Renting Out Your House Instead of Selling? What Changes in Southeast Oakland County

Turning your home into a rental raises your property tax bill, may require a city license, and brings Michigan's security deposit and lease rules into play. Here is what applies before the first tenant moves in.

By BIG Real Estate · November 9, 2026

This fall, more Oakland County homeowners are asking whether to rent out their house instead of selling it. Realtor.com's county data, published through FRED, showed 3,761 active listings in October 2026, up 29.4% from a year earlier. In the same month, 42.4% of listings had a price reduction. Listings that don't sell by December head into the slowest months of the year. Some owners also don't want to give up a low mortgage rate when the 30-year average is near 7.2%.

Renting can be a reasonable choice. But your home becomes a different kind of property, both for tax purposes and in the eyes of your city, your lender and your insurer. This guide covers the costs and rules that apply in southeast Oakland County. It does not tell you whether renting beats selling. That depends on rents, repairs and your own plans, and we have not found reliable county-level rent data to report.

1. Your property tax bill goes up, but your taxable value stays capped

Michigan's principal residence exemption (PRE) exempts an owner-occupied home from up to 18 mills of school operating tax. It applies only to "the 1 place" where the owner has a "true, fixed, and permanent home" (MCL 211.7dd). Once you move out and rent the whole house to someone else, it no longer qualifies.

The law puts the duty on you. You must file a rescission with your city or township within 90 days after the home stops being your principal residence. If you don't, the penalty is $5 a day, up to $200 (MCL 211.7cc(5)). The bigger risk is an assessor who later finds a rented house still carrying the exemption. Assessors can deny the exemption for the current year and the three years before it, with interest. Under the statute, the assessor removes the exemption effective December 31 of the year you file the rescission. In practice, the higher rate usually appears on the following year's bills. Confirm the timing with your assessor.

Two options people often ask about don't help a full rental:

• Conditional rescission, which lets an owner keep the exemption on a former home for up to three years, requires the home to be unoccupied, for sale and not leased. If the home is leased, the law says the conditional rescission must be denied.
• Renting part of the home is different. If you still live there and rent less than 50% of the living space, the rented portion can remain part of your principal residence (MCL 211.7dd).

What stays the same: a lease is not a transfer of ownership, so your taxable value does not uncap. (Michigan's transfer rules treat only unusually long leases, more than 35 years, as transfers.) An owner who has been in the home for years keeps the low capped value. Only the millage rate changes.

How much? Using the 2025 certified rates from Oakland County's apportionment report:

• Troy (Troy School District): 36.0430 mills homestead vs. 51.4634 non-homestead, a difference of 15.42 mills.
• Royal Oak (Royal Oak Schools): 37.9610 vs. 54.9301, a difference of 16.97 mills.

Added tax per year after the exemption ends

• Taxable value $100,000: Troy about $1,540 · Royal Oak about $1,700
• $146,421 (2025 county average for improved residential): Troy about $2,260 · Royal Oak about $2,480
• $200,000: Troy about $3,080 · Royal Oak about $3,390

BIG Real Estate calculation: taxable value ÷ 1,000 × mill difference. Excludes administration fees and special assessments. 2026 rates may differ slightly.

Rates vary by city and school district, so check yours. Many city millage rate sheets list both the homestead and non-homestead totals. In Royal Oak, the example works out to roughly $200 a month in extra cost that the rent has to cover. We explain the exemption in more detail in our guide to Michigan's principal residence exemption.

2. Your city may require a rental license and inspection first

Most inner-ring Oakland County cities require landlords to register a single-family rental, and many require an inspection before a tenant moves in. These are the fees on the cities' own current forms and fee schedules, retrieved November 9, 2026:

• Royal Oak: $145 to register a single-family rental, under the city's 2024 rental registration ordinance. The city must have a local responsible party on file (application, guide).
• Berkley: $180 inspection plus $60 registration. The license runs for two years, and the inspection comes before the license is issued (application).
• Ferndale: $200 for the first unit, plus $100 for each additional unit, listed as "bi-annual rental" in the FY2027 fee schedule (fee schedule).
• Oak Park: $80 registration plus $150 inspection. Inspections are every two years or at each change of tenant, and a certificate of compliance is required before occupancy (form).
• Southfield: $40 application plus $300 for a new registration, then $215 to renew. The late fee is $1,000 a month (application).
• Madison Heights: $210 per single-family house for a landlord license. The license requires an inspection, and property taxes and water bills must be paid first. The city's checklist says the license lasts four years (checklist).
• Warren (Macomb): $200 for a single-family rental license, with an inspection (application, July 2026).

Birmingham, Beverly Hills, Pleasant Ridge, Huntington Woods, Hazel Park and Lathrup Village also run rental programs. Their fees should be confirmed directly with each city. We did not find a single-family rental registration in Troy (multi-family only), Rochester Hills, Bloomfield Township or Sterling Heights. Sterling Heights does require landlords to certify every year that working smoke and carbon monoxide alarms are installed (city page).

The cost is modest compared with the tax change. The inspection is what can take time: it is usually built on the property maintenance code, so items like handrails, smoke alarms, egress windows and electrical defects may need repair before you can lease. Schedule it before you promise a tenant a move-in date.

3. Check your mortgage and your insurance

Mortgage. The standard Fannie Mae/Freddie Mac Michigan mortgage (Form 3023, Section 6) requires the borrower to move in within 60 days of closing and live in the home for at least one year, unless the lender agrees otherwise or extenuating circumstances exist. If you bought recently, read that clause before you move out. After that first year, federal law bars a lender from using the due-on-sale clause just because you sign a lease of three years or less with no option to purchase, for homes with fewer than five units (12 U.S.C. 1701j-3(d)). A lease with a purchase option is a different matter.

Insurance. A standard homeowners policy is written for an owner-occupied home. The National Association of Insurance Commissioners warns that homeowners policies often exclude or limit coverage once a home produces rental income. It describes landlord policies as covering the structure, your contents, lost rent after damage and liability. Call your insurer before the lease starts, not after a claim.

4. Michigan's lease and deposit rules

Michigan landlord law applies to a one-house landlord just as it does to a large apartment owner. The rules that most often catch first-time landlords:

• Security deposits cannot exceed 1½ months' rent (MCL 554.602). They must be held in a regulated financial institution unless the landlord posts a bond with the Secretary of State (554.604).
• Within 14 days of the tenant taking possession, you must give written notice of your name and address, where the deposit is held, and the tenant's duty to send a forwarding address within 4 days of moving out (554.603).
• Move-in checklist: give the tenant two blank inventory checklists. The tenant returns one within 7 days (554.608).
• Move-out: mail an itemized list of damages within 30 days (554.609). Within 45 days, either return the balance or file suit. A landlord who doesn't comply waives the damage claims and is liable for double the amount retained (554.613).
• The lease must carry the Truth in Renting Act notice, in at least 12-point type, telling tenants that Michigan law sets rights and obligations for both parties (554.634).
• Homes built before 1978: before the lease is signed, federal rules require you to disclose any known lead paint, provide the EPA pamphlet and a lead warning statement, and keep signed copies for three years (EPA).

Fair-housing law applies to how you advertise and choose a tenant. Since April 2, 2025, Michigan's Elliott-Larsen Civil Rights Act has barred discrimination based on a tenant's lawful source of income, such as a housing voucher or veterans' benefits. That rule covers landlords who, with related entities, own five or more rental units in Michigan (MCL 37.2502). An owner renting one house is usually below that threshold, but other state and federal fair-housing protections still apply. Some cities' own ordinances may go further. If you are unsure, ask a real estate attorney before screening applicants.

5. If you might sell later, watch the three-year window

The federal capital gains exclusion on a home sale ($250,000, or $500,000 for most married couples) requires that you owned the home and lived in it for at least two of the five years before the sale (IRS Publication 523). If you lived there at least two years before moving out, renting it for up to about three years generally keeps that test within reach. Rent it longer and the exclusion can be lost entirely.

Even if you qualify, the part of the gain equal to the depreciation allowed or allowable on the rental can't be excluded, whether or not you actually claimed it. It is taxed when you sell. Talk with a tax professional before you sign a lease, not when you list the house again.

What this means if you're deciding now

Renting out a home in southeast Oakland County has a fixed cost that many owners overlook. For a home with a taxable value between $100,000 and $200,000 in Troy or Royal Oak, it adds about $1,500 to $3,400 a year in property tax, plus a city license and inspection in most inner-ring cities. You also take on legal duties that start before the tenant moves in. None of that makes renting a bad idea. It means the rent has to cover more than the mortgage payment.

A practical order of operations:

1. Find your taxable value on your latest assessment notice or tax bill, and look up the homestead and non-homestead rates for your city and school district.
2. Call your city's building or rental department about registration, inspection and lead times.
3. Read the occupancy clause in your mortgage, and call your insurer about a landlord policy.
4. Use a Michigan-compliant lease with the Truth in Renting notice, a deposit notice and checklists.
5. File the PRE rescission within 90 days of moving out.
6. Note the date you moved out. Three years from it is roughly when the home-sale tax exclusion starts to slip away.

If you're weighing a sale against a rental, it also helps to know what your home would sell for this winter. Our fall pricing guide covers how sellers are positioning homes in this market.

This article is general information, not legal, tax or insurance advice. Rules and fees change; confirm current requirements with your city, assessor, lender, insurer and a qualified professional. Fees listed are from official city documents retrieved November 9, 2026. Tax rates are 2025 certified millage from Oakland County's apportionment report.