Should We Keep or Sell Mom and Dad’s Rental Property?

Updated November 2026

Short answer: It depends on three things: whether the family wants to be landlords, what the property taxes will be after the transfer, and the tax picture when you sell. Under Prop 19, a rental passing from parents to children is usually reassessed to current market value, so property taxes often jump. That one change makes keeping it less attractive than it used to be.

Why property taxes matter more now

Before 2021, children could often keep a parent’s rental at the parent’s low tax base. Under Prop 19, only a family home that becomes the child’s own primary residence, or a family farm, can keep part of that tax base. A rental usually gets a new assessment at market value. If Mom bought the duplex in 1985, the new tax bill could be many times what she paid. See what Prop 19 means for inherited homes.

Questions to ask before deciding

• Does anyone in the family want to manage tenants, repairs and vacancies?
• Will the rent still cover the reassessed property taxes, insurance and upkeep?
• Do all the heirs agree, or would one need to buy out the others?
• Is the property in good shape, or does it need major work?
• Are there tenants with leases and rent-control or just-cause protections?

Taxes when you sell

Inherited property generally gets a “stepped-up” tax basis to its value at the date of death. A sale soon after inheriting often results in little or no capital gains tax. Heirs who want to stay invested in real estate can sometimes use a 1031 exchange to trade into different property. Ask your CPA how this applies to your family.

Selling with tenants in place

A rental can be sold with tenants living there. Existing leases and California tenant protections continue, so plan showings, notices and timing carefully. Some families sell to an investor with tenants in place. Others wait for a natural vacancy and sell to an owner-occupant, often for a higher price.

How I help

I’ve helped many families who were selling a parent’s home and their rental properties at the same time. I’ll give you a realistic value with and without tenants, rental comparisons, and an honest look at keeping versus selling. The decision stays with your family.

This article is general information, not legal or tax advice. Thomas Jackson is a real estate broker, not an attorney or CPA. Property tax and income tax rules depend on your situation, so please confirm the details with your CPA, attorney or county Assessor. More answers: California Probate FAQ.