Rent out your house when the cash flow is positive and you’re prepared for landlord responsibilities. If the numbers don’t work or you’d rather not deal with tenants, sell and invest the equity.
Quick Decision Framework
| Factor | Rent It Out | Sell It |
|---|---|---|
| Cash flow positive? | ✅ Yes | ❌ Not worth it |
| Have a low mortgage rate (3-4%)? | ✅ Keep that rate! | ⚠️ Losing the rate is costly |
| Comfortable being a landlord? | ✅ Ready | ❌ Not interested |
| Need the equity for next home? | ❌ | ✅ Must sell |
| Strong local rental demand? | ✅ | ⚠️ Weak market |
| Emotional attachment? | ⚠️ Can cloud judgment | ✅ Clean break |
Cash Flow Analysis
$400,000 home, $250,000 mortgage at 3.5%:
| Income | Monthly |
|---|---|
| Estimated rent | $2,500 |
| Vacancy allowance (-8%) | -$200 |
| Effective income | $2,300 |
| Expenses | Monthly |
|---|---|
| Mortgage (P&I) | $1,123 |
| Property taxes | $400 |
| Insurance (landlord policy) | $175 |
| Maintenance (1% value ÷ 12) | $333 |
| Property management (10%) | $250 |
| CapEx reserves (5% rent) | $125 |
| Total expenses | $2,406 |
| Result | Monthly |
|---|---|
| Cash flow | -$106 |
In this example, the property loses $106/month after all expenses. You’d be betting on appreciation and tax benefits to make up the gap.
The Same House with No Management (Self-Managed)
| Adjusted expenses | Monthly |
|---|---|
| All expenses minus management | $2,156 |
| Cash flow (self-managed) | +$144 |
Self-managing turns it cash-flow positive — but your time has a cost too.
Tax Benefits of Renting
| Tax Benefit | Value |
|---|---|
| Depreciation | Deduct ~3.6% of building value per year (not land) — paper loss that reduces taxable income |
| Expense deductions | Mortgage interest, taxes, insurance, repairs, management fees, travel to property |
| Passive loss carryforward | Losses can offset future rental income or be used when you sell |
| 1031 exchange | Sell and buy another rental without paying capital gains tax |
Example: $400,000 property (building value $320,000). Annual depreciation deduction: ~$11,636. At a 24% tax rate, that saves ~$2,793/year in taxes — even if the property is breaking even on cash flow.
When to Sell Instead
| Situation | Why Sell |
|---|---|
| Negative cash flow with no path to positive | You’re losing money every month |
| High mortgage rate (7%+) | Too expensive to hold |
| Need equity for your next home | Can’t fund the move otherwise |
| Don’t want to be a landlord | Tenants, maintenance, and liability |
| Property needs major repairs | $20K+ in roof, HVAC, foundation |
| Lived in 2 of last 5 years | Qualify for $250K/$500K capital gains exclusion (use it or lose it) |
The Bottom Line
Keep the house as a rental when: you have a low mortgage rate, the cash flow is positive (or close with tax benefits), and you’re willing to manage the property. Sell when: the numbers don’t work, you need the equity, or you don’t want landlord responsibilities. Don’t keep a property just because you can — do the math first.
Related: Should I Buy Investment Property? | Should I Sell My House Now?