The Sell vs Keep Rental Property Calculator prices the decision landlords actually face: take the net proceeds of a sale today, or keep renting for a chosen holding period and collect the cash flow plus a later, larger sale. It builds both futures from your numbers, selling costs, capital-gains tax, appreciation, and cash flow, and reports which leaves you wealthier and by how much.
How It Works
Selling now nets the current value minus the mortgage, selling costs, and capital-gains tax on the profit over your purchase price. Keeping multiplies the value by your appreciation rate over the holding period, accumulates the monthly cash flow (rent minus expenses and mortgage payment), and computes the eventual sale on the same cost and tax rules:
With the extended inputs (accumulated depreciation and invested cash flow), the model sharpens: depreciation recapture is taxed at 25% ahead of the capital-gains rate, cash flow is compounded at your alternative return, and the mortgage balance amortizes instead of standing still.
Parameters
| Input | Required | Meaning | |---|---|---| | Current value / purchase price | Yes | Today's value and your basis anchor | | Mortgage balance | Yes | Debt repaid from proceeds | | Selling costs % / CGT % | Yes | Transaction friction and tax | | Rent, expenses, mortgage payment | Yes | The monthly cash-flow trio | | Holding period / appreciation % | Yes | The keep scenario's clock and growth | | Depreciation, alternative return | No | Unlock the extended model |
Worked example
A property worth 350,000, with a 30,000, profit 18,000, net proceeds 2,000 against 1,400 mortgage payment (cash flow +12,000 over the hold): the value grows to 215,630 after 29,229 of tax, and with the cash flow the keep side totals 75,630 on these assumptions. Change appreciation to 0% and the same property's future sale nets about 12,000 of cash flow: the appreciation assumption is doing most of the work, as it usually does.
Reading the verdict without being read by it
The model's most dangerous feature is that it always produces a confident number from inputs that include two guesses: future appreciation and (in the base model) a mortgage balance held constant, which flatters keeping by ignoring the equity your payments build (the extended model fixes that) while also ignoring vacancy, major repairs, and rent growth, which cut the other way. Use it as a sensitivity instrument: find the appreciation rate at which the verdict flips (lower it step by step until it does), and ask whether you actually believe growth above or below that line. A verdict that survives pessimistic inputs is a decision; a verdict that needs 5% annual growth to exist is a hope with a spreadsheet attached.
The tax layer, honestly
The base model taxes the whole gain at your single CGT rate. The extended model splits it the way US law does for depreciated rentals: the accumulated depreciation portion is recaptured at up to 25%, and only the remainder enjoys the capital-gains rate, which is why long-held, heavily depreciated properties owe more tax on sale than owners expect, and why the keep side's future tax bill grows quietly in the background of every hold decision. Neither model handles like-kind exchanges, state taxes, the net investment income tax, passive-loss carryforwards, or a stepped-up basis at inheritance; each can move a real decision by five figures, and each belongs in the professional version of this conversation.
Limitations
A scenario model on constant assumptions: no vacancy or arrears, no capital expenditure shocks, flat rent and expenses in the base run, no refinancing events, and tax reduced to the rates described. It compares two financial futures and cannot weigh tenancy law, your liquidity needs, concentration risk of holding one illiquid asset, or the non-financial costs of landlording. Not financial or tax advice.
Frequently Asked Questions
Why does the base model keep the mortgage balance fixed?
Simplicity, and it is flagged in the results: it understates the keep side's equity growth. Enter the extended inputs (depreciation and cash flow) and the model amortizes the balance properly over your rate and term.
What alternative return should I use?
The return you genuinely expect from the realistic alternative for the sale proceeds, commonly a diversified portfolio figure of 5 to 7% nominal. It only enters the extended model, where proceeds and cash flow are compounded; the base comparison is undiscounted, another reason to treat close verdicts as ties.
The verdict says sell, but barely. What breaks the tie?
Everything the model excludes: a roof at end of life, a softening local market, your marginal tax bracket changing, or a 1031 exchange deferring the tax entirely. A small modeled gap means the decision should be made on those factors, not on the arithmetic.