If you’re thinking about renovating your home, you need to carefully evaluate the costs, the return on investment and how much you’ll enjoy the improvements.

If you’re looking at fixing up your parents’ home before selling it, the calculation is quite a bit different.

Selling your parents’ home after they pass away or move out can be difficult, both emotionally and logistically. And you may wonder if you can do so without spending too much of your own money.

Before you put a bunch of money into renovations, you’ll want to carefully evaluate the condition of the home and your own financial situation. We’ll go over some of the questions you should ask below — and then some options if you decide that you want to move forward.

Evaluating Your Parents’ Home — Renovate or Just Sell?

Buying a home is always a stressful time. Buying your parents’ home involves a new layer of emotional complexity. Selling it can be stressful, too — especially if you’re doing so after a parent passes away or starts full-time care.

Try to evaluate the home as rationally as you can. There’s a lot of money at stake, and you’ll want to treat the home as if it were any other real estate deal.

Before sinking big money into the project, here are some questions to ask.

• Do your parents have a will? You’ll need to know who has legal ownership of the home before deciding if or how to sell it. Less than half of adults aged 55 or older have a will, according to a 2020 Caring.com survey, and that percentage is falling. If there’s a brewing legal battle over control of your parents’ assets, you might not want to invest in renovations.
• Is there a mortgage on the home? The amount of equity in the home can make a big difference, especially if a reverse mortgage is involved. A reverse mortgage is a common way for seniors to tap their equity as income during retirement, and the loan balance grows over time. The loan must be repaid when the owners die or move out. But the most common type of reverse mortgage, the federally backed Home Equity Conversion Mortgage (HECM), does not require heirs to make up the difference if the home is worth less than the market value at the time of sale. If you think the home might be underwater, it wouldn’t be worth investing in fixing it up if there’s an HECM involved.
• What needs to be done? Small renovations can make a real impact on the selling price. Large projects, however, make it much harder to recoup your investment.
• Also keep in mind how much time you can put into the project. Major renovations are time consuming, even if you’re hiring somebody else to do the work. If the house needs major work or if you live too far away to manage the project, it might be better to just sell the house as is.

3 Ways to Pay for Renovations to Your Parents’ Home

If you’ve decided it’s worth the investment to fix up your parents’ house to sell or to live in, you have some choices on how to pay for it.

• Personal loan. A personal loan generally offers a fast and flexible way to access cash for large purchases. You receive a lump sum as a loan and pay it back over time with fixed monthly payments. Personal loans are unsecured, meaning there’s no collateral at stake if you find yourself unable to pay back the loan.
• Home equity loan. You may choose to use the equity in your own home to renovate your parents’ house. A home equity loan or home equity line of credit can generally be used as you wish. However, keep in mind that these loans are secured by your property, meaning your home is at risk of foreclosure if you fail to pay back the loan.
• Life insurance. If you also received a life insurance payout when you took over control of your parents’ home, you may feel obligated to use the money to fix up the house. However, you are free to use the money as you wish, even if there’s a mortgage on the house.

Joe Resendiz is a Research Analyst at ValuePenguin, where he focuses on personal finance and credit research to assist consumers. Previously, Joe specialized on public sector and infrastructure financing at Goldman Sachs. He graduated from the University of Texas at Austin with a BBA in Finance.