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.
Rent vs. Sell Inputs
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.
Sell vs. Rent: Net Worth Projection
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.
Sell vs. Rent: 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.
Sell vs. Rent: The Complete Guide
Evaluate whether to convert your home into a rental or sell and invest the proceeds.
1The Three Dimensions of the Decision
Deciding whether to sell or rent out your home when you move is not just a numbers game. There are three dimensions to weigh:
Cash Flow
Will monthly rent cover your mortgage payment, property taxes, insurance, HOA dues, property management, maintenance, and vacancies? If you are negative every month, the long-term appreciation and equity build-up need to be large enough to justify the monthly drain.
Wealth Growth
Compare two paths over a 10 to 30 year horizon. Path A: keep the home, let the tenant pay down your mortgage, and capture property appreciation. Path B: sell now, invest the net proceeds in stocks, and let compounding do the work. The calculator above runs both projections side by side.
Lifestyle
Being a landlord means dealing with tenants, maintenance calls, and vacancies. You can hire a property manager (costs 8% to 10% of gross rent), but that eats into returns. Selling and investing in stocks is passive. You never get a 2 AM call about a broken water heater from an index fund.
The Opportunity Cost Baseline
When you sell, you walk away with cash. Roughly: Home Value minus Selling Costs minus Remaining Mortgage Balance. That is your net proceeds. If you invest that cash in a diversified stock portfolio, historical returns suggest 8% to 10% annual growth with zero effort and complete liquidity.
This is your baseline. For renting to win financially, the rental path needs to produce a higher net worth than selling and investing. The calculator uses the stock return rate you set (default 8%) to model the sell path. If your rental projections fall below that, selling is the stronger financial move.
The Real Costs of Being a Landlord
A common mistake is comparing rent to the mortgage payment and calling it profit. Actual rental operating costs are higher. You need to budget for:
- Vacancy. Expect the unit to be empty roughly 5% of the time. That is about 3 weeks per year with no rent coming in.
- Maintenance and capital expenditures. Budget about 1% of the property value per year. On a $400,000 home, set aside $4,000 annually for repairs, replacements, and upkeep.
- Property management. If you hire a manager, they charge 8% to 10% of gross monthly rent. On $2,500 rent, that is $200 to $250 per month off the top.
- Insurance and taxes. Landlord insurance costs more than homeowner insurance. Property taxes may increase if you lose a homestead exemption. Check with your county assessor.
All four of these are adjustable sliders in the calculator. Crank them up to see how thin the margins can get in a realistic scenario.
Why Your Mortgage Rate Changes the Math
A low mortgage rate is a financial asset. If you locked in at 2.5% to 4%, you are borrowing money far below what anyone can get today. When you rent out the home, your tenant covers that cheap debt. The interest gets paid by them, and the principal paydown builds your equity month after month. You cannot recreate this with a new investment property at today's rates.
If your mortgage rate is high, the equation flips. A 6.5% or 7% rate means most of the rent gets eaten by interest. There is less principal paydown, and the monthly cash flow shrinks. At high rates, selling and putting the equity into stocks often comes out ahead.
2Tax Traps to Watch For
Losing the capital gains exclusion (Section 121)
When you sell your primary home, you can exclude up to $250,000 of capital gains if single, or $500,000 if married filing jointly. To qualify, you must have lived in the home for at least 2 of the past 5 years. If you rent it out for more than 3 years, you lose this exclusion. The tax bill on a long-held, appreciated home can be significant.
Depreciation recapture
When a home becomes a rental, the IRS requires you to depreciate the building's value over 27.5 years. You deduct this depreciation from your rental income each year. But when you sell, you pay depreciation recapture tax (up to 25%) on the total depreciation you claimed or should have claimed. This matters even if you never actually took the deduction.
The calculator runs projections on a pre-tax basis. It does not factor in capital gains exclusions, depreciation deductions, or recapture taxes. If your holding period approaches or exceeds 3 years, account for these tax costs separately. If you need to pull equity out of the home before selling, use our HELOC vs. Refi calculator to evaluate your options.
3How to Use This Calculator
Enter your home value, selling costs, remaining mortgage balance, interest rate, property taxes, insurance, expected monthly rent, and a few assumptions about vacancies and maintenance. The calculator runs two parallel projections:
- The sell path: net proceeds invested in stocks, compounding at the return rate you set
- The rent path: monthly rental cash flow plus appreciation and equity build-up over time
- A year-by-year comparison table showing how net worth diverges between the two paths
- A clear indicator of which option comes out ahead over your chosen time horizon
All calculations happen in your browser. No data gets sent anywhere. Adjust the sliders to test different rent prices, vacancy rates, and stock return assumptions. Small changes in these numbers can flip the recommendation.
How We Calculate This
The sell path: net proceeds (home value minus selling costs minus mortgage balance) are projected forward using compound annual growth at the stock return rate you set. The rent path: monthly rental cash flow (rent minus PITI, management, maintenance, and vacancy) is tracked year by year, with the property appreciating and the mortgage balance declining through normal amortization.
The net worth comparison is pre-tax. It does not account for IRS Section 121 capital gains exclusion or depreciation recapture (IRS Pub 527). If your holding period approaches 3 years, factor these tax costs separately. All calculations run in your browser. No data leaves your device.
Related Tools
Sell vs. Rent 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.