Rent vs Sell Calculator: Should You Keep Your Home or Sell It?

Deciding whether to keep your home as a rental or sell it comes down to three numbers: what you would walk away with today, what the house would earn each year as a rental, and what the tax bill looks like either way. This rent vs sell calculator framework walks through each one using illustrative figures you can swap for your own, so you can compare cash flow, taxes, and equity side by side.

Step One: What Would You Actually Net From Selling?

Start with your expected sale price, then subtract your loan payoff and the cost of selling. Selling costs (agent commissions, closing costs, and any repairs or staging) commonly run 5% to 8% of the price. For example, say your home would sell for $800,000, you owe $400,000, and selling costs are 6%, or $48,000. That leaves about $352,000 before taxes. That figure is the equity you would be giving up to keep the home, so it is the number the rental has to beat.

Step Two: What Would the House Earn as a Rental?

Start with annual rent, then subtract the costs most first-time landlords forget. Using the same illustrative home at $4,000 a month ($48,000 a year):

• Vacancy allowance at 5% (about 18 empty days a year): $2,400
• Property taxes at roughly 1.2% of value: $9,600
• Insurance (a landlord policy, not a homeowner policy): $2,400
• Maintenance reserve at 1% of value: $8,000
• Property management at 8% of collected rent: about $3,650

That is about $26,050 in costs, leaving roughly $21,950 in net operating income, which is rent minus operating costs, before any mortgage payment. If your principal-and-interest payment is about $22,900 a year, cash flow lands near break-even, around negative $1,000. The rest of the return comes from paying down the loan (about $7,000 in the first year on a $400,000 loan at 4%) and from appreciation, which is never guaranteed. A 3% gain would add about $24,000, bringing the total to roughly $30,000, or about 8.5% of the $352,000 you would have netted by selling. Treat that as an illustration, not a forecast: most of it is paper gain, not cash in your pocket.

Step Three: What Do Taxes Look Like Either Way?

If you sell, the federal home-sale exclusion lets you keep up to $250,000 of gain tax-free (or $500,000 for married couples filing jointly) if you owned and lived in the home for at least two of the last five years. Gains above that are taxed, and California taxes capital gains as ordinary income. If you rent the house for more than about three years after moving out, you can lose that two-out-of-five-year window.

If you keep it as a rental, your rent is taxable income, offset by expenses and depreciation, a yearly deduction for the wear on the building (not the land), spread over 27.5 years for residential rentals. The catch is depreciation recapture: when you eventually sell, the depreciation you claimed is taxed at up to 25% federally. Ask a CPA to run both scenarios with your actual numbers before you decide.

Step Four: Weigh What the Spreadsheet Misses

Numbers do not capture everything. A low-rate mortgage you could not replace today is worth more as a reason to keep the home than any line in the spreadsheet. On the other side, owning a rental means being ready to cover a $10,000 roof repair or several months of vacancy, and being comfortable with the time and legal responsibilities of being a landlord. If you would only keep the house because selling feels like a loss, that is a signal to look harder at the first step.

A Simple Test to Make the Call

Compare the rental’s total return (cash flow, loan paydown, and a modest appreciation estimate) with what you could earn by putting your net sale proceeds to work elsewhere, then subtract something for the effort and risk of being a landlord. Stress-test it by rerunning the numbers with 10% vacancy and no appreciation. If the rental still looks good and you can cover six months of expenses from savings, keeping it is reasonable. If the gap is thin, selling is usually the simpler choice.