Should I Sell My House?

When to Sell vs Rent Out Your House

Deciding whether to sell your house or keep it as a rental property is one of the biggest financial decisions you'll make when relocating. The right choice depends on your cash flow, tax situation, time horizon, and tolerance for landlord responsibilities. This calculator helps you compare net worth outcomes for five scenarios: keeping your home, selling and renting, selling and buying again, renting out your current home while renting elsewhere, or renting out your current home while buying a new one.

5 Questions to Ask Before Deciding

1. Do I qualify for the primary residence capital gains exclusion? If you've lived in your home for 2 of the last 5 years, you can exclude up to $250,000 ($500,000 married) of capital gains tax-free when selling. Once you convert your home to a rental property, you lose this exclusion permanently. If you have significant gains and plan to sell within a few years, selling now saves tens of thousands in taxes.
2. Will the rental cash flow positive? Calculate your true monthly cost: mortgage + property tax + insurance + HOA + maintenance (1-2% of home value annually) + vacancy (assume 1 month per year) + property management (8-10% of rent if hiring). If rental income doesn't cover all of this, you're betting on appreciation while subsidizing the rental monthly—a risky strategy if you also need to buy or rent elsewhere.
3. Can I afford two housing payments? If you're buying a new home, lenders will count your old mortgage against your debt-to-income ratio. They'll only credit 75% of rental income (to account for vacancy). You'll also need 6+ months of cash reserves for both properties. Many homeowners are shocked to find they can't qualify for a new mortgage while keeping the old one.
4. Am I willing to be a landlord? Being a landlord means midnight maintenance calls, tenant screening, evictions, legal compliance, and capital expenditures (roof, HVAC, appliances). Even with property management, you're responsible for major decisions and capital reserves. If you're moving out of state, add 10% property management fees and accept that you'll have limited control.
5. Is my home a good rental property? Great rental properties have strong rental demand, rental income that covers all costs plus a cushion, low crime, good schools (family renters are more stable), and appreciation potential. If your home is in a weak rental market, has expensive HOA restrictions on rentals, or requires major repairs, it may not be worth keeping as a rental.

When Selling Makes Sense

• You have large capital gains: Use your $250k/$500k primary residence exclusion before it's gone. Example: You bought for $300k, it's now worth $700k. Sell now and pay $0 in capital gains tax. Rent it out for 3 years and sell later, you'll owe ~$60-80k in federal and state capital gains tax on the $400k gain.
• Cash flow would be negative: If your monthly costs exceed rental income, you're subsidizing the rental while hoping for appreciation. That's speculation, not investing. Selling provides liquidity to invest in diversified assets.
• You need liquidity: Down payment for a new home, emergency fund, paying off high-interest debt, or investing in retirement accounts may be better uses of capital than tying it up in a single rental property.
• The home requires major repairs: Selling "as-is" or with deferred maintenance is easier than trying to rent a fixer-upper. Tenants will demand repairs, and you'll be on the hook.
• You don't want to be a landlord: If the thought of tenant calls, evictions, and property management stresses you out, selling eliminates this burden entirely.

When Renting Out Makes Sense

• Strong positive cash flow: Rental income exceeds all costs (PITI, HOA, maintenance, vacancy, management) by at least 20-30%. This creates a self-sustaining asset that generates income and appreciates.
• High appreciation market: You're in a desirable area with strong long-term fundamentals (job growth, limited supply, good schools). Locking in today's price and mortgage rate could pay off in 10-20 years.
• Low mortgage rate: If you have a 3% mortgage locked in and current rates are 7%, keeping that loan is valuable. Tenants pay down your low-rate mortgage while you benefit from the rate arbitrage.
• You plan to return: Relocating for a 2-3 year work assignment and planning to move back? Renting out preserves your option to return without buying/selling twice.
• You can afford two housing payments: Strong income, significant cash reserves, and the ability to qualify for a new mortgage while keeping the old one. Lenders typically want 6-12 months of reserves.

Tax Considerations: Primary Residence vs Rental Property

Capital Gains Exclusion (Primary Residence): If you sell your primary residence after living there 2 of the last 5 years, you can exclude up to $250,000 ($500,000 married filing jointly) of capital gains from federal income tax. This is one of the best tax breaks in the U.S. tax code.

What Happens When You Rent Out: Once you convert your home to a rental, 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 lose the exclusion permanently, and all future gains are taxed as investment property at federal capital gains rates (0%, 15%, or 20% depending on income) plus state capital gains tax.

Depreciation Recapture: When you rent out your home, you must depreciate the building portion (not land) over 27.5 years for tax purposes. This reduces your taxable rental income each year, which is great—but when you eventually sell, you must "recapture" all depreciation taken at a 25% federal rate plus state tax. Example: You depreciated $50,000 over 10 years. When you sell, you'll owe ~$12,500 in federal depreciation recapture tax plus state tax, even if you have no other gain.

Real Example: You bought a home for $400k in 2015. It's now worth $700k (2026). If you sell now as your primary residence, you pay $0 in capital gains tax (assuming married, $300k gain is under the $500k exclusion). If you rent it out for 5 years and sell in 2031 when it's worth $850k, you'll owe capital gains tax on $450k gain (~$67,500 federal at 15% rate + state tax) PLUS depreciation recapture on ~$60k of depreciation taken (~$15,000 federal). Total tax bill: $82,500+ federal plus state, versus $0 if you sold in 2026.

Cash Flow Reality Check: What It Actually Costs to Be a Landlord

Many first-time landlords dramatically underestimate the true cost of ownership. Here's what to budget:

• Mortgage, property tax, insurance (PITI): Your fixed costs. These don't go away even if the property is vacant.
• HOA fees: If applicable, typically non-negotiable and increase annually.
• Maintenance and repairs: Budget 1-2% of property value annually. A $500k home needs $5-10k/year for routine maintenance (HVAC, plumbing, appliances, landscaping, pest control).
• Vacancy: Assume 5-10% vacancy (1 month per year). Tenant turnover, time to find new tenants, and market downturns all create vacancy periods where you earn $0 but still pay all costs.
• Property management: 8-10% of monthly rent if you hire a manager. Worth it if you're out of state or don't want to deal with tenant calls. If you self-manage, factor in the value of your time.
• Capital expenditures (CapEx): Big-ticket items like roofs ($15-30k), HVAC replacement ($8-15k), water heaters ($1-2k), appliances, flooring, etc. Budget $200-400/month even if you don't spend it every month—these costs are lumpy but inevitable.
• Landlord insurance: 15-25% more expensive than homeowner's insurance. Covers liability, property damage, and loss of rental income.
• Legal and eviction costs: Hope you never need it, but budget for the possibility. Evictions can cost $3-10k in legal fees, lost rent, and property damage.

The 50% Rule: A common rule of thumb is that operating expenses (everything except mortgage principal) will eat up ~50% of your rental income. So if you collect $3,000/month in rent, expect $1,500 to go toward property tax, insurance, maintenance, vacancy, CapEx, and management, leaving $1,500 to cover your mortgage payment. If your mortgage is $2,000/month, you're cash flow negative by $500/month—a $6,000/year subsidy just to hold the property.

Rental Cash Flow Breakeven Analysis (New!)

When you choose to rent out your current home, our calculator now includes a detailed year-by-year rental cash flow breakeven analysis that shows:

• When you'll break even: The exact year and month when your rental property becomes cash flow positive after accounting for all costs and tax benefits.
• Total subsidy before breakeven: How much money you'll need to subsidize the rental property before it becomes self-sustaining.
• Tax deductions included: Mortgage interest, property tax, insurance, HOA fees, maintenance costs, property management fees, and depreciation (27.5-year schedule for residential rental property).
• After-tax cash flow: Shows monthly cash flow both before and after applying tax benefits, giving you a realistic picture of what it actually costs to be a landlord.
• Year-by-year timeline: Visualize how rental income increases with annual rent growth while mortgage interest decreases as you pay down principal, eventually reaching positive cash flow.

This analysis helps you answer critical questions: How much will I need to subsidize this rental? When will it become cash flow positive? Are the tax benefits worth the negative cash flow? Many landlords are surprised to learn they'll need to subsidize their rental for 5-10 years before it becomes profitable—our calculator shows you the exact timeline so you can plan accordingly.

How to Use This Calculator

This calculator models your net worth over 5-30 years under different scenarios. It accounts for mortgage payoff, home appreciation, rental income, selling costs (typically 6-8% of sale price for realtor commissions and closing costs), capital gains tax, rent increases, investment returns on proceeds, and opportunity cost of capital.

Scenario Options:

• Keep: Stay in your current home. Net worth = home equity + investments.
• Sell & Rent: Sell now, rent elsewhere, invest the proceeds. Net worth = investments (no home equity).
• Sell & Buy: Sell current home, buy a new one. Net worth = new home equity + investments.
• Rent Out & Rent: Keep current home as rental, rent elsewhere. Net worth = current home equity + investments, minus carrying costs.
• Rent Out & Buy: Keep current home as rental, buy a new home. Net worth = current home equity + new home equity + investments. Requires strong cash flow and income to carry two mortgages.

Key Assumptions to Adjust:

• Home appreciation rate: National average is ~3-4% long-term, but varies widely by market. High-growth cities (Austin, Boise in 2020s) saw 10-20% annual gains, while some markets stay flat for years. Be conservative.
• Investment return rate: Historical stock market returns are ~10% nominal (7% real after inflation). If you're investing sale proceeds in a diversified portfolio, 6-8% is a reasonable assumption.
• Rental income: Research comparable rentals in your area (Zillow, Rentometer). Be honest—your house might not rent for as much as you think, especially if it's large, has high HOA fees, or is in a weak rental market.
• Vacancy rate: Don't assume 0% vacancy. Even great landlords experience turnover. Budget 1 month per year (8.3% vacancy) as a baseline.

Where the Data Comes From

• Wealth Planner: If you've set up your real estate and mortgage data in the Wealth Planner, we'll auto-fill your current home value, mortgage balance, property tax, insurance, and HOA fees. You can override any values.
• Account Profile: We pull your state, filing status, and available cash from your account profile to calculate capital gains tax and determine how much you have available for down payments or investments.
• Your Assumptions: Rent, appreciation rates, investment returns, and rental income are fully editable. Use local data and be conservative—optimistic assumptions lead to bad decisions.

Related Tools & Resources

• 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

Disclaimer: This calculator provides estimates for educational purposes only. It does not constitute financial, tax, or legal advice. Consult with a CPA, tax advisor, or financial planner before making major housing decisions. Tax rules are complex, and individual circumstances vary significantly.