Sell or Keep the House?: the facts

1. Staying in a paid-off house is not free: property tax, insurance, and upkeep run two to three percent of its value a year for many homes, and the equity earns nothing you can spend. Selling is not free either: the transaction costs several percent, any gain above the exclusion is taxed, and rent replaces the carrying costs.
2. The fair comparison is over time: what you would have after some years if you kept the house (its equity, less the carrying costs you paid, at what that money could have earned) against what you would have if you sold (the proceeds invested, less the rent you paid).
3. Example: a paid-off $800,000 house costing $20,000 a year to carry and appreciating 3 percent, against selling for $752,000 after costs, investing at 5 percent, and paying $36,000 a year in rent. After ten years, keeping leaves about $810,997 and selling about $749,484.
4. The answer turns on three assumptions more than any other: the appreciation rate on the house, the return on the freed equity, and the rent. Small changes in each swing the result, which is why the tool shows all three.
5. The tax on the sale is often zero: a couple excludes the first five hundred thousand of gain, a single person half that, and the tool applies the exclusion before the gains rate.
6. The number that is not in the arithmetic is the one people decide on: the house is where they live. The tool prices the money side so the other side can be weighed against a figure rather than a fear.

Educational only, not investment, tax, or legal advice. Results are hypothetical estimates that vary with each use and over time and are not guaranteed accurate or complete. Using this tool creates no client relationship with Considerate Capital, and the site that linked here is not affiliated with it. By using it you agree to the tool terms.