Rent vs Sell Calculator

About the Rent vs Sell Calculator

When homeowners move, many face the same choice: sell the old house, or keep it and rent it out. Renting it out can build wealth through rent, mortgage paydown and rising prices, and the low mortgage rate many owners locked in years ago makes keeping the house tempting. Selling turns the equity into cash that can be invested elsewhere, free of tenants, repairs and vacancies. The right answer depends on the numbers.

This rent vs sell calculator compares the two paths over the same period. Path one sells now, pays the selling costs and mortgage, and invests the net proceeds at your chosen return. Path two rents the home out, pays the mortgage and running costs from the rent, invests any yearly cash flow, and sells at the end. It shows the wealth each path produces and which comes out ahead, before taxes.

How to Use the Rent vs Sell Calculator

Enter the home value, mortgage balance, mortgage rate and years left.

Enter the monthly rent, running costs as a percentage of rent, and yearly property tax and insurance.

Enter the home price growth, selling costs, return on invested money and years you would rent it out.

The Formulas

  sell now     = value × (1 − selling costs) − mortgage balance
  sell path    = sell now × (1 + return)^years
  cash flow    = rent × 12 × (1 − running costs) − tax and insurance − mortgage payments
  rent path    = sale later + yearly cash flows grown at the return
  sale later   = value × (1 + growth)^years × (1 − selling costs) − balance then

Step-by-Step Example

A 400,000 home with 250,000 owed at 4% over 25 years, rented at 2,500 a month for 5 years.

  sell now     400,000 × 0.94 − 250,000 = 126,000 → at 6% for 5 years = 168,616
  mortgage     1,319.59 a month; 217,762 left after 5 years
  cash flow    30,000 × 0.65 − 6,000 − 15,835 = −2,335 a year
  sale later   400,000 × 1.03^5 = 463,710 × 0.94 − 217,762 = 218,126
  rent path    218,126 − 13,163 (cash flows with growth) = 204,962
  verdict      renting comes out ahead by about 36,346

What Makes Renting Win or Lose

Three things work in favour of keeping the house: rent that covers most of the costs, a low mortgage rate being paid down by tenants, and steady price growth on a property bought with leverage. Against it: high running costs, low rent compared with the home's value, a high return available on invested cash, and selling costs paid twice if prices stall. Try lower appreciation or higher running costs to see how sensitive the result is. Small changes in growth rates can flip the answer over longer periods.

Running Costs

New landlords often underestimate costs. Allow for vacancy between tenants, routine repairs, larger replacements such as roofs, furnaces and appliances, property management fees if you will not manage it yourself, landlord insurance, and legal and accounting costs. A combined 35 to 50% of rent before mortgage, tax and insurance is a common budget. Owning a rental far from where you live usually means paying a manager.

Taxes

The calculator works before tax because tax depends on your circumstances. In the US, the biggest factor is usually the home-sale exclusion: if you lived in the home for at least two of the five years before selling, up to 250,000 of gain, or 500,000 for married couples, can be tax-free. Renting the home for more than three years before selling loses that exclusion. Rental income is taxable, but depreciation and expenses reduce it, and depreciation claimed is taxed when you sell. A tax adviser can model these effects for your situation.

Being a Landlord

The numbers are only part of the decision. Landlords deal with tenant screening, repairs, rent collection, local rental regulations and occasional disputes or evictions. Some owners enjoy it; others find the time and stress outweigh the returns. A property manager reduces the workload but costs a share of the rent.

Financing the Next Home

Keeping the old house can make buying the next one harder. Lenders count the existing mortgage in your debts, and may only count part of the expected rent as income until there is a rental history. If you need the equity for a down payment, selling may be the only practical option, whatever the long-run numbers say.

Insurance and Rules

A homeowner's policy does not cover a rental. You will need a landlord or dwelling policy, and possibly umbrella liability cover. Some homeowner associations restrict rentals, and many cities require rental licences, inspections or registration. Check these before deciding.

Trying Different Scenarios

Run the calculator with several sets of assumptions: lower and higher price growth, a longer or shorter rental period, and different returns on invested money. If renting only wins under optimistic assumptions, selling may be the safer choice. If it wins under most, keeping the house deserves a closer look, including the tax effects.

Selling Later

Selling costs are paid either way, but selling later pays them on a higher price. Agents, transfer taxes and repairs needed to sell a tired rental can also cost more after years of tenants.

Understanding Your Result

The headline says which path comes out ahead and by how much.

The sell now line shows net proceeds and what they grow to.

The rent then sell line shows the cash flow, the later sale and the total.

The mortgage line shows the payment and balance after the rental period.

When Should You Use This Calculator?

Use it when moving and deciding what to do with your current home.

Use it to test how rent, growth and costs change the decision.

Use it before talking to a tax adviser about the options.

Common Mistakes

Ignoring running costs. Repairs and vacancies add up.

Forgetting the tax exclusion. Renting too long can lose it.

Assuming prices always rise. Test lower growth rates.

Comparing cash flow only. Include equity and investment returns.