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Rent vs. Sell Calculator

If you RENT OUT your property, you'll have $21,355 more wealth in 5 years

Move the slider to see the change per year

Year

$14

Rent Out

$14

Sell Now

$14

Difference In Wealth

$14

Year Rental Income Mortgage Expense Other Costs Net Cash Flow House Value House Equity Wealth (Rent Out) Wealth (Sell Now) Difference in Wealth (Rent Out to Sell Now)

Disclaimer: This data is provided for informational purposes only. It is not to be relied upon as a guarantee of any future result. Consult a qualified professional before making any decisions.

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Interested in Speaking to a Property Management Expert?

Should I rent or sell my home?

This is one of the most pressing questions for homeowners who no longer plan to reside in their property. This decision is complex with many variables to consider. To help owners discover the long-term valuation of their decision, we created our rent vs. sell calculator for landlords.

This tool is designed to help you assess your financial outcomes in both long-term and short-term scenarios. The best part – it’s completely free to use!

Our rent vs. sell calculator for landlords factors in the value of your home, the price you paid for it, your mortgage, your home’s appreciation rate, and other important factors that will help you make a financial comparison of renting vs. selling your property. 

Table of Contents

How to use our rent vs. sell calculator

Deciding to rent vs. sell your property can be complex. To simplify this decision, our Rent vs. Sell Calculator considers a wide range of factors. Below is a detailed guide on how to use our free tool and interpret the results.

Step 1: Gather financial information about your property

To use our rent vs. sell calculator for landlords effectively, start by gathering financial information about your property. This includes: 

  • The current value of your property 
  • The original purchase price of your property 
  • Original and current mortgage details, including the original loan amount, your current mortgage balance, the interest rate, and your monthly mortgage payment 

Step 2: Evaluate your property’s current state

Other expenses considered in our analysis are expenses required to make your property ready for tenants (“make-ready costs”) and the cost of refurbishing your home now.

Make-ready costs

You might hear that make-ready costs are also sometimes called “rental turnover costs.” And that’s exactly what they are! These will be the expenses you incur to make your rental units ready in between tenants. For instance, you might need to clean, paint, perform minor repairs, fix appliances, repair damages, and check plumbing, electrical, and HVAC systems. As a landlord, you will be legally responsible for ensuring that your property is safe for tenants, and this can be very demanding! However, in some cases, you might find that most of the work can be done upfront (before your first tenant). This way, maintenance over time is usually easier to keep up with.

Refurbishing costs

Now, let’s discuss refurbishing costs. First, examine your property and determine whether it’s safe and habitable. Do you have smoke and carbon monoxide detectors? Do all doors and windows have working locks? Does your property have holes, water leaks, or pests? Are all of the appliances working? Is the plumbing in good condition? If you find that any of these things need to be upgraded, refurbished, or fixed, try to obtain an accurate estimate on how much you will spend to get it done. 

For a comprehensive list of what your responsibilities as a landlord would be, check out our article Rental Property Repairs: Landlord vs. Tenant Responsibilities. If you’ve never been a landlord before, that article will help you understand the maintenance and upkeep costs of renting your property.

Step 3: Input your details into the calculator

Once you have all your information, you will need to fill in the following: 

  • Monthly rent potential and appreciation rate: this is the rent you could charge and the annual increase in property value you expect. 
  • Mortgage details: Using precise values in these sections will ensure that you get an accurate result. 
  • Financials and costs: Include taxes, insurance, community charges, make-ready costs, refurbishing costs, and capital improvement costs. 

After inputting your details, our rent vs. sell calculator will provide you with a comprehensive financial analysis for renting vs. selling, considering both immediate and long-term projections. 

Step 4: Analyze your results for renting vs. selling

After entering your data, our free rent vs. sell calculator will provide an easy-to-read summary and a graph to visualize your wealth in your time horizon. You can adjust this time or “years to hold,” to make it as short or as long you’d like. The graph also contains a slider that you can move between years. Your wealth summary will automatically update as you adjust it. For more detailed information on financial projections for home equity, net cash flow, difference in wealth, etc., expand the navy box above the disclaimer.

Step 5: Consider personal factors to make an informed decision

At Good Life Property Management, we want you to have enough information as possible to make an informed decision. Even though our rent vs. sell calculator shows you the financial and practical projections of renting vs. selling your home, we encourage you to think beyond the numbers.

Lifestyle Considerations

As a landlord, you will be responsible for providing a safe home for tenants. If you choose to manage your own property, you will also be responsible for responding to maintenance requests in a timely manner, screening tenants, keeping up with payments, and much more. Hiring a property management company, on the other hand, could save you the time and hassle, so you can enjoy all the benefits of owning a rental property without having to stress over day-to-day management responsibilities.

If you’re looking for a reliable and trustworthy San Diego property management company or Orange County property management company, consider Good Life.

Immediate and future financial goals

Setting clear goals will set you up to make a strategic and sound decision. Do you have an immediate financial need? Selling your property can offer you a significant cash inflow and a one-time financial benefit to resolve your immediate financial needs. 

On the other hand, if you are financially stable now but are considering retirement planning or investing in more property, renting your property can lead to long-term wealth accumulation. In many cases, renting would provide a consistent passive income and healthy property value appreciation.

What is a good ROI in real estate?

In real estate, ROI is a measure used to evaluate the efficiency of your investment. Essentially, an ROI is an indicator of potential profit. 

While what is considered a “good ROI” can vary widely depending on the market conditions and location, the general rule of thumb is to aim for an ROI of 10% or more. In more competitive or high-demand areas like San Diego, you may want to consider aiming for a higher ROI.

Good Life Property Management can maximize your ROI potential by helping you with property management and getting the most profit from your rental. We also ensure that your property attracts the best tenants, and we can help you maintain a high occupancy rate and optimal rental income.

Schedule a call with our Orange County office or San Diego office today. 

Calculating your ROI

ROI in real estate is typically calculated by subtracting the total operating costs (cost of investment) from the total yearly income and dividing that number (your net gain) by the cost of investment.

ROI = (net profit - cost of investment) / cost of investment

As a homeowner, your cost of investment can include the purchase price, closing costs, and renovation expenses. Your net profit would be the selling price minus all of these costs and any outstanding mortgage amounts. 

For rental properties, we suggest that you consider the variables that could affect your property’s ROI, such as repair and maintenance expenses.

Pros and cons of selling your home

Selling a home is a major life event! To help you create a balanced perspective, here is a list of pros and cons of selling your home.

Pros of selling your home

  • Immediate financial gain
  • You can capitalize on financial market peaks 
  • Simplify your lifestyle 
  • Tax advantages if your home has been your primary residence for a certain amount of time

Cons of selling your home

  • Transaction costs can add up
  • Market risks can cause you to end up selling your home for less than its potential value 
  • If the market continues to appreciate, you could miss out on additional ROI

Pros and cons of renting your home

Renting out your home is a great way to build long-term wealth. However, it can also come with its own set of challenges and responsibilities.

Pros of renting your home

  • You can set yourself up for a steady income stream 
  • Gain a higher ROI over time with property value appreciation 
  • Tax reductions related to property ownership as a landlord 
  • You can hold onto your property for a few more years and sell later 

Cons of renting your home

  • Landlord responsibilities can be time-consuming 
  • Tenants can be unpredictable 
  • Rental income can fluctuate based on local market conditions 
  • Renting out your home requires initial investments like make-ready repairs 

To mitigate the hassle and heading of rental management, consider hiring a property management company

Costs to sell your property

Selling your home can require expenses that can greatly affect your net proceeds from selling. Here’s a breakdown of the typical costs associated with selling a property:
  • Closing costs: Homeowner’s insurance and escrow fees
  • Holding costs: This includes property taxes, insurance, and maintenance while you try to sell your home.
  • Home reparation costs and staging: To get your property ready for sale, you will need to maximize your home’s value. This process might require that you invest in repairs that make it more appealing to buyers. Staging will require hiring a professional stager to enhance your home’s appeal and possibly even increase your selling price. In some cases, you might even want to invest in landscaping.
  • Agent commission: In San Diego, the agent commission fee ranges from 5 to 6% for real estate agents to help you sell your property.
  • Pre-sale inspection and appraisal: To check for any potential issues of your home, you could conduct a pre-sale inspection. While this is an added expense, it can help prevent headaches and delay selling later on.
  • Moving expenses: Selling your home will require moving out everything!
  • Capital gains tax: If your home has appreciated in value since you bought it, you might need to pay a tax on your sale’s profit. However, in California, the Primary Residence Exclusion allows you to exclude up to $250,000 of your profit from capital gains tax (or $500,000 if married) if you have lived in your home as your primary residence for at least two out of the last five years before selling.

Costs to rent your property

Renting out your home can definitely be a lucrative option in the long-term, but there are several costs that you should consider. Here’s an overview:
  • Make-ready costs: Upgrades and maintenance are required in the beginning and in between tenants.
  • Professional inspections: Annual inspections are required to maintain a safe home. The inspections should look for any potential issues related to plumbing, electrical, or the structural integrity of the property.
  • Legal and administrative fees: Consulting with property management companies or lawyers to set up rental agreements can incur extra costs.
  • Property management fees: These services will help relieve the burden of day-to-day operations and tenant management but you should expect to pay a fee.
  • Maintenance and repairs: While regular maintenance is generally easy to keep up with, you should be prepared for occasional larger and more costly repairs.
  • Insurance: Although landlord insurance is not legally required in California, it is highly recommended to protect you from unexpected situations and risks.
  • Vacancy costs: When you have an unoccupied space, you will have to deal with the financial burden of lost income.
  • Tenant screening: To choose the best tenants, we advise you background and credit checks.
  • Licenses/Permits: Some cities might require you to get a license to rent out units
  • Taxes: Your rental income will be taxable and complicated, which could increase your accounting costs.

Important considerations

When deciding between renting and selling your home, we recommend that you focus on several important factors. 

First, legal compliance is very important. In becoming a landlord, you will need to navigate a complex landscape of state and local regulations such as fair housing laws, safety standards, and specific licensing requirements. Understanding these laws will prevent you from incurring penalties. Financial planning also plays an important role. As a landlord, you must manage expenses like licenses, property taxes, maintenance costs, and emergency repairs.

Understanding how your lifestyle will change as a landlord is another key consideration. Ensuring that your property meets health and safety standards is key to avoiding issues with your tenants and potentially with the state. This will include conducting regular inspections and fast repairs for your tenants.

You should also think about maintaining a positive relationship with your tenants, as this can greatly affect your rental operations. You should be ready and consistent with effective communication, a clear lease agreement, and maintaining professional boundaries and respect for your tenants.

FAQs

How does the Rent vs. Sell Calculator work?

The rent vs. sell calculator considers a number of financial factors, including the amount you paid, the current worth of your property, the terms of your mortgage, the rate of appreciation of your house, and other expenses. It compares the financial results of renting versus selling your property by analyzing these variables.

What information do I need to use the Rent vs. Sell Calculator?

In order for the calculator to produce the most accurate results, you will need:

  • The current value of your property.
  • The original purchase price.
  • Details about your original and current mortgage.
  • Information on taxes, insurance, and community charges.
  • Costs associated with make-ready, refurbishing, and capital improvements.

I want to know if renting my house is a wise long-term investment. Can the Rent vs. Sell Calculator assist me in making this decision?

Yes, the calculator considers long-term financial assumptions, such as prospective rental revenue and increases in property value.

What are typical costs involved in selling my home?

Closing fees, real estate agent commissions, pre-sale inspections, staging, and capital gains tax are a few of the expenses associated with selling your home. Every expense adds up to the overall cost of selling your house and has the potential to affect the net proceeds.

Are there any tax advantages to selling my home?

If you have lived in your home as your primary residence for at least two of the last five years, you may be eligible for the Primary Residence Exclusion, which allows you to exclude up to $250,000 (or $500,000 if married) of the profit from capital gains tax.

What should I consider when setting the rental price for my property?

When setting a rental price, consider the current market rates in your area, the condition of your property, any amenities you offer, and your costs for maintaining the property. To learn more about this, visit our article on our free Rent Estimator.

How do I make my property ready for renting?

Preparing your property for renting typically involves making necessary repairs, ensuring all appliances and systems are in good working condition, and possibly upgrading features to attract tenants. You’ll also need to ensure compliance with all local safety and housing regulations.

How long does it typically take to sell a home compared to renting it out?

The time it takes to sell a house can vary greatly depending on the state of the market, the location, price, and the condition of the house. Getting your house ready for rent and finding tenants can happen faster if there is a large demand for rentals in the neighborhood.

Should I consider hiring a property manager if I decide to rent out my home?

Hiring a property manager can be beneficial if you don’t have the time or expertise to manage the property yourself. Property managers handle day-to-day tasks, tenant screening, maintenance issues and ensure legal compliance, which is especially helpful if you live far from the property or have multiple rentals. Good Life Property Management can assist with these responsibilities, providing expert property management services to help maximize your rental income and maintain the quality of your property efficiently. 

Schedule a call for Orange County Property Management or San Diego Property Management today.

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Our team is ready to help with your property management needs. 

Adam Manly

Adam Manly

Business Development Manager