As for raising the rent, such a tenancy would come under a state law known as Costa Hawkins, which allows you to raise rent to Market Rent at any time. However, you can't raise the rent beyond Market Rent as a way of forcing the tenant to vacate. That would amount to an unlawful constructive eviction and you could be used for wrongful eviction.
What is Market Rent? Well, ultimately if it was taken far enough, it is the price beyond what a jury in a law suit would find is market. So you want to do some homework so that you can support your opinion as to what market it. Try getting some comparables from craigslist or other "for rent" sources. You want to stay within a range of what other people in your area are asking for rent.
Whether to rent or not when you contemplate selling in the near future is always a difficult decision.
Jeff Woo, Esq.
Sedgwick, Detert, Moran & Arnold, LLP
Complex Rental Property Group
To avoid a wrongful eviction lawsuit you should make friends at the rent board. They will give you the most up to date infomrtion and can be very helpful if treated correctly. By that I mean with respect. I have stood and listened as they help both tenants and landlord with issues and they are big fans of being right. If you still have questions after getting information from them you really should sit down with an attorney.
Be sure you don't add an in-law or rent out an existing unwarranted space becasue the property will no longer be a sinigle family home. Legal -warranted or not it is then a multi-unit property and subject to rent control and eviction controls.