Rent Vs Sell Calculator
Decide what to do with a home you already own — and watch the section 121 exclusion clock, because letting it lapse can cost more than the entire rental advantage.
Rent Vs Sell Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- Highly sensitive to the appreciation and alternative return assumptions.
- Excludes income tax on rental profit and any capital expenditure.
- The value of retaining a below-market mortgage rate is discussed but not quantified.
In short: The tax clock usually decides this. Renting beats selling by 26,929.14 over ten years here — but losing the 250,000 exclusion would cost 39,862.20, which is 148.0262% of the entire advantage.
Formula
rent total = future equity + reinvested cash flow
sell total = net proceeds × (1 + alternative return)n
[('net proceeds', 'value less mortgage less selling costs'), ('section 121', 'two of the last five years of residence'), ('future equity', 'appreciated value less balance less selling costs'), ('alternative return', 'what the cash earns instead')]
Worked Example
- Compute net proceeds after mortgage and selling costs.
- Compound those proceeds at your alternative return.
- Model the rental: cash flow, paydown and appreciation.
- Compare the two totals at your horizon.
- Check the section 121 clock before acting on either.
A 525,000 home with a 268,000 mortgage has 257,000 of equity, but 37,511.78 of selling costs leaves 219,488.23 net. Invested at 7% for ten years that becomes 431,766.56. Renting at 2,850 produces 21,118.50 of NOI against 23,710.87 of debt service — cash flow of − 2,592.37 a year. Yet the house grows to 740,564.35 and the balance falls to 193,137.21, giving 494,513.07 of net equity; after the negative cash flow the total is 458,695.70, beating selling by 26,929.14. But the 167,488.22 gain is currently exclusion-sheltered, and losing that costs 39,862.20 — 148.0262% of the whole advantage.
Strengths & Limits Of This Model
Where this engine is strong
- Prices the section 121 clock against the rental advantage
- Treats selling as reinvestment rather than as doing nothing
- Compounds negative cash flow at its true opportunity cost
Where it stops
- Assumption-sensitive
- Pre-income-tax on rental profit
Practical Use Cases
Relocating for work
Deciding whether to keep the old home.
Inherited or second property
Testing rental against liquidation.
Low-rate mortgage
Weighing the value of a loan you cannot replace.
Approaching the 121 deadline
Timing a sale inside the three-year window.
Portfolio planning
Comparing the house against an alternative investment.
Methodology & Editorial Standards
Selling is modelled as net proceeds after mortgage and selling costs, compounded at the entered alternative return, because selling converts the asset rather than ending it. Renting is modelled as future net equity after appreciation, principal paydown and eventual selling costs, plus cash flow reinvested at the same alternative rate, so negative cash flow carries its own opportunity cost. The section 121 exclusion is then priced against the resulting advantage, because a lapsed exclusion frequently exceeds the entire operating benefit.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
Rent Vs Sell Calculator — 10 Expert FAQs
10 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
Should I rent out my house or sell it?
It depends on the numbers and, very often, on the tax clock. Renting captures appreciation, principal paydown and any cash flow; selling frees capital and locks in a gain that may currently be tax free. Run both and check the exclusion deadline before deciding.
What is the section 121 exclusion?
It allows you to exclude up to 250,000 of gain on the sale of a principal residence, or 500,000 filing jointly, provided you lived there for two of the five years before the sale. It is one of the most valuable provisions available to an individual taxpayer.
How long can I rent before losing the exclusion?
Roughly three years. The test requires two years of residence within the five years preceding sale, so once you have been out for three, the two-of-five test can no longer be met. Missing the deadline converts a tax-free gain into a taxable one.
Is depreciation recapture covered by the exclusion?
No, and this catches people out. Depreciation claimed during any rental period is recaptured at up to twenty-five per cent regardless of the exclusion. Even a short rental leaves a recapture liability that the exclusion does not touch.
Should I count my low mortgage rate?
Yes, and it is frequently decisive. A fixed rate well below current market is an asset you cannot repurchase, and selling surrenders it permanently. Where the gap is wide, that alone can justify keeping a property whose rental numbers look marginal.
What if the rental cash flow is negative?
Then you are funding the property from elsewhere every month, and that money has an opportunity cost which this calculation includes. Negative cash flow is only defensible if appreciation and paydown are large enough to outweigh it, and both are assumptions rather than facts.
What return should I assume on sale proceeds?
Something you would genuinely achieve, not a best case. Selling is not doing nothing — the cash goes somewhere and earns something — and using an unrealistically low alternative return is the most common way this comparison is rigged in favour of keeping the house.
Do I become a landlord overnight?
Effectively yes, with the tenant screening, maintenance calls, insurance changes and vacancy risk that involves. Converting a former home also means switching to a landlord insurance policy, and many mortgages have occupancy terms worth checking before you let.
How does the 1031 exchange interact with this?
A former residence converted to a genuine rental can eventually qualify for like-kind exchange treatment, which defers the gain rather than excluding it. The two provisions have different requirements and cannot simply be combined — this is worth specific advice.
What is the most sensitive assumption here?
The appreciation rate and the alternative return, in that order. A single percentage point on either can reverse the conclusion over a decade, which is why the tax deadline is often the more reliable basis for the decision than the projected returns are.