year or two ago in most locations across the country and then there are the people who own second homes and vacation homes they're unloading these properties now too because the economy isn't doing nearly as great as it was before and these homes are more expensive to carry the cost of than ever before and a lot of them are choosing to sell especially investors because they're not able to make the same level of cash flow that they were able to just two or three years ago and by the way if you are somebody who's looking to buy or sell anywhere in the United States feel free to use my link down below it's 100% free I can set you up with a real estate agent in your area at no cost to you and many people have written me and said how useful this service has been and it doesn't cost you a dime and if you use it and ends up helping the channel so thanks if you do you know going back to just the sheer cost of what it takes to continue to maintain and pay for a home is also prompting a lot of people to sell these days because when you just look at how much property taxes and insurance alone have gone up a lot of people are looking at this and saying you know these expenses have gone up 30 to 40 percent and my income's only gone up 20 percent it's just not enough to keep up I'm spending a larger chunk of my income today on my house and my house payment than I was five years ago maybe it's time to downsize or go back to renting especially when you see houses in your neighborhood renting for less than what you're paying for a mortgage also shout out to my buddy Ben he keeps asking me about this and here's your answer to it you know in institutional investors right now are selling more than they're buying now does that mean that they're not buying at all no but they are selling more than they're buying according to real estate analytics from parcel labs you have markets here like in Florida for example which used to be institutional investors favorite place to invest in real estate are seeing a significant pullback due to all the expenses and the risk of carrying these properties and then you have other sellers who are looking at how much the inventory has been rising in their area they're like huh I better list and sell now while I can still get a lot of the value out of this property because when you see inventory climbing like crazy in your area it's a guarantee that prices are going to be coming down so if inventory is rising rapidly in your area the longer you wait the less you're gonna make and let's face it the tradition is people's list their homes for sale in the spring and summertime this is the time of year when most people will list their homes for sale because traditionally you'll be able to ask more for the house to be able to get more for the house but not when there's a huge explosion in inventory it's actually gonna lead to the opposite situation happening but overall this is great news for anybody who's been waiting doesn't mean it's a great time to buy doesn't mean you're gonna find the deal of the century right now in 2025 but does it mean it's a better time to buy than it was a couple years ago in most instances yes it is just from the choice and the availability of homes for sale alone and if you're gonna pay a lot of money for a house you might as well buy something you like not buy something that you feel like you have to buy because there's nothing else available but if you have an even longer time horizon and you have more patience and you're say you're paying a low amount of rent right now and you're able to sock away a lot of money and get a nice return in the stock market or some other type of investment gold and silver keep stocking that money away because if times on your side like we talked about earlier next 10 to 20 years there's gonna be so much real estate coming available due to inheritances it's not even gonna be funny guys so anybody who's gonna have the cash to pick up those properties is gonna be able to really be able to build some wealth in real estate I know I'll probably be picking some up over the years as they come up available so if you enjoyed this video make sure you subscribe to the channel and if you don't want to wait for my next video to come out check out this one on the screen right over here and I'll see you in the next one