The Rent vs Sell Calculator helps you determine the financially optimal decision for your current property by comparing the estimated future net wealth of two scenarios: selling the property and investing the proceeds, or retaining the property for a specified period and selling later.
Rent vs Sell Financial Comparison
Final Recommendation:
Calculation Steps and Details
Rent vs Sell Calculator Formula
W_Sell = (V_Current * (1 - C_Sell / 100) - M) * (1 + I_Return / 100)^Y - R_Total_FV
W_Keep = V_Current * (1 + G_Appreciation / 100)^Y * (1 - C_Sell / 100) - M
Variables
- V_Current (Current Home Value): The current market price of the property.
- M (Outstanding Mortgage Balance): The debt remaining on the property.
- C_Sell (Total Selling Costs): Total percentage cost to sell (e.g., realtor commission, transfer taxes).
- G_Appreciation (Annual Home Appreciation Rate): Expected average annual growth rate of the property value.
- Y (Years to Analyze): The period over which the comparison is made.
- R_Total_FV (Future Value of Rent Payments): The combined future value of all monthly rent payments over Y years, assuming they are invested at I_Return.
- I_Return (Annual Investment Return Rate): The expected return on investments (stocks, bonds) used for the comparison.
Related Calculators
- Property Cash Flow Calculator
- Mortgage Affordability Calculator
- Compound Interest Calculator
- Capital Gains Tax Estimator
What is the Rent vs Sell Calculation?
The rent vs sell calculation is a critical financial tool that helps homeowners facing a relocation or investment decision. Unlike a simple ‘buy vs rent’ tool, this calculator specifically assesses the optimal outcome for an *existing* asset. It quantifies the opportunity cost of holding the property versus liquidating it and reinvesting the net cash proceeds.
The core of the analysis lies in comparing two future net wealth positions. Scenario A assumes you sell immediately, invest the resulting cash pool, and pay rent out of pocket, while the investment grows. Scenario B assumes you hold the asset, let it appreciate, and then sell it in the future, retaining the investment gains within the property’s value. The result indicates which strategy yields a higher net financial outcome after the specified time period.
How to Calculate Rent vs Sell (Example)
- Determine Initial Cash: Calculate the net cash realized if the house is sold today: Home Value – Mortgage – Selling Costs. This amount becomes the starting principal for the Sell & Invest scenario.
- Calculate Future Home Value (Keep Scenario): Project the home’s value based on the annual appreciation rate over the analysis period (Years to Analyze).
- Calculate Future Wealth (Keep Scenario): Deduct the outstanding mortgage (if not paid down) and future selling costs from the Future Home Value to find the final net wealth.
- Calculate Future Wealth (Sell & Invest Scenario): Project the future value of the Initial Cash invested at the Annual Investment Return Rate. Subtract the total future value of all rent payments made during the period.
- Compare: The scenario with the higher resulting net wealth is the financially superior choice.
Frequently Asked Questions (FAQ)
Should I include property taxes and maintenance costs?
For a simplified comparison focusing on market growth and opportunity cost, they are often excluded, but in a deeper analysis, they should be included. If you keep the home, maintenance reduces wealth; if you rent, the landlord pays maintenance. The inputs here focus on the major variables.
What is the “opportunity cost” in this calculation?
The opportunity cost is the potential investment return you forego by keeping your equity tied up in the home (Scenario B) instead of liquidating it and investing it in a higher-return asset (Scenario A).
What is a reasonable Annual Investment Return Rate?
A typical long-term rate for a diversified portfolio (e.g., S&P 500) ranges from 6% to 10% before inflation, but you should use a rate that reflects your personal risk tolerance and investment strategy.
Why does the calculator subtract the Future Value of Rent?
In the Sell & Invest scenario, you gain investment growth but lose money on rent. We calculate the future value of those rental payments to accurately represent the total loss of capital at the end of the analysis period, making it comparable to the net wealth of keeping the home.