Renting Out a Property for Money.
A personal story.
My mom bought a house 13 years ago; today its worth around 1 million+.
She's getting older and its getting more difficult to maintain the house, clean it, take care of broken fixtures, gardening, etc.
We built an ADU (Accessory Dwelling Unit) on my sister's property. The ADU is well built, has a great kitchen, en suite bathroom and about 200 to 300 square feet of living space. Having the ADU obviates the need for daily commutes back and forth to her house. She helps my sister with cooking, cleaning and general housework for her kids.
It made better sense to either rent or sell her primary residence.
The Rent vs. Sell Dilemma.
The choice between selling the property outright or transforming it into a rental investment isn't just about immediate cash flow—it's about a long-term wealth strategy.
There are cases for both, so lets explore them further.
The Case for Selling
Sometimes, cashing out makes perfect sense.
Selling a house gives you funds for a next home purchase or cash for investments, selling delivers that crucial lump sum immediately.
Market timing matters enormously. If it were a hot seller's markets with limited inventory, we could probably get premium prices for the house.
But the economy is going through struggles right now and we probably wouldn't get top dollar for the home (it's July 7th, 2025 as of this writing). We did a market survey of similar homes in her area on Zillow and the prices have indeed gone down from a few years ago. Mortgage rates for a 30-year fixed mortgage in 2020 - 2022 were hovering around 2 - 3%, that has changed due to the rise in interest rates to around 6 - 7%.
There is still a lot of unemployment and people are buying less big ticket items like homes or cars.
We thought if it was really a good time to sell?
There are things to consider when you're renting a home that makes it less attractive than selling it, like maintenance costs, ongoing repairs, property taxes, and more…
When your renting out a home, the desirability of the neighborhood, convenience - location to shopping malls, schools, etc., are important. Potential tenants evaluate these things before renting. If the home requires extensive repairs or lacks modern amenities you could have trouble finding renters.
Selling it made sense, there would be no ongoing monthly expenses, HOA fees, taxes and other incidentals and worries that come with home ownership.
On the other hand,
selling it would mean paying closing costs, selling expenses, commission and taxes (sunk costs) and we would forgo building equity in the home and annual tax benefits from renting.
The Rental Route
If you rent, you essentially become a landlord. This is good if you have the time and energy necessary to maintain and take care of the properties, it offers advantages like steady passive income while the property appreciates over time. You're essentially getting paid to hold an appreciating asset—a powerful wealth-building strategy.
We thought about it and since my mom already owned the property outright there would be no mortgage payments and she could get monthly income from the rent plus tax benefits, expense deductions and depreciation. Rather than rushing into a sale we might regret - closing costs, taxes, all costs that are sunk- the rental income would cover the HOA fees, property taxes and give her additional income while seeing the annual appreciation on the value of her home.
Making Our Decision
The choice ultimately came down to risk tolerance, cash needs, and long-term goals. Considering the current market conditions and the property's rental viability, we opted to rent. As we wanted to make our Mom's life as hassle free as possible we decided to enlist a property management company that could handle day-to-day operations, though this reduces some of the net returns.
Smart homeowners evaluate both options thoroughly, consulting real estate professionals and tax advisors before committing to either path.
Howie Lim is an entrepreneur and personal finance advocate splitting time between San Francisco and Tokyo. With a background in behavioral economics and a passion for financial literacy, Howie has spent over a decade studying how individuals can develop healthier relationships with money. When not analyzing investment strategies or interviewing successful savers, Howie can be found exploring neighborhood markets or testing minimalist living principles across two continents.