Selling vs. Renting an Inherited House: Running the Numbers

Emotions aside for a moment — what does the actual math say about selling versus renting out an inherited house? Here's how Real Time Home Buyers Metro Detroit would walk you through the numbers.

Start With the 1% Rule

A common benchmark investors use: for a rental property to be worth holding, it should generate roughly 1% of its value in monthly rent. So a home worth $200,000 would ideally rent for around $2,000 a month to be considered a solid rental investment. If your inherited home's realistic rent is well below that threshold, the rental math likely doesn't support keeping it as an income property.

Account for What Actually Comes Out of Rental Income

Gross rent isn't what you keep. A realistic rental analysis subtracts:

• Property management fees, if you're not self-managing (typically 8–12% of rent)

• Property taxes (which may be reassessed once the property changes hands)

• Insurance — often a landlord-specific policy, which usually costs more than standard homeowners coverage

• A maintenance reserve, commonly budgeted around 1% of the property's value per year

• Vacancy periods, since the home won't always be rented

Once you subtract all of that from gross rent, what's left is your actual net yield — and it's often meaningfully smaller than the sticker rental price suggests.

Compare That to Selling and Reinvesting

If you sell instead, the proceeds don't have to just sit in a checking account. Many families compare the net rental yield against what those same proceeds could earn in other investments — a high-yield savings account, CDs, dividend-paying stocks, or paying down higher-interest debt, which is effectively a guaranteed "return." An account like this typically demands far less time and effort than managing tenants and maintenance calls.

Factor In the Payback Period

If the home needs work before it could be rented, consider how long it would take to earn back that investment through rental income before you start actually profiting. If that payback period stretches out for years, selling as-is and redirecting the proceeds elsewhere may get you to a better financial position faster.

The Bottom Line

There's no universal right answer — a strong rental market and a move-in-ready property can make renting genuinely worthwhile. But when the net numbers come in below the 1% benchmark, or the payback period on needed repairs is long, selling often turns out to be the better math, even setting aside the time and effort landlording requires.

If you want help thinking through what your inherited home might be worth as a sale versus what the rental numbers might realistically look like, Real Time Home Buyers Metro Detroit is happy to talk it through. Call us at 248-509-5398.

This post is for general informational purposes only and isn't financial or tax advice. Please consult a financial advisor for guidance specific to your situation.