Should You Rent Out Your Home or Sell? Pros & Cons Explained
If you're considering moving out of your current home, you may be wondering: Should I sell it, or keep it as a rental? The short answer is there’s no one-size-fits-all answer. Both options have financial implications, lifestyle considerations, and long-term wealth-building opportunities.
In this article, we’ll walk through the pros and cons of selling vs renting, and use a real-world example to show you how to crunch the numbers. We’ll also give you tools that can help you run your own analysis and decide what makes the most sense for you.
Pros of Renting Out Your Home
Monthly Cash Flow Potential - If the rent you can charge exceeds your expenses (mortgage, taxes, insurance, maintenance), you could generate monthly income.
Long-Term Appreciation - You’ll continue to build equity if the home appreciates in value over time.
Tax Benefits - Rental properties come with potential tax advantages including mortgage interest, depreciation, repairs, and more (always speak with your tax professional about your specific situation).
Flexibility - Renting gives you the option to move back in or sell later when market conditions may be more favorable.
Cons of Renting Out Your Home
Being a Landlord Is Work - Even if you hire a property manager, you’re still responsible for big decisions, unexpected expenses, and vacancy periods. It’s not passive income, it’s a small business.
Maintenance and Repairs - Homes need upkeep. Think water heaters, roofs, appliances, tenant damage—and it’s on your dime and your timeline.
Risk of Vacancy or Non-Payment - A missed month of rent or a vacant property can quickly erase your profit for the year. Also keep in mind that most cities in Washington tend to be more tenant friendly vs landlord friendly so removing a tenant can take time and come with its own complexities, even if they are not paying.
Capital Gains Tax Exclusion Clock Starts Ticking - If you move out and rent it, you can lose the ability to exclude up to $250K ($500K for married couples) of capital gains when you eventually sell, unless you sell within 3 years of moving out.
Pros of Selling
Access to Equity Now - You get to cash in on your equity and use it for your next home, investments, or life plans.
Less Responsibility - Once you sell, you walk away with no ongoing responsibilities or risk.
Potential for a Strong Return - In some markets, selling now may provide a better return than holding long term, especially if prices are high.
Cons of Selling
Losing a Long-Term Investment - If your home is in a high-demand area, selling means you miss out on potential appreciation and future rent income.
Selling Costs - Factor in real estate commissions, closing costs, and potential repair or staging costs to prep the home for market.
Real Example: Analyzing the Numbers
Let’s look at a real-world scenario for a 3 bedroom, 2 bathroom home:
Estimated Home Value: $1,000,000
Mortgage Balance: $600,000 at 3.5% interest
Monthly Mortgage Payment (PITI): ~$3,800
Estimated Rent: $4,500/month
Property Management: 10% of rent (optional cost which can be eliminated if you decide to self manage) = $450/month
Maintenance Reserve: $150/month
Vacancy Reserve: 1 month/year = $375/month average
Net Rent: $4,500 – $450 – $150 – $375 = $3,525/month
Monthly Carrying Cost (monthly mortgage plus any other costs you won’t have tenants pay such as yard maintenance or water/sewer/garbage): $3,800
Monthly Cash Flow (profit if positive, loss if negative): –$275/month
Even though it’s renting for more than the mortgage, when you factor in management, maintenance, and vacancy, you’re actually losing about $275/month.
However, the property could still be worth holding if:
You expect home values or rent to rise, or
You are focused on long-term equity rather than short-term cash flow (meaning you are willing to float the $275/month because in the long run you believe the home value will increase and you can recoup this plus profit once you sell the home in the future)
But for someone who wants zero landlord involvement or monthly losses, selling might make more sense than renting in this scenario.
Special Consideration for Condos and Townhomes: HOA Rules Matter
If your property is part of a homeowners association (HOA), such as a condo or townhome, you’ll need to check the rental rules before making any decisions.
Some HOAs limit or prohibit rentals entirely.
Others have a rental cap (a maximum percentage of homes in the community that can be rented).
If the rental cap has already been met, you may be placed on a waitlist or denied the ability to rent altogether.
Before committing to becoming a landlord, review your HOA’s bylaws and rental policy, and confirm whether your unit is eligible to be rented out. Your HOA board can help you get clarity.
Tools to Help You Decide
Estimate Rental Value - Search for similar homes for rent in your neighborhood on Zillow or Apartments.com to get a ballpark of what your home could rent for. Look for homes nearby that have similar number of beds, baths, square footage, and level of finishes. Remember, features like having a fenced in yard or garage can increase the amount of rent your property can command.
Run the Numbers - Use this Rental Property Calculator to plug in your mortgage, rent estimate, management costs, and more. It’ll show you cash flow, ROI, and even your break-even horizon.
Talk to a Real Estate Expert - Every home and every market is different. We can help you assess your property’s rentability, current market value, and what makes sense for your goals.
One More Thing: Do You Actually Want to Be a Landlord?
Some people enjoy building a rental portfolio. Others find the responsibility stressful, even with a property manager.
Before you make your decision, ask yourself:
Do I want to deal with tenant turnover, repairs, or late-night emergencies?
Am I OK with treating this like a business?
Or would I rather sell, simplify, and move on?
There is no right or wrong decision, only what is right for you. The answer will truly depend on your personal circumstances and desires.
Final Thoughts
Deciding whether to rent or sell comes down to math, market, and mindset. Look at the numbers, consider your goals, and don’t forget to factor in your personal lifestyle preferences.
If you’d like help analyzing your specific situation, we’d be happy to run the numbers with you and talk through your options. Get in touch here for a no-pressure consultation.