Sell vs. Rent Calculator
Analyze whether you should sell your home or convert it into a rental property when you move.
Deciding whether to sell your primary residence or hold it as a rental property is one of the most critical wealth-building decisions a homeowner can make. This client-side simulator models both paths simultaneously on a pre-tax basis. It evaluates your net sale proceeds compounding in alternative index fund investments against a rental path that accumulates monthly tenant-funded cash flows, home appreciation leverage, and mortgage principal paydown. Compare your options over a custom timeline, keeping tax implications like Section 121 capital gains tax exclusions in mind, and download your full spreadsheet projection.
Parameters
Renting Wins
Advantage of $238,489 over 15 years.
0.1 Years
Rent beats Sell after Year 0.
$-353/mo
Deficit: Requires out-of-pocket funding.
Financial Projections
Projected Net Worth Advantage
Equity & Appreciation Compound
Over the projection timeline, your home value is modeled to grow from $450,000 to $810,425 due to compounding appreciation. This unlocks $360,425 in total asset appreciation.
Alternative Return Opportunity
By selling and investing the net proceeds of $123,000 immediately, your stock portfolio grows to $390,177. This is the opportunity cost baseline your rental must beat.
Year-by-Year Comparison
Annualized Amortization and Net Worth Accumulation
| Year | Home Value | Mortgage Bal. | Annual Rent | Annual Cash Flow | Rent Net Worth | Sell Net Worth | Rent Advantage |
|---|---|---|---|---|---|---|---|
| Start | $450,000 | $300,000 | - | - | $123,000 | $123,000 | - |
| Yr 1 | $468,000 | $289,453 | $31,200 | $-4,415 | $145,980 | $132,840 | +$13,140 |
| Yr 2 | $486,720 | $278,532 | $32,136 | $-3,937 | $170,150 | $143,467 | +$26,683 |
| Yr 3 | $506,189 | $267,221 | $33,100 | $-3,447 | $195,577 | $154,945 | +$40,633 |
| Yr 4 | $526,436 | $255,509 | $34,093 | $-2,943 | $222,329 | $167,340 | +$54,989 |
| Yr 5 | $547,494 | $243,380 | $35,116 | $-2,426 | $250,480 | $180,727 | +$69,753 |
| Yr 6 | $569,394 | $230,819 | $36,169 | $-1,894 | $280,108 | $195,186 | +$84,922 |
| Yr 7 | $592,169 | $217,812 | $37,254 | $-1,347 | $311,295 | $210,800 | +$100,494 |
| Yr 8 | $615,856 | $204,342 | $38,372 | $-786 | $344,129 | $227,664 | +$116,464 |
| Yr 9 | $640,490 | $190,393 | $39,523 | $-209 | $378,702 | $245,878 | +$132,825 |
| Yr 10 | $666,110 | $175,948 | $40,709 | +$384 | $415,114 | $265,548 | +$149,567 |
| Yr 11 | $692,754 | $160,989 | $41,930 | +$993 | $453,470 | $286,792 | +$166,679 |
| Yr 12 | $720,464 | $145,499 | $43,188 | +$1,618 | $493,881 | $309,735 | +$184,146 |
| Yr 13 | $749,283 | $129,457 | $44,484 | +$2,260 | $536,465 | $334,514 | +$201,952 |
| Yr 14 | $779,254 | $112,844 | $45,818 | +$2,920 | $581,349 | $361,275 | +$220,074 |
| Yr 15 | $810,425 | $95,641 | $47,193 | +$3,597 | $628,666 | $390,177 | +$238,489 |
Spreadsheet Export
Download the complete monthly ledger containing appreciation steps, rent inflators, vacancy losses, and compounding reinvestment accounts.
Appreciation Leverage Asset
Renting out creates $238,489 more wealth, but you must subsidize a cash deficit of -$353/mo. Ensure you have the liquid reserves to support this leverage.
Did you know?
Under the IRS Section 121 rule, you can exclude up to $500,000 of home sale capital gains from taxes, but you lose this exemption if the home is rented for more than 3 years.
Frequently Asked Questions
Understand the taxes, returns, and logistics of converting your home to a rental.
1How do I decide between selling my home and renting it out?
Evaluate three main dimensions: cash flow (does monthly rent cover PITI, management, maintenance, and vacancy?), long-term wealth growth (does property appreciation + principal paydown beat investing in stocks?), and lifestyle (are you ready to manage tenants or pay 8-10% for a property manager?).
2What is the 2-out-of-5-year capital gains tax rule (Section 121)?
In the United States, if you sell a home that was your primary residence for at least 2 of the last 5 years preceding the sale, you can exclude up to $250,000 (single) or $500,000 (married filing jointly) of capital gains from income tax. Generally, if you rent out the home for more than 36 months, you may no longer meet this 2-out-of-5-year residency test, which can disqualify you from the exclusion, subject to IRS exceptions. (Note: This simulator operates on a pre-tax basis and does not calculate capital gains or tax exclusions directly; please factor these tax changes into your analysis manually.)
3What is depreciation recapture tax and how does it work?
When you rent out a property, the IRS expects you to depreciate the building's value over 27.5 years, deducting it from your rental income to lower taxes. However, when you sell the property, you must pay a 'depreciation recapture' tax of up to 25% on the cumulative depreciation deductions you took (or should have taken), even if you did not actually claim them on your tax return. (Note: This simulator executes a pre-tax comparison and does not calculate depreciation basis, annual deductions, or recapture taxes.)
4How does my current mortgage interest rate influence this decision?
A low mortgage rate (e.g. 2.5% to 4%) is a valuable financial asset. If your monthly cost of debt is low, your tenant will cover your interest and pay down your principal much faster. This makes renting out highly lucrative. If your interest rate is high, debt service will consume most of your rent, making selling and investing the equity more attractive.
5What rental operating expenses must I expect?
A common mistake is neglecting non-mortgage landlord costs. You must model: 1. Vacancy Rate (typically 5% of gross rent), 2. Annual Maintenance/CapEx (typically 1% of property value), 3. Property Management (8-10% of gross rent), and 4. Supplemental Landlord Insurance and local property tax adjustments.
6Is it better to invest in the stock market or physical real estate?
Stocks offer pure passivity, absolute liquidity, and historical index returns of 8-10% with no overhead or liability. Real estate offers leveraged appreciation (e.g. a 3% gain on a $400k home is a $12k return on much less cash down), tax advantages, and monthly cash flow, but is highly illiquid and demands active management.