Inherited a Property in Orlando? Here's How to Decide: Rent It Out or Sell It

You just inherited a house. Now everyone has an opinion.

Your uncle tells you to sell it immediately. Your cousin says you'd be crazy not to rent it -- "it's free money." Your accountant keeps saying "stepped-up basis" like you're supposed to know what that means. Meanwhile, you're still dealing with the emotional weight of losing someone, and now there's a house sitting empty in Orlando that needs a decision. See our when to sell your Orlando rental for more. Here's the truth: there's no universal right answer. But there is a right answer for your situation, and it comes down to three things -- the tax math, the cash flow math, and how much of your life you want to spend being a landlord. Let's break all three down.

The Tax Advantage Most People Don't Understand

When you inherit property in Florida, you get something called a stepped-up basis . This is one of the most valuable tax benefits in real estate, and most heirs don't fully understand it. Here's what it means: the IRS resets your cost basis to the property's fair market value on the date the previous owner died. Not what they paid for it in 1987. Not what they refinanced it for in 2005. The value right now . Example: Your parent bought a house in Orlando in 1998 for $120,000. When they passed, the house was worth $385,000. Your new tax basis is $385,000. If you sell it for $390,000, you owe capital gains tax on $5,000 -- not $270,000. At the federal long-term capital gains rate of 15% for most taxpayers, that's $750 in tax on a $390,000 sale. Florida charges zero state income tax and zero estate tax. So the tax hit from selling an inherited property immediately is often close to nothing. If you hold the property for years and then sell it for $450,000, you'd owe capital gains on $65,000 ($450,000 minus your $385,000 basis). That's $9,750 in federal tax. Still not bad -- but significantly more than selling now. This stepped-up basis is a one-time gift. It's worth understanding before you make the rent-or-sell decision, because it changes the math.

The Rent Math: What Does the Cash Flow Actually Look Like?

Let's say the inherited property is a 3-bedroom house in a decent Orlando neighborhood. The stepped-up value is $385,000. Orlando's average rent is roughly $1,943/month. But you won't collect every dollar of that. Here's the reality: Monthly rent: $1,900 (conservative for a 3BR in Orlando) Monthly expenses: Property taxes: ~$450/month (Orlando's effective rate runs 1.2-1.7% without homestead exemption -- and you lose the homestead exemption on inherited property if you're not living there) Insurance: ~$300/month (Florida homeowners insurance averages $3,200-4,500/year, and inherited properties often cost more due to age and condition) Maintenance reserve: ~$190/month (budget 10% of rent for ongoing repairs) Vacancy reserve: ~$130/month (even in Orlando, expect 5-7% vacancy between tenants) Property management: ~$190/month (if you hire someone -- typically 8-10% of rent) Net monthly cash flow with management: roughly $640/month or about $7,680/year . That's a 2.0% cash-on-cash return on a $385,000 asset. Not bad for a property you inherited with no money out of pocket. But not spectacular either. And that's the good scenario. Add one major repair -- a $6,000 roof patch, a $4,500 AC replacement, a $2,000 plumbing emergency -- and your first year's profit vanishes. Inherited properties often come with years of deferred maintenance. That HVAC unit your parents installed in 2010? It's 16 years old and living on borrowed time. The flip side: You also get to depreciate the building's value over 27.5 years. On a stepped-up basis of $385,000 with $100,000 in land value, that's $285,000 ÷ 27.5 = roughly $10,360/year in depreciation deductions . That can offset your rental income and reduce your overall tax burden -- sometimes to zero on the rental itself. Talk to a CPA. This one's worth paying for.

The Sell Math: What Do You Actually Walk Away With?

Selling sounds simpler. And it is. But the costs add up faster than most people expect. Sale price: $385,000 (at current market value) Selling costs: Realtor commission: ~$20,700 (5.38% average in Orlando) Closing costs: ~$7,700 (roughly 2% of sale price -- title insurance, doc stamps, transfer taxes) Repair/prep costs: $5,000-15,000 (depending on property condition) Net proceeds: roughly $342,000-357,000 after all costs. If you sell immediately after inheriting, your capital gains tax is minimal (maybe zero if the appraised value matches the sale price). No ongoing expenses. No tenant calls. No maintenance surprises. But you're trading a $385,000 appreciating asset for a one-time check. If Orlando home values grow at even 3% annually over the next decade, that property is worth $517,000 in 2036. That's $132,000 in appreciation you'd miss -- on top of ten years of rental income.

Five Questions That Actually Decide This

Forget the generic "it depends" advice. Answer these five questions honestly and the decision makes itself. 1. Do you need the money right now? If you're carrying debt, funding a kid's education, or need capital for your own home purchase, selling gives you immediate liquidity. A rental property paying $640/month doesn't help when you need $50,000 next quarter. 2. Is the property rent-ready or does it need $20,000+ in work? Get an inspection before you decide. If the roof has five years left, the electrical panel is a Federal Pacific (they're everywhere in Orlando homes built in the '70s and '80s), and the kitchen hasn't been touched since 1995 -- the upfront cost to make it rentable can change the entire equation. A property that needs $25,000 in work before it can be rented starts its cash flow clock deep in the negative. 3. Are there multiple heirs involved? Three siblings inheriting a house creates three opinions. One wants to sell. One wants to rent. One just wants their share. In Florida, any co-owner can file a partition action to force a sale through the court. Partition lawsuits are expensive, slow, and usually result in below-market sales. If the heirs can't agree quickly, selling and splitting the proceeds is often the least destructive option. 4. Do you live near the property? Managing a rental from out of state is possible -- we do it for dozens of clients. But if you're inheriting a house in Orlando and you live in Chicago, you're not going to handle the 2 AM water heater call yourself. Factor in property management costs (8-10% of rent) or accept that self-managing from 1,000 miles away is a recipe for expensive mistakes. 5. What's your actual appetite for being a landlord? Being a landlord means understanding Florida eviction law , screening tenants within fair housing rules , maintaining the property to Florida code, and handling security deposit procedures that can cost you thousands if you get them wrong . If that sounds like more than you signed up for, selling is the right call -- or hiring a property manager who handles all of it for you.

What If the Property Already Has a Tenant?

This happens more often than you'd think, and it changes the timeline. In Florida, an existing lease survives the owner's death. The lease is a contract, and it transfers to the estate (and ultimately to you as the heir). That means you can't move in, sell vacant, or re-lease until the current lease expires. You can sell the property with a tenant in place -- investors buy occupied rentals all the time -- but it typically reduces the buyer pool and may lower the sale price by 5-10%. Your options: Honor the lease and collect rent until it expires, then decide Negotiate a lease buyout (similar to cash for keys ) where you offer the tenant money to leave early Sell with the tenant in place to an investor buyer Wait for the lease to expire and then sell vacant or re-lease on your terms Do not try to evict a paying tenant just because you inherited the property. The lease is binding, and you'll lose in court.

The Property Tax Surprise

Here's something most guides skip: when you inherit a property in Florida that was someone's primary residence, you lose the Save Our Homes cap . The previous owner's homestead exemption limited annual assessed value increases to 3% or the CPI, whichever was less. Over 15-20 years, that can create a massive gap between assessed value and market value. When you inherit the property and it's no longer a homestead, Orange County reassesses it to full market value on January 1 of the following year. Example: The property's assessed value under the homestead cap was $210,000. Market value is $385,000. After reassessment, your property tax bill jumps from roughly $3,700/year to $6,500-7,200/year. That's an extra $250+/month that comes straight out of your rental cash flow. Heirs who plan to live in the inherited property as their primary residence can apply for homestead exemption by March 1 of the year following the death. But if you're renting it out, there's no homestead protection. Budget for the full tax bill.

Our Recommendation (Based on What We See Every Week)

We manage properties for inherited-property owners across Orlando. Here's the pattern we see: Sell if: You need the cash, the property needs major work, there are multiple heirs who can't agree, or you have zero interest in being a landlord (even with a manager). The stepped-up basis makes selling now tax-efficient. Take the money. Rent if: The property is in decent shape, you're comfortable with a long-term hold, and the cash flow works after real expenses. Orlando's population is growing. Rents have held steady around $1,900-2,000/month. A well-maintained rental in a good submarket like Lake Nona or Winter Park will appreciate and cash flow over time. Not sure? Start with a rental analysis. We'll look at the property's condition, the local rental comps, the real expense picture, and the net cash flow -- so you can make the decision with actual numbers instead of guesses. Get a Free Rental Analysis →