Should I Sell My House or Rent It Out? Complete Calculator Guide for 2026

You are moving to a new city. Your current home is worth $600,000, you owe $350,000 on the mortgage, and comparable rentals go for $3,200/month. Do you sell or rent it out?

Most people guess. Some listen to a friend who became a landlord. A few ask a realtor who has a clear incentive to sell. Almost nobody runs the actual numbers.

The decision is not about what feels right. It is about cash flow, taxes, opportunity cost, and your tolerance for being a landlord. This guide walks through the math nobody tells you and shows you how to use the Should I Sell My House Calculator to compare every scenario with real numbers.

The Five Scenarios Compared

The calculator models five distinct paths when you relocate:

1. Keep - Stay in your current home (baseline scenario)
2. Sell & Rent - Sell now, rent elsewhere, invest proceeds
3. Sell & Buy - Sell current home, buy a new one
4. Rent Out & Rent - Convert to rental property, rent elsewhere
5. Rent Out & Buy - Keep as rental, buy a new primary residence

Each scenario produces a different net worth outcome over 5 to 30 years. The winner depends on home appreciation, rental cash flow, tax treatment, and investment returns.

The Math Nobody Tells You About Being a Landlord

Your property manager says you can rent your home for $3,200/month. That sounds like $38,400 per year. But here is what it actually costs:

Typical Landlord Costs (Annual)

You are not making $3,200/month. You are losing $1,457/month before tax benefits.

This is where most first-time landlords fail. They underestimate vacancy, maintenance, and capital expenditures. They assume 100% occupancy and zero major repairs. Then reality hits: the HVAC dies ($12,000), the tenant moves out mid-lease ($3,000 in lost rent), or the roof needs replacement ($20,000).

The question is not whether you can rent your home. The question is whether the rental income covers all costs, or whether you are betting on appreciation while subsidizing the property monthly.

NEW: Rental Cash Flow Breakeven Analysis

The calculator now includes a year-by-year rental cash flow breakeven analysis that shows exactly when your rental property becomes cash flow positive.

What It Shows:

1. Breakeven Timeline - The exact year and month when rental income exceeds all costs after tax benefits
2. Total Subsidy Required - How much cash you will need to cover negative cash flow before breakeven
3. Tax Deductions Applied - Mortgage interest, property tax, insurance, HOA, maintenance, management fees, and depreciation (27.5-year residential schedule)
4. After-Tax Cash Flow - Monthly cash flow before and after applying tax deductions to show the true cost

Example Scenario:

You rent out a $600,000 home with a $350,000 mortgage at 4%. Rental income is $3,200/month. All-in costs are $4,657/month (see table above).

• Year 1: Cash flow -$17,480, tax benefit +$8,200 (28% marginal rate), after-tax cost -$9,280
• Year 3: Cash flow -$15,800, tax benefit +$7,600, after-tax cost -$8,200
• Year 7: Cash flow -$11,200, tax benefit +$6,400, after-tax cost -$4,800
• Year 12: Cash flow +$1,800, tax benefit +$4,200, after-tax cash flow +$6,000 (breakeven!)

Total subsidy before breakeven: $86,400 over 12 years

Many landlords are shocked to learn they will subsidize their rental for 10+ years before it becomes cash flow positive. The calculator shows you the exact timeline so you can decide if you have the reserves and patience to get there.

If you do not have $86,400 sitting in a bank account earmarked for this rental, you are one bad tenant or major repair away from a forced sale at the worst possible time.

Tax Considerations: The $250k/$500k Exclusion You Might Lose

If you have lived in your home for 2 of the last 5 years and sell it as your primary residence, you can exclude up to $250,000 ($500,000 married filing jointly) of capital gains from federal income tax. This is one of the most valuable tax breaks in the U.S. tax code.

What Happens When You Rent Out Your Home:

Once you convert your primary residence to a rental property, the clock starts ticking. You have 3 years from the date you move out to sell and still qualify for the exclusion (as long as you lived there 2 of the prior 5 years). After that, you permanently lose the exclusion, and all future gains are taxed as investment property.

Real Example:

• Purchase price (2016): $400,000
• Current value (2026): $700,000
• Unrealized gain: $300,000

Option 1: Sell Now as Primary Residence

• Capital gains tax: $0 (under $500k exclusion for married couples)
• Net proceeds: $700,000 - $30,000 selling costs - $350,000 mortgage = $320,000

Option 2: Rent Out for 8 Years, Sell in 2034

Assume the home appreciates to $950,000 by 2034.

• Total gain: $550,000
• Depreciation taken: $80,000 (building portion over 8 years)
• Taxable gain: $550,000 (no exclusion, exceeded 3-year window)
• Federal capital gains tax (15% rate): $82,500
• Depreciation recapture (25% rate): $20,000
• State capital gains tax (assume CA at 9.3%): $51,150
• Total tax bill: $153,650

By renting out instead of selling in 2026, you paid $153,650 more in taxes. That is real money that could have been invested in diversified assets.

Key Insight: If you have significant unrealized gains and plan to sell within a few years, selling now as your primary residence can save tens of thousands in taxes. Every year you rent it out brings you closer to losing the exclusion permanently.

Depreciation Recapture: The Tax Bill You Forgot About

When you rent out your home, you must depreciate the building portion (not land) over 27.5 years for tax purposes. This is great while you own it because depreciation reduces your taxable rental income each year.

But when you sell, you must "recapture" all depreciation taken at a 25% federal rate plus state tax, even if you have no other gain.

Example:

• Home value: $600,000 ($480,000 building, $120,000 land)
• Annual depreciation: $480,000 ÷ 27.5 = $17,455/year
• Depreciation over 8 years: $139,640
• Depreciation recapture tax (federal): $139,640 × 25% = $34,910
• State recapture tax (CA): $139,640 × 9.3% = $12,987
• Total recapture tax: $47,897

This tax is mandatory and unavoidable. Even if you sell at breakeven or a loss, you still owe recapture tax on all depreciation taken. Many landlords forget this and are shocked by a $40k+ tax bill when they finally sell.

When Selling Makes Sense

Selling your home when relocating is the right move when:

1. Large Capital Gains + Short Timeline

If you have significant unrealized gains and might sell within 5-10 years, selling now preserves your $250k/$500k primary residence exclusion. Waiting until after you rent it out could cost $50k-150k in avoidable taxes.

2. Negative Cash Flow

If rental income does not cover all costs (mortgage, taxes, insurance, HOA, maintenance, vacancy, management, CapEx), you are subsidizing the rental while betting on appreciation. That is speculation, not investing. Selling provides immediate liquidity to invest in diversified assets with less risk.

3. Need for Liquidity

Down payment for a new home, emergency fund, paying off high-interest debt, or maxing out retirement accounts may be better uses of capital than tying it up in a single illiquid rental property.

4. Major Repairs Required

If your home needs a new roof, HVAC, foundation work, or other expensive repairs, selling "as-is" is easier than trying to rent a fixer-upper. Tenants will demand repairs, and you will be on the hook.

5. No Desire to Be a Landlord

Being a landlord means tenant screening, lease enforcement, maintenance coordination, eviction management, and legal compliance. If this sounds stressful, selling eliminates the burden entirely.

When Renting Out Makes Sense

Keeping your home as a rental property works when:

1. Strong Positive Cash Flow After All Costs

Rental income exceeds PITI, HOA, maintenance, vacancy, management, and CapEx by at least 20-30%. This creates a self-sustaining asset that generates income and appreciates without requiring monthly subsidies.

2. High Appreciation Market

You own in a high-demand area with strong long-term fundamentals (job growth, limited supply, good schools, population growth). Locking in today's price and mortgage rate could pay off significantly in 10-20 years.

3. Low Mortgage Rate Locked In

If you have a 3% mortgage and current rates are 7%, keeping that loan is valuable. Tenants pay down your low-rate mortgage while you benefit from the rate arbitrage.

4. Planning to Return

Relocating for a 2-3 year work assignment and planning to return? Renting out preserves your option to move back without buying and selling twice (and paying transaction costs twice).

5. Can Afford Two Housing Payments

Strong income, significant cash reserves (6-12 months for both properties), and the ability to qualify for a new mortgage while keeping the old one. Lenders typically want to see this level of financial strength before approving dual mortgages.

The 50% Rule for Rental Properties

A common rule of thumb: operating expenses (everything except mortgage principal) will consume approximately 50% of rental income.

Example:

• Monthly rent: $3,200
• Operating expenses (50% rule): $1,600
• Includes: property tax, insurance, maintenance, vacancy, CapEx, management
• Remaining for mortgage: $1,600

If your mortgage payment is $2,400/month, you are cash flow negative by $800/month ($9,600/year) even before accounting for capital expenditures like roof or HVAC replacement.

This rule helps you quickly estimate whether a rental property will be cash flow positive or require ongoing subsidies.

How to Qualify for Two Mortgages

If you want to keep your current home as a rental and buy a new primary residence, you will need to qualify for both mortgages simultaneously.

Lender Requirements:

1. Debt-to-Income Ratio (DTI): Total monthly debt payments (both mortgages, car loans, credit cards, student loans) cannot exceed 43-50% of gross monthly income
2. Rental Income Credit: Lenders typically only count 75% of rental income to offset the old mortgage (accounts for vacancy and expenses)
3. Cash Reserves: Expect lenders to require 6-12 months of reserves for both properties (PITI for both homes × 6-12 months in liquid assets)
4. Credit Score: Strong credit (740+) helps, especially when carrying multiple mortgages

Example:

• Old mortgage: $2,400/month
• New mortgage: $3,600/month
• Rental income: $3,200/month (lender credits 75% = $2,400)
• Net DTI impact: $2,400 - $2,400 + $3,600 = $3,600/month
• Required gross income: $3,600 ÷ 0.43 = $8,372/month minimum ($100,464/year)
• Required reserves: ($2,400 + $3,600) × 12 = $72,000 in liquid assets

Many homeowners are shocked to learn they cannot qualify for a new mortgage while keeping the old one, even with rental income covering the old payment. Run the numbers before you commit.

How to Use the Calculator

The Should I Sell My House Calculator models your net worth over 5-30 years under all five scenarios. It accounts for mortgage payoff, home appreciation, rental income, selling costs (typically 6-8%), capital gains tax, rent increases, investment returns, and opportunity cost of capital.

Step 1: Enter Current Home Details

• Home value (use recent comps, Zillow, or appraisal)
• Purchase price (for capital gains calculation)
• Mortgage balance and interest rate
• Property tax, insurance, HOA fees
• Estimated rental income (research Zillow, Rentometer, or ask local property managers)

Step 2: Enter New Home or Rent Details

• If buying: new home price, down payment, mortgage rate, property tax, insurance
• If renting: monthly rent, annual rent increases, renter's insurance

Step 3: Adjust Assumptions

• Home appreciation rate: National average is 3-4% long-term, but varies widely by market. Be conservative. Using 10% because your market was hot in 2024 is setting yourself up for disappointment.
• Investment return rate: 6-8% for diversified stock/bond portfolio is reasonable based on historical averages.
• Vacancy rate: Do not assume 0%. Budget 5-10% (about 1 month per year) even for great properties.
• Maintenance rate: 1-2% of home value annually is standard. A $600k home needs $6-12k/year for routine maintenance.

Step 4: Review Results

The calculator shows:

• Net worth by scenario over your chosen time horizon (5-30 years)
• Winner by year - which scenario produces the highest net worth each year
• Rental cash flow breakeven - year-by-year cash flow for "Rent Out" scenarios with tax deductions applied
• Capital gains tax impact - comparison of selling now vs. later

Step 5: Sensitivity Analysis

Change key assumptions and see how results shift. What if appreciation is only 2% instead of 4%? What if investment returns are 8% instead of 6%? What if rental income is 10% lower than you estimated?

The best decisions are robust across multiple scenarios, not dependent on best-case assumptions.

Real Example: When Renting Out Loses

Scenario:

• Current home value: $650,000
• Purchase price: $450,000 (2018)
• Mortgage: $400,000 at 3.5%, 25 years remaining
• Monthly mortgage payment: $2,000
• Property tax: $700/month
• Insurance: $150/month
• HOA: $250/month
• Maintenance: $800/month (1.5% of value)
• Estimated rent: $3,500/month
• You are buying a new home for $750,000

Monthly Cash Flow as Landlord:

• Rental income: $3,500
• Mortgage (PITI): $2,850
• HOA: $250
• Maintenance: $800
• Vacancy (1 month/year): $292
• Property management (10%): $350
• CapEx reserve: $400
• Total monthly cost: $4,942
• Monthly cash flow: -$1,442

You will subsidize $17,304/year to be a landlord. Over 10 years, that is $173,040 in negative cash flow.

Tax Deductions:

At a 28% marginal tax rate, your after-tax subsidy is about $12,500/year. Still a significant ongoing cost.

Alternative: Sell Now

• Sale price: $650,000
• Selling costs (7%): $45,500
• Mortgage payoff: $400,000
• Net proceeds: $204,500
• Capital gains: $200,000 ($650k - $450k)
• Capital gains tax: $0 (under $500k exclusion)

Invest $204,500 at 7% annual return:

• Year 10: $402,000
• Year 20: $791,000
• Year 30: $1,556,000

Rent Out for 10 Years, Then Sell

• Home value (year 10, 3% appreciation): $873,000
• Cumulative subsidy: $125,000 (after-tax)
• Depreciation taken: $100,000
• Sale proceeds (after costs): $417,000
• Capital gains tax: $63,450 (15% on $423k gain)
• Depreciation recapture: $25,000 (25% on $100k)
• Net proceeds after tax: $328,550

Sounds better until you account for the $125,000 subsidy you paid over 10 years. Your actual net is $203,550—less than if you sold in year 1 and invested.

Conclusion: In this scenario, renting out results in lower net worth than selling immediately, even with home appreciation. The negative cash flow subsidy and loss of the capital gains exclusion outweigh the benefits of holding the property.

Real Example: When Renting Out Wins

Scenario:

• Current home value: $500,000
• Purchase price: $350,000 (2015)
• Mortgage: $200,000 at 2.75%, 20 years remaining
• Monthly mortgage payment: $1,175
• Property tax: $400/month
• Insurance: $100/month
• HOA: $0
• Maintenance: $600/month (1.5% of value)
• Estimated rent: $3,000/month
• You locked in a low rate and are moving out of state for work

Monthly Cash Flow as Landlord:

• Rental income: $3,000
• Mortgage (PITI): $1,675
• Maintenance: $600
• Vacancy (1 month/year): $250
• Property management (10%): $300
• CapEx reserve: $350
• Total monthly cost: $3,175
• Monthly cash flow: -$175

Small negative cash flow, but manageable with tax benefits. After-tax cost is about $125/month ($1,500/year).

Hold for 15 Years, Then Sell

• Home value (year 15, 4% appreciation): $901,000
• Cumulative subsidy: $22,500 (after-tax, assuming breakeven by year 10)
• Mortgage payoff: $0 (paid off by tenants in year 20, but partial paydown)
• Remaining balance (year 15): $50,000
• Depreciation taken: $130,000
• Sale proceeds (after costs): $788,000
• Mortgage payoff: $50,000
• Capital gains tax: $82,650 (15% on $551k gain)
• Depreciation recapture: $32,500 (25% on $130k)
• Net proceeds: $622,850

Subtract $22,500 subsidy: $600,350 net.

Alternative: Sell Now, Invest Proceeds

• Sale price: $500,000
• Selling costs: $35,000
• Mortgage payoff: $200,000
• Net proceeds: $265,000
• Capital gains: $150,000 ($500k - $350k)
• Capital gains tax: $0 (under $500k exclusion)

Invest $265,000 at 7% annual return for 15 years: $732,000

Conclusion: In this scenario, selling and investing wins by about $130,000 over 15 years. The rental property appreciated well and had low negative cash flow, but the opportunity cost of capital (7% investment returns vs. 4% home appreciation + negative cash flow) tilted the outcome toward selling.

Change the assumptions (higher appreciation, lower investment returns, positive cash flow), and the rental property could win. This is why running the calculator with your specific numbers matters.

Should You Keep Your House If You Move Out of State?

Keeping your house as a rental when relocating out of state adds complexity:

1. Long-Distance Property Management: You will need to hire a property manager (10% of rent), and you will have limited ability to inspect the property, interview tenants, or coordinate repairs.
2. State Tax Implications: You may owe income tax in the state where the rental is located, even if you no longer live there. Some states require non-resident landlords to file returns and pay tax on rental income.
3. Dual Mortgage Qualification: If you are buying in your new state, you will need to qualify for both mortgages simultaneously (see DTI requirements above).
4. Emergency Reserves: You cannot drive over to fix a leak or handle an emergency. You need 6-12 months of reserves and a reliable local property manager.

When It Works: You have a low mortgage rate locked in, strong rental demand in the original market, positive cash flow after all costs including 10% management, and significant reserves.

When It Doesn't: Negative cash flow, weak rental market, no trusted local property manager, or inability to qualify for two mortgages.

Common Mistakes First-Time Landlords Make

1. Underestimating Vacancy

Assuming 100% occupancy is financial suicide. Even great landlords lose 1-2 months per year to tenant turnover, maintenance, or market weakness. Budget for it.

2. Ignoring Capital Expenditures

Roofs, HVAC systems, water heaters, and appliances do not last forever. Budget $200-400/month even if you do not spend it every month. These costs are lumpy but inevitable.

3. Overestimating Rental Income

Your home might not rent for as much as you think. Large homes in suburban areas, high HOA fees, and pet restrictions all reduce rental demand. Get quotes from local property managers before committing.

4. Forgetting About the Capital Gains Exclusion

Once you move out, you have 3 years to sell and still use your primary residence exclusion. After that, it is gone forever. If you have large gains, this can cost $50k-150k in avoidable taxes.

5. Not Running the Numbers

Most people decide based on emotion ("I love this house") or vague advice ("real estate always goes up"). Use the calculator to model every scenario with realistic assumptions. The right answer is in the data, not your gut.

Related Tools and Resources

• Should I Sell My House Calculator - Compare all 5 scenarios with your numbers
• Rent vs Buy Calculator - For first-time buyers deciding whether to rent or buy
• Mortgage Calculator - Calculate monthly payments, amortization, and payoff schedules
• Capital Gains Tax Optimizer - Optimize which investments to sell to minimize capital gains tax
• Rent vs Buy in 2026: Break-Even Checklist
• Mortgage Buydown vs Refinance vs Extra Payments

Final Checklist Before Deciding

Before you decide to sell or rent out your home, work through this checklist:

• Calculate true monthly rental cash flow including PITI, HOA, maintenance, vacancy, management, and CapEx
• Determine if you qualify for the $250k/$500k primary residence capital gains exclusion
• Estimate capital gains tax if you sell now vs. later
• Calculate depreciation recapture tax if you rent out and sell in the future
• Verify you can qualify for two mortgages if buying a new home
• Confirm you have 6-12 months of cash reserves for both properties
• Get rental income estimates from 2-3 local property managers
• Model all 5 scenarios in the calculator with conservative assumptions
• Run sensitivity analysis (what if appreciation is lower? vacancy higher? repairs more expensive?)
• Decide whether you are willing to be a landlord (tenant calls, evictions, legal compliance)

The decision to sell or rent out your home is one of the biggest financial choices you will make. Do not guess. Run the numbers, understand the tax implications, and make a data-driven decision.

Use the Should I Sell My House Calculator to compare every scenario with your real numbers. The answer is in the math, not the emotion.