This is a conversation I have more often than you’d think. Someone’s parent or grandparent owned a commercial building. They passed away. Now the family is trying to figure out what to do with it.
It’s a tough spot. There’s emotion involved. The building might have been in the family for decades. Dad built his business out of it. Grandma bought it in the ’80s. There’s sentimental value on top of the financial value.
But here’s the reality: inheriting a commercial property and actually managing it are two very different things.
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Get Property Appraised at Date of Death: This becomes your stepped-up basis. The earlier and cleaner the appraisal, the stronger your position if anyone questions the value later. -
Review Existing Leases: What’s the lease expiration timeline? Long leases are more valuable to buyers. Short leases reduce value. Understand what you inherited. -
Assess Deferred Maintenance: Old buildings come with repair needs. If the original owner deferred maintenance, you now own that liability. Factor it into sell-or-hold decision. -
Plan for Multiple Heir Dynamics: If there are multiple heirs, establish upfront: hold and rent, sell and split proceeds, or use 1031 for one heir to buy out others. Unclear plans lead to forced sales. -
Consider Tax-Deferred Exchange: If one heir wants to keep real estate and others want cash, a 1031 exchange might let the real estate-interested heir buy out others while deferring taxes.
The stepped-up basis advantage
This is the big one that a lot of heirs don’t fully understand. When you inherit a property, your cost basis “steps up” to the fair market value at the date of death. So if grandma bought the building for $200K in 1985 and it’s worth $1.2M today, your basis is $1.2M. Not $200K.
Conditions that favor a quick sale
- Property has appreciated significantly since original purchase
- Multiple heirs with competing interests
- Heirs don’t want to manage real estate
- Building has substantial deferred maintenance
- Current market conditions are strong
Conditions that favor holding or managing
- Original owner just acquired property (low appreciation)
- All heirs agree on long-term hold and rent
- Property has excellent tenants with long leases
- Market conditions are soft or uncertain
- Heirs have real estate expertise
That means if you sell it for $1.2M, your capital gains tax is close to zero. That’s huge. If grandma had sold it during her lifetime, she would have owed tax on the $1M gain. You don’t.
But here’s the catch: this advantage doesn’t last forever in a practical sense. Every year you hold the property after inheriting it, any additional appreciation above that stepped-up basis becomes taxable again. So there’s a genuine financial argument for selling relatively soon after inheriting.
The management problem
Most heirs aren’t in the commercial real estate business. They don’t want to deal with tenant calls, lease renewals, roof repairs, and property tax appeals. Especially if they live out of state, which happens a lot.
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I talked to a family in Asheville that inherited a small flex building. Three siblings, all living in different states. None of them had any interest in managing commercial property. The building was generating some cash flow but the deferred maintenance was piling up and nobody wanted to be the one to write the check for a new roof. They called me, we agreed on a price, and they split the proceeds three ways. Clean and simple.
When multiple heirs are involved
This is where it gets messy. Three siblings who all have different opinions about what to do with the building. One wants to sell, one wants to hold, one has no idea. I’ve seen families argue about this for years while the building deteriorates. By the time they finally agree to sell, they’ve lost value.
My advice: make the decision early. Get an honest valuation. Understand the tax implications. And if selling makes sense, do it while the stepped-up basis is fresh and the building is still in decent shape.
I buy directly from estates and families across Rock Hill and the rest of the Carolinas. I’m patient with the process because I know it’s emotional. But I can also move fast when the family is ready. No listing, no commission, confidential.
Seller takeaway
If you’ve just inherited commercial property in NC or SC, the stepped-up basis gives you a tax advantage if you act within 12 months. Call Roth Capital at 704-600-3839 to discuss your inherited property and whether selling now makes tax sense for your family.
704-600-3839. Happy to talk through your situation.
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