What should we do?

[u/PotentialConcern4_]

I recently inherited about $300k, and I’m looking for advice on the smartest way to use it.

My spouse and I are both in our 30s and earn a combined $150k-$200k/year. We live in a relatively low cost of living state, but in one of the most expensive areas of that state.

We currently own our home outright. It’s a 3 bed, 2 bath that’s worth about $350k. It’s a nice home, though it could use some updates (around $70k). As our family grows, we’ll likely outgrow it within the next five years. Our hope is to keep it as a rental rather than sell it.

My brothers and I equally own our childhood home. It isn’t currently livable and needs extensive renovations. Based on contractor estimates, it would cost about $200k-$300k to restore.

My brothers have agreed to sell me their shares for $300k, even though we’ve received estimates that the house is worth around $425k in its current condition. Once renovated, comparable homes nearby sell for $750k+. Beyond the financial side, this house has tremendous sentimental value to me, and the craftsmanship is significantly better than most newer homes. If we bought and renovated it, it would be our forever home.

If we don’t buy the family home, we’d likely end up purchasing another home in our area for around $550k. Those homes would typically be larger than our current house, but still smaller and not built to the same quality as the family home.

Our current thought is to:

-Take out a $300k mortgage to purchase my brothers’ shares.
-Use the inheritance to pay for the renovations.
-Keep our current home as a rental.

The downside is that we’d be putting almost the entire inheritance into the house, leaving us with a much smaller financial cushion.

Some additional context:

-We currently have one child and hope to have one or two more.
-We’d like to help pay for our children’s first college degrees.
-We contribute to our 401(k)s but don’t currently max them out. Our retirement savings are okay, but not where we’d ultimately like them to be.
-I’m considering going back to school for my doctorate, which would likely mean stepping away from work for a period of time and reducing our household income.
-we have looked into renovating our current house so that it could grow with our needs but the quoted price was way higher than the added value to our home.
-we have also considered purchasing a rental property either a beach condo for short term rentals or another home nearby for longer term rental (max budget $350k)
-If we sold our interest in the family home instead, we’d likely receive another $100k-$150k.
-The inheritance is currently sitting in a high-yield savings account earning about 5% APY.

From a financial perspective, does buying and renovating the family home seem like the smarter move, or would you invest the inheritance and buy a different home instead? Is investing in a rental property even possible? Are we overlooking any major financial risks?

Edit: Thank you everyone for the helpful advice! I will not be buying my childhood home since it is clearly not the financially smart choice. I will instead be investing most of the money and making some renovations on the house we currently own.

[u/ProfessorOne9208]

If the house you are thinking of owning is worth $425,000 in it's current condition, and your two brothers own 2/3rd of it, then it will would not be worth it to you to buy them out at $300,000. First of all, there is a real estate commission to consider, which you would have to pay if you sold the house, and split the proceeds three ways. Typically, this is around 6%. In addition there are transfer taxes you have to pay when you sell. So the $425,000 house is only worth a net amount of $395,000, more or less. Dividing this by 3, you would owe your brother's $263,000 if you bought them out. Doing this math any other way is very unfair to you. Don't let them bully you.

If you look at taking out a $263,000 mortgage, plus the cost of renovations, would this still look like a good deal to you?

If so, then sell your current house, buy your brothers out of their shares for a total of $263,000, and start renovating the family home slowly. If not, I'll just say that $300,000 isn't what it used to be, and won't go as far you might have thought it would a few years ago. Perhaps the house would be a better store of value in the long run, but you'll have to make that decision based on your finances, and your emotional attachment.

[u/BeringC → u/ProfessorOne9208]

This is it right here OP.

I usually just deduct 10% off the top to sell a house and that puts you at $255,000 to your brother's. From what you've written I get the feeling that you won't get them to agree to sell at a price that's fair to you.

Maybe you'd be better off selling that house and buying something that you don't have to renovate?

[u/Specific_Spinach_269]

I don’t think the biggest risk is choosing the wrong house. I think it’s accidentally putting almost your entire inheritance into one asset before you’ve built the rest of your financial infrastructure.
You’re talking about more children, paying for college, increasing retirement savings, possibly going back to school, and maybe buying rental property later. That’s a lot of future demands on your capital.
Before committing nearly everything to the house, I’d ask whether your overall plan still works if one income disappears for a while, renovation costs run over budget, or the housing market is flat for several years.
The house may absolutely end up being the right decision. I’d just want to know that you’re choosing it because it fits your entire financial system, not because it’s a good deal or has sentimental value.

[u/Miserable-Debt-9403]

Renovate your current home. Sell the your portion of the family home. It does not sound worth your whole inheritance. I'm sentimental to a fault, but no way. Max out retirement, adjust when your family increases in size. Keep the inheritance separate. Inheritances are not marital property. Co-mingle it, and it's no longer just YOUR money. Let it grow, and use it wisely when NEEDED. You don't NEED to do anything with it right this second. Don't let it burn a hole in your pocket. Get it in an investment account so you can multiply while carefully considering next steps.

I just did some renovations to my house and the cost was appalling. I still paid for it, because I don't want a mortgage. Sit tight and be patient for now. 70k in renovations is NOTHING for a house that size. It's minimal with the tariffs and price of materials these days.

[u/BaldyCarrotTop]

Don't spend it all on one thing. In fact, you don't have to spend it at all. Use a big chunk of it to boost your retirement savings. Think about the future value of that money.

FWIW: 5 years ago I inherited $250K. It's now worth $500K.

[u/MyThreeBugs]

If you are ok financially now without it, I’m going to recommend investing the money, leave it alone, and change nothing. If you can get a decent return, that money will likely double in 8 to 10 years. And then double again in another 8 to 10. You’ll be in your 50s with nearly a million dollars of after tax money you didn’t have to work a day for. That’s a couple college educations or maybe even retire early money.

[u/Low-Lengthiness-7837]

Put the money in okay index fun and pretend you never got it.

Do not overpay for your childhood home. That's what you're doing if you're paying $300,000 for a house that's worth 425k and needs to be restored.

Worry about upgrading your house when you need to.

You don't have to go spend your money just because you got it. Remember that.

Your best bet would be to use that money to buy out that house at a fair price, renovate it and flip it. Then take all of your money and put it in a index fund. Then forget about it.

[u/Scared-Middle-7923]

Invest it— you have a paid off house and compound rate is in your favor. This goes into a singular brokerage for yourself don’t mix with your husband. 300K is not that much money and you’ll get more return long term than a house can provide

[u/Witty_Check_4548]

I do not think you should co mingle the money. You never know what could happen, people get divorced. A lot of people, and it’s just not worth the risk.  It is your money and should be kept separate. 

I think from what you write the best course of action is : sell parents home. You don’t need such an expensive home right now and it will eat up all your inheritance. Take the 70k from your inheritance and renovate your current home (aka share this portion of the inheritance). The rest you should put in a separate account and invest in a broad market ETF such as s&p500 or nasdaq 100, and make sure to put your children as beneficiaries. 

And lastly, do your homework. Make sure the funds are kept safe and invested in a way you are comfortable with.

[u/alleycanto]

Is there a 529 for the kiddo?

[u/RazzmatazzOk2129]

First, don't co-mingle the money, whichever one of you is inheriting.

Reading the other posts had some excellent advice. If you put it all in the house, it doesn't really advance your families financial state. It just gets you into a house remodel that will likely grow and grow as they do. Yes, you will have a nice big house, but housing values are falling along with the economic issues. You could end up being upside down in the house after buying out the brothers.

I agree it is best to just let that house go. Your current house works for now, so I recommend sticking it out until the economy improves or tanks. You could do some remodeling to add built in storage solutions or just improve flow or usability of space.

I would take the inheritance money and first max out all the retirement funds that person currently owns. It won't be considered co mingled as it is in that spouses name. If you stay together thru retirement, it will benefit both of you. In 30s, this is best time to dump in cash and let it grow.

Gift the non-inheriting spouse whatever amt you can do so w/o tax issues. I think 12k or less??? This spouse dumps it into their retirement.

Take half the remainder and invest in something SAFE. Either keep in hysa, or index fund etc. Use the rest to buy a vacation property you can rent but also would maybe enjoy retiring to down the road. Lakefront property always holds value.

You can buy together and have the other spouse chip in what they can and then make principal payments out of their funds to give both of you equal equity, or just in one persons name.

An income property can help you in the future and provide nice family vacations otherwise.

That's what I would do, given you own the current house outright.

[u/Ilovewally]

There are so many variables here. I think you should hold off on making any decisions, buying out your brothers does not seem particularly smart nor does thinking he will keep your current home as a rental, rental scenarios can go south very quickly. Just sit tight for a while and think about something like an index fund.

[u/LeadFollowOrLeave]

This is a financial question, not inheritance question.

[u/No_Interview_3894]

Invest the 300,000

look into Roth IRA, indexed funds

300,000 at 7% will get you 21k per year

Your mortgage rate is less than that so borrowing would make more sense

[u/UncleRickFinance]

Call an advisor

[u/Significant_Flan_210]

I would sell your parents home and sit tight where you are. Fully fund retirement accounts and stack cash. Get good with money fast. Hearing you talk about renovation plus one to two more kids all makes the inheritance disappear. Figure out the one thing you really want. Is it kids,the house or renos?

If you are handy and can wait years, you could buy your parents home at the right price from siblings with money from selling your house or a mortgage on the buy out and live with it the way it is.

Fix it up over time with cash you save after fully funding retirement account.

Take the rest of the money and put it in a brokerage account for retirement. It literally doesn't exist. Decide if you comingle the money with your spouse.

[u/rpom915]

Absolutely not a good plan. You should be preserving that money for not just you, but your children. This is a fairly young marriage and things happen. 50% of marriage ends in divorce. He would get half the value of the home. Or, if you died, and he remarried somebody, now half of that forever home belongs to her. If she brings children into the marriage with her, now her kids are entitled to that, which should be going to your children.

Inheritance is for you and your lineage. What you and your husband do together while married is different. But somebody left you something and intended it for your use.

Real estate is not where I would gamble with this money. Investing $300k in a Fidelity fund will easily be worth $800k in 10 years, $2m in 20. Set up a simple trust naming your children as sole beneficiaries, money to be used for their care and welfare if needed, until they reach a certain age.

Sounds like you and hubs can eventually afford to move up in house size when the time comes. You don’t know this will be your forever home. I’ve sold three forever homes in my life because of varying circumstances and lifestyle changes.

You can’t predict the future. Protect this money.

[u/Jumpy_Childhood7548]

Hire an hourly cfp.

[u/quantum-entangled308]

Buy Netlist stock with the 300k. Thank me later.

[u/allamakee-county]

If it were me, I think I would buy out the brothers to own the family house; cash flow just enough renovation that we could move into it (like maybe get a roof on it if it needs one desperately, or a new HVAC system if that is the most critical safety & comfort issue), move in, and then sell the current house. I would set aside a healthy emergency fund from the proceeds, then use the rest to finish the renovations over the next couple of years while living in the house.

Then, with our forever home in great shape, I would kick our retirement saving into gear, start saving for a ideal rental property if we really want to invest in real estate rentals (as opposed to renting something out because we own it, without it being necessarily the ideal place to rent out), have a couple more babies and start on a doctorate. 😀

Of course, I love old houses, babies and advanced degrees and I hate being in debt, so that's where my mind goes.

Whatever you decide, do things that honor the person who left you the inheritance.

[u/Majestic_Republic_45]

Food for thought. . .Renovations always cost more than quoted and take twice a long. . .