My father recently passed away. I will be administrator of his estate. After taxes, administration, and funeral expenses, his estate will be out of money (even after liquidating personal property). I'm uncertain, but I believe Dad's unsecured debt will be on the order of $10K. Dad owned a small 720 square foot 2 bedroom 1 bath house with attached single car garage. The house needs some repairs before it would be move in ready - replace carpets, repair or replace laminate floor in kitchen, repair or replace dishwasher and microwave. The "Zestimate" for the house is approximately equal to the balance on the HELOC. Further complicating things is the spa my dad installed a few years ago in the back yard without a permit.
If the estate were solvent, I would share an inheritance with 7 siblings, but none of us ever expected to get anything (other than a mess to deal with) from my dad and none of us have emotional ties to any of the things he had that have monetary value. The only thing in favor of keeping the property at all is California's Prop 13 property taxes - the house was purchased by my grandfather in 1941, so taxes have been less than $600/yr. Considering the current value of the property tax savings (which only applies if it stays in the family) the estate might actually be worth more than nothing.
If the estate were solvent, it would likely make sense to renovate (either to increase the selling price more than the cost of renovations or to keep as a rental property). I could probably afford to put up the money for renovation, but I'm not sure how I could protect my interest. Perhaps I could structure it as a loan to the estate secured by whatever equity is left after the HELOC is paid off.
Currently the HELOC is scheduled to miss its first payment early in October. If the house will be liquidated by the estate without renovation, there is no reason to make any further payment on the HELOC.
The options I see:
1) pay nothing further on the house, liquidate it as quickly as possible (likely a short sale/foreclosure), then close the estate.
2) renovate the house to sell at price high enough to pay off HELOC and renovation loan provided by me, then close the estate (I'm not sure the house would be worth enough for this option).
3) renovate the house and rent it out - income from property could make estate solvent over time. In this scenario, the estate woulld own the house and pay expenses (including property management fees to me) from rental income. If I wanted to continue holding the house as a rental myself, I could attempt to close the estate at near zero net worth and buy out my siblings shares. The big disadvantage here is the cost of estate income taxes.
If I were on the other side of the deal under option 1, I would certainly be looking to flip the house. Holding this property as a rental seems more like a bet on appreciation than a true income property.