Rent or Sell My House Calculator

How to use the rent vs sell calculator

The tool needs:

• Home value, what it would sell for today.
• Mortgage balance and monthly payment (principal and interest).
• Expected rent, based on similar rentals nearby.
• Monthly costs as a landlord: property tax, landlord insurance, repairs, a capital expense reserve, vacancy and management.
• Selling costs, as a percentage of the sale price.
• Appreciation, a yearly percentage you’re willing to bet on.
• Years you’d keep it as a rental before selling.

It shows your net position both ways: cash in hand if you sell now, and equity plus accumulated cash flow if you rent for the period and then sell.

The formulas

Sell now:

• Net proceeds = home value - selling costs - mortgage balance

Rent, then sell:

• Future value = home value x (1 + appreciation) ^ years
• Net at the end = future value - selling costs on that value - remaining mortgage balance + total cash flow over the period
• Monthly cash flow = rent - mortgage payment - monthly costs

A worked example

Your house is worth $350,000. You owe $220,000 at 3.5%, with a $1,450 principal-and-interest payment. Similar homes rent for $2,400, and your landlord costs come to $800 a month. You’d use 8% for selling costs and 3% a year for appreciation, and you’re looking at five years.

Sell now: $350,000 - $28,000 - $220,000 = $102,000.

Rent for five years:

• Monthly cash flow: $2,400 - $1,450 - $800 = $150, or $9,000 over 60 months
• Value in five years: $350,000 x 1.03^5 = about $405,750
• Selling costs at 8%: about $32,460
• Mortgage balance after 60 more payments: about $167,080
• Net at the end: $405,750 - $32,460 - $167,080 + $9,000 = about $215,200

Renting looks better by about $113,000, but compare it fairly. If you sold now and invested the $102,000 at 5% a year, you’d have about $130,180 after five years. Renting still comes out ahead in this case, by roughly $85,000 before taxes, and most of that comes from appreciation and the low-rate loan paying down.

What a good result looks like

A good case for renting has positive monthly cash flow with realistic costs, a few months of expenses in reserve, and a lead that holds up if you cut appreciation to 1% or 2%. If renting only wins at 4% or more appreciation a year, you’re making a bet on the market, not on the rental.

A cheap mortgage is often the strongest reason to keep a house. A 3.5% loan is hard to replace, and its low payment is what makes the cash flow work here.

Limits and caveats

• Taxes aren’t modeled. Under the home-sale exclusion, you can exclude up to $250,000 of gain ($500,000 for most joint filers) if you owned and lived in the home for two of the five years before the sale. Rent it for more than three years and you lose that. Depreciation taken while it’s a rental is recaptured and taxed at up to 25% even if the exclusion applies.
• Insurance changes. You’ll need a landlord (dwelling) policy instead of homeowners, which often costs more.
• Your time counts. Self-managing takes evenings and weekends. If you’d hire a manager, put the fee in monthly costs.
• Appreciation isn’t guaranteed. Run a 0% scenario too.