Should I Sell or Rent My House? Consider an ADU for More Income

Selling feels final. Renting can feel risky. But if you're caught asking yourself, “should I sell or rent my house?”, there's another option more California homeowners are exploring—building an ADU to create passive income without giving up ownership. In a high-stakes market like Los Angeles, it’s not just about offloading your home or leasing it out. It’s about increasing its earning potential.

Accessory Dwelling Units (ADUs) offer a way to maximize your property’s value, create long-term wealth, and generate consistent rental income. From garage conversions to standalone backyard units, they give homeowners more control, flexibility, and ROI—without the pressure of selling or the complexities of traditional landlording.

NEO Builders, a leading general contractor in Los Angeles, helps homeowners design, permit, and build high-ROI ADUs tailored to their lifestyle and goals. Book your free ADU consultation to explore what’s possible on your property.

Should I Sell or Rent My House? Key Factors to Weigh First

Some things to take into account when deciding the next best move for your property include:

• Timeline: Do you need money urgently or is there a major sudden change happening in your life?

• Motivation: Why do you need the money?

• Short-term vs Long-term goals: How will your decision impact the present AND the future?

• Obligations: If renting, do you have the bandwidth to take on the responsibilities?

Let’s break down each of these factors. 

What’s Your Timeline and Motivation?

Your timeline and personal motivations play a crucial role in deciding whether to sell or rent your house. If you're relocating permanently or need immediate funds, selling might be the appropriate choice. Conversely, if you're moving temporarily or foresee returning, renting could provide a steady income while preserving your property's long-term value.

Do You Need Cash Now or Want Long-Term Income?

Selling your home can provide a substantial lump sum, useful for purchasing a new property or investing elsewhere. However, renting offers ongoing income, potentially covering mortgage payments and generating profit over time. Building an ADU can enhance this income stream, allowing you to rent out either the main house or the ADU as long-term housing, depending on your living arrangements.

Are You Ready for the Lifestyle Shift That Comes With Being a Landlord?

Selling your home offers a clean break: once the transaction is done, you move on with no further responsibilities. Renting, on the other hand, makes you a landlord—legally and logistically. That means taking on tenant screening, maintenance coordination, rent collection, and full compliance with local landlord-tenant laws. Some homeowners embrace that role and enjoy the steady income it brings. Others prefer the simplicity of cashing out and avoiding the ongoing time and energy required. If you’re open to taking on those responsibilities—but want more flexibility or privacy—renting an ADU could be a more balanced way to build long-term income while staying rooted in your property.

Costs and Responsibilities of Renting vs. Selling

Financial and Practical Costs of Becoming a Landlord

Renting out your property isn’t passive—it's an ongoing investment of both money and time. Landlords need to budget for recurring maintenance, emergency repairs, property management fees, and periods of vacancy where no rent is coming in. You’ll also need rental property insurance, which typically costs 15–25% more than a standard homeowner’s policy. These expenses can significantly affect your net income if you’re not prepared.

An ADU can help offset some of these challenges. A newly constructed, code-compliant unit is less likely to need costly repairs early on, and modern features tend to attract long-term, reliable tenants. Plus, renting out an ADU instead of your main home can reduce wear and tear where you live—making the arrangement more manageable overall.

Realtor Commissions, Repairs, and Taxes When Selling

Selling your home isn’t free—even in a hot market. You’ll typically pay 5–6% in realtor commissions, plus closing costs, legal fees, and possibly capital gains taxes if you don’t qualify for an exemption. On top of that, many sellers invest in staging, landscaping, or pre-sale repairs to make their property competitive. These expenses can chip away at your profit. By contrast, building an ADU can increase your property's long-term value while generating consistent rental income—offering a more sustainable way to grow equity over time.

Signs You Should Sell Your Home

You’re Relocating Permanently

If you’re moving for good—whether for a new job, retirement, or lifestyle change—selling your home can provide the liquidity and clean break you need. It frees up equity for your next purchase and removes the responsibility of maintaining or managing a property from afar.

You Want to Avoid the Responsibilities of Being a Landlord

Becoming a landlord isn’t for everyone. If you're not comfortable with tenant management, maintenance issues, legal compliance, or the time commitment involved, selling may be the more stress-free option—especially if your schedule or lifestyle doesn't allow for hands-on involvement.

Your Home Needs Repairs That Make Renting Impractical

If your property needs significant upgrades—like a new roof, plumbing, or HVAC—renting it may require too much upfront investment to be worth it. Selling the home as-is, particularly in a competitive market, might deliver better returns without requiring major renovations.

The Market Is Hot and You Want to Maximize Sale Value

If you're in a seller's market, with low inventory and high buyer demand, selling now could mean multiple offers and top-dollar value. Timing the market well can turn your home into a strategic windfall—especially if you've built substantial equity.

Signs You Should Rent Out Your Home Instead

You’re Relocating Temporarily and Plan to Return

If you're leaving for a short-term job assignment, travel, or education—but plan to come back—renting can help you hold onto your asset, build equity, and generate income in the meantime. When you return, your home will still be there.

You Want to Build Passive Income While Keeping the Property

Many homeowners choose to rent to generate ongoing income, particularly in markets like Los Angeles where long-term rental demand is strong. Renting allows you to continue benefiting from appreciation while offsetting your mortgage with rental income.

You Have the Perfect Lot for an ADU

If your property has a detached garage, a spacious backyard, or favorable zoning, you're well-positioned to add an Accessory Dwelling Unit (ADU). Building an ADU allows you to rent out one part of the property while maintaining residence or ownership of the other. It's a smart way to earn income without selling. Check out our ADU Property Tours to see how other LA homeowners are doing it.

You Anticipate Property Values Will Rise

Holding onto your property during an upswing in the market can be a strategic wealth-building move. Renting your home now while values increase may position you to sell later at a significantly higher price—or simply continue benefiting from a growing rental asset.

Why More Homeowners in Los Angeles Are Choosing ADUs Instead

Accessory Dwelling Units, or ADUs, are self-contained residential units built on the same lot as a primary home. Commonly known as backyard homes or in-law suites, ADUs can be detached, attached, or converted from existing structures like garages. 

To be legally recognized in Los Angeles, an ADU must include its own entrance, kitchen, bathroom, and living space—and it must meet California’s building codes and local zoning requirements. 

These compact units typically range from 400 to 1,200 square feet and can serve as rental properties, guest suites, home offices, or multigenerational housing. Thanks to statewide policy changes and the ongoing housing shortage, more LA homeowners are turning to ADUs as a smart, flexible way to generate income and maximize property value.

Generate Rental Income Without Giving Up Ownership

In Los Angeles, where the median rent for a one-bedroom apartment is around $2,165/month, a well-built ADU can bring in $25,000–$35,000 in annual rental income—often more if it’s located near universities, job centers, or transit lines. By building an ADU, you retain full ownership of your property while tapping into a reliable income stream that can help cover your mortgage, offset rising living costs, or fund other investments. Unlike selling, you stay in the real estate market and continue to benefit from long-term appreciation—critical in a city where property values have increased over 40% in the past five years. 

NEO Builders and Design specializes in designing high-performing ADUs tailored to your lot, goals, and income potential.

Live in the ADU While Renting Out the Main Home

Some homeowners choose to reside in the newly constructed ADU and rent out the main house, maximizing rental income. This arrangement can be particularly beneficial for retirees or those seeking to downsize without leaving their neighborhood. It’s an ideal option when contemplating should I rent my house or sell it for lifestyle and income flexibility.

House Family Without Sacrificing Equity or Privacy

For many homeowners, ADUs are a thoughtful way to bring family closer without giving up independence. Whether it's aging parents, adult children, or extended relatives, an ADU creates private space on your property—no major renovations or shared living rooms required. You maintain full ownership and flexibility while offering support in a way that works for everyone. It’s a modern solution for multigenerational living that protects both your home’s value and your peace of mind.

What to Know About Building an ADU in Los Angeles

Zoning, Permits, and Design Considerations

Los Angeles has specific ADU zoning regulations that vary by lot size, location, and zoning designation. In most residential zones (R1, R2, RD, and RE), you're allowed to build at least one ADU and one Junior ADU (JADU) per lot. Detached ADUs must generally be set back at least 4 feet from rear and side property lines, and there’s no minimum lot size requirement. Height limits vary—up to 16 feet for standard ADUs, and up to 25 feet if the ADU is attached to a primary residence or built above a garage in many zones.

Some additional considerations include:

• No parking is required for ADUs located within a half mile of a major transit stop (which applies to large areas of LA)

• ADUs must have a separate entrance, kitchen, bathroom, and utility hookups

• Most lots are eligible for garage conversions, but the converted space must meet the same fire safety and energy standards as any other living space

• All new-built detached ADUs must have solar panels. Prefab detached ADUs, however, are exempt

Understanding these zoning layers is critical. NEO Builders offers full permitting support, helps assess what your specific lot allows, and designs ADUs that meet California's state mandates and LA’s local code—ensuring faster approvals and fewer construction delays.

Timeline and Costs for Garage Conversions or New Units

The timeline and cost for building an ADU vary based on factors like size, design, permitting complexity, and the condition of any existing structures. Garage conversions typically cost less and take less time than building a new unit from scratch—but that depends on whether the garage is structurally sound, up to code, and free of issues like foundation damage or outdated electrical. NEO Builders provides transparent pricing and efficient construction timelines, ensuring your project stays on track and within budget. Want to know what it would cost for your specific property? Schedule a free consultation to get clarity on scope, pricing, and timelines tailored to your lot.

What Sets a High-Value ADU Apart in Los Angeles

A high-performing ADU isn’t just compliant—it’s strategic. Premium layouts with smart separation from the main house, upscale finishes, natural light, and thoughtful extras like built-in storage, in-unit laundry appliances, or private outdoor space all increase tenant demand and long-term property value. Location also matters: detached ADUs with private access in walkable neighborhoods or near major institutions tend to command the highest rents and resale premiums. NEO Builders specializes in designing ADUs that maximize livability, aesthetic value, and ROI from day one.

Book a Free ADU Consultation With NEO Builders

Let’s Explore Your Property’s Income Potential Today

Discover how an ADU can elevate your property's value and generate reliable income. Book your free consultation today to get expert insight tailored to your lot and goals.

Custom Designs, Full Permitting, and Expert Local Knowledge

NEO Builders delivers custom ADU designs, navigates the full permitting process, and brings deep knowledge of Los Angeles zoning and building codes to every project. Our team is known for being transparent, honest, and genuinely empathetic—qualities that are rare in this industry. From first consultation to final walkthrough, we prioritize your needs, communicate clearly, and deliver on what we promise.

Start your income-generating journey today with the team that builds high-performing ADUs designed for long-term value—while treating you like a partner, not just a project.