Should You Sell or Rent Out Your House? The 2026 Landlord Math

You're moving for a job, a bigger place, or a fresh start, and the old house is sitting there with a decision attached. Sell it and walk away with a check, or keep it and let a tenant pay the mortgage? Everyone has an opinion; almost nobody runs the actual numbers.

This is the math worth doing before you commit either way. It comes down to three things: what the house really nets as a rental, what the tax code does to you on each path, and whether you're honestly built for landlording.

Start with net rent, not gross rent

Say the internet tells you your house rents for $2,400 a month, and your brain hears $28,800 a year. That number is fiction. Before a dollar of rental income actually reaches you, the house pays for:

• Property management: 8–10% of collected rent, plus a leasing fee of half to a full month's rent at each turnover. Skip the manager only if you live nearby and genuinely want a part-time job.
• Maintenance: budget 1–1.5% of the home's value per year. In 2026, a water heater runs $1,500–$2,500 installed, and an HVAC replacement $7,000–$12,000.
• Vacancy: plan on 5–8% of the year empty — a few weeks between tenants if you price right, longer if you don't.
• Landlord insurance: typically 15–25% more than a homeowner's policy.
• Property taxes: they continue either way, and some states strip your homestead exemption once the house becomes a rental.

A worked example: the $400,000 house

Take a $400,000 house renting for $2,400. Gross rent is $28,800. Now deduct roughly $2,900 for management, $1,200 for an amortized leasing fee, $4,500 for maintenance reserves, $1,700 for vacancy, and $800 in extra insurance — you're down to about $17,700 before the mortgage sees a dime.

If your remaining principal-and-interest payment is $1,500 a month, that's $18,000 a year, which puts you at breakeven or slightly underwater on cash flow. That's not automatically a deal-breaker: the tenant is still paying down your loan, and the house may appreciate. But be clear about what you're signing up for — an investment that pays you in equity later, not income now.

The capital-gains clock is ticking

Here's the rule that changes the math more than any fee. If you've lived in the house for two of the last five years, the IRS lets you exclude up to $250,000 of gain when you sell — $500,000 if you're married filing jointly. Move out and rent the place, and that five-year window starts closing.

Rent it for more than about three years and the exclusion is gone; your gain gets taxed at long-term capital-gains rates of 15–20% for most sellers. You'll also owe depreciation recapture at up to 25% for every year it was a rental, even if you sell inside the window. If you're sitting on $150,000 of appreciation, this one rule can be worth more than five years of rental profit.

So the honest choice usually isn't "rent for a while and see." It's sell now with the exclusion intact, or commit to holding long enough that appreciation and loan paydown outrun the tax hit.

When keeping it actually makes sense

Renting out the old house is genuinely the right call for some owners. The pattern usually looks like this:

• You locked a pandemic-era mortgage under 4% that no buyer — including future you — can replicate at 2026's roughly 6.5% rates.
• The rent covers every cost above, including management and reserves, with at least a couple hundred dollars a month to spare.
• You don't need the equity for your next down payment.
• There's a real chance you'll move back within a few years, which also protects the tax exclusion.
• Your market has strong rental demand and landlord rules you can live with.

Who should never become a landlord

Just as real: some owners should sell every time, and it has nothing to do with intelligence or effort. Being a landlord is running a small business with one customer and one asset — if that sounds exhausting rather than interesting, you already have your answer. Sell, don't rent, if any of these fit:

• You need this equity to buy the next house. A tenant's security deposit doesn't make a down payment.
• You can't float a $10,000 surprise — roof, sewer line, furnace — without reaching for a credit card.
• You're moving far away and aren't willing to pay for professional management.
• Late rent, property damage, or a possible eviction would keep you up at night.
• The deal only works if the house appreciates. Hope is not underwriting.

Run both numbers, then decide

The clean way to decide is to price the same address twice: a rental pro forma with every cost above, and a seller's net sheet with 2026 selling costs of roughly 6–8% all-in. This is the part worth handing to a licensed professional — an agent like Acme Realty can pull real rental comps and a real net sheet for your specific house, and flag the lease-law and disclosure traps that generic calculators miss.

If the rental clears all its costs with a cushion and you don't need the cash, keeping it can quietly build wealth for a decade. If the math is breakeven-plus-hope — and for most 2026 movers with big embedded gains, it is — sell while the exclusion still belongs to you.