Sell vs keep calculator
Should you sell your rental and invest the money, or keep it? Compare your net worth after N years, counting taxes, selling costs, cash flow and appreciation.
After 10 years, keeping wins by
$127,060
Net worth if you keep
$357,722
Net worth if you sell
$230,661
Cash from selling today
$128,800
Tax if sold today
$27,200
First-year cash flow
$3,834
Cash flow on equity
2.98%
- Year 1: keep vs sell
- $144,575 / $136,528
- Year 5: keep vs sell
- $221,828 / $172,363
- Year 10: keep vs sell
- $357,722 / $230,661
- Keeping pays off after
- 1 yr
- Value at the end
- $537,567
- Loan balance at the end
- $155,660
- Tax if sold at the end
- $77,063
How this is calculated
- 1Selling today leaves the value − selling costs − loan balance − tax. Adjusted basis = original price + improvements − depreciation, and the gain is the value after selling costs − adjusted basis.
- 2Tax: gain up to the depreciation is taxed at the recapture rate, the rest at the capital gains rate, and all of it at the state rate.
- 3Keeping earns rent after vacancy, minus expenses and the loan payment. Rent and expenses grow once a year, and the value grows monthly.
- 4Same budget both ways: positive cash flow is invested by the keeper. If the rental loses money each month, the seller invests that amount instead. Investments grow at the investment return.
- 5Net worth if you keep = what you'd net selling at the end + invested cash flow. If you sell = the invested sale money.
Not included: income tax on rent and investment returns, the tax benefit of depreciation each year, a 1031 exchange, refinancing or the home sale exclusion. Tax here is a simplified estimate, so check with a tax professional before you decide.
Frequently asked questions
- What does the result compare?
- What you'd have after the same number of years either way. If you sell, it's the money left after costs, the loan and tax, invested. If you keep, it's the rental's cash flow invested plus what you'd net selling at the end.
- Why does it assume I sell at the end if I keep?
- So both sides are compared after taxes and selling costs. If you plan never to sell, keeping may look better than shown, because the tax at the end may never come due in the same way. Ask a tax professional about your situation.
- What is depreciation recapture?
- When you sell a rental, gain up to the depreciation you claimed (or could have claimed) is generally taxed at up to 25% federally, usually above the long-term capital gains rate.
- What about a 1031 exchange?
- An exchange can put off the tax if you buy another investment property, which this comparison doesn't assume. The 1031 exchange calculator shows how much tax could be deferred.
- What does cash flow on equity mean?
- The first year's cash flow as a percent of the cash a sale would free up. A low figure means a lot of money is tied up for the income it produces, though appreciation and loan paydown can still make keeping worthwhile.