1. What is the Rent vs Sell NPV Calculator?

This calculator helps homeowners compare the financial outcomes of renting versus selling their property by calculating the Net Present Value (NPV) of both options. It considers time value of money to provide a more accurate comparison.

2. How Does the Calculator Work?

The calculator uses the NPV formula:

Where:

• \( Cash\ Flow_t \) — Rental income each year or sale proceeds at end of period
• \( r \) — Discount rate (your opportunity cost of capital)
• \( t \) — Time period in years

Explanation: The calculator sums the present value of all future cash flows from renting and compares it to the present value of selling the property now.

3. Importance of NPV Calculation

Details: NPV accounts for the time value of money, helping you make apples-to-apples comparisons between receiving money now (selling) versus receiving money over time (renting).

4. Using the Calculator

Tips:

• Use a discount rate that reflects your alternative investment opportunities (typically 5-8%)
• Estimate realistic rental income after expenses
• Consider your time horizon for owning the property
• Account for all sale costs (agent commissions, taxes)

5. Frequently Asked Questions (FAQ)

Q1: What discount rate should I use?
A: Typically 5-8%. Higher if you have good investment alternatives, lower if you're risk-averse.

Q2: Should I include property taxes and maintenance?
A: Yes, your rental income should be net of all expenses including these costs.

Q3: What about home price appreciation?
A: This calculator assumes flat home prices. For rising markets, adjust sale proceeds upward.

Q4: How does mortgage payoff affect this?
A: Sale proceeds should be net of mortgage payoff. Rental income should be after mortgage payments.

Q5: What other factors should I consider?
A: Tax implications, personal attachment to the home, and local market conditions.