Should I Sell or Rent My House When I Relocate for Retirement?
This decision isn’t easy, thanks to investment, tax and other considerations. Let’s explore the implications of each.


After 40 years of sitting in traffic and punching the clock, you will sit and punch no more. While your home was great for raising a family and earning a living, you’ve decided to relocate in retirement. But you might be asking yourself, should I sell or rent my house? This decision is complicated because there are investment, tax and non-financial considerations. We will address them in that order.
Is Your Home Considered a Good Investment?
Your home as you have used it during your working years, is just that, a home. You have to consider it as a home first, investment second. If you are considering renting out your home, that order reverses. I often speak with clients who argue that they should keep the home because the rent is sufficient to cover the mortgage cost, or that, because there is no mortgage, this is good “passive income.” These are not good ways to evaluate the quality of the investment. Below are a few rules of thumb:
The 1% rule. You should be able to get 1% of the current purchase price of a home in monthly rent. But what if there is no purchase price? You already own the home. I believe that if you are approaching this objectively, you have to ask yourself: Would you buy this home for the current value, as an investment?

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For example, if a home is worth $750,000, you should be able to get $7,500 per month in rent. You may be thinking, “No way!” And, if you live in a high cost-of-living area, you’re probably right. It’s unlikely you’ll get that much. Instead, in these markets, you are often betting on property appreciation.
Some would argue that, with the run-up in prices over the last several years, the 1% rule is now too high. I think of it in the same vein as the 4% rule for retirement distributions. In certain environments, it may be too high or too low, but it is a good rule of thumb to at least figure out if you’re in range of the target.
Cap rates. Cap rates are the real estate term for yield. You take your total income, less operating expenses, and divide that by the home value.
For example, say you have a $750,000 home with $6,000 per month in rent and $2,000 per month in expenses. Your cap rate is $48,000 divided by $750,000, or 6.4%. The total return of the investment is the yield plus any expected appreciation.
Liquidity. Liquidity has to be a consideration, because compared to stocks and bonds, real estate is much less liquid. In certain markets, like the spring of 2021, real estate is easy to sell. The market in 2023, not so much.
Tax Considerations for Selling and Rental Property Income
There are significant tax benefits of selling a primary residence. So long as you have lived in a home for two of the last five years, you are entitled to the 121 exclusion. This will allow you to exclude up to $250,000 of capital gains. If you’re a married couple living in the home, it’s $500,000.
If you are considering turning your home into a rental, it’s possible you’ll lose that exclusion if you rent the home out for more than five years.
If you convert your home into a rental property, you have to consider how income will be taxed. As a general rule, income from real estate is taxed as income rather than (often more favorable) capital gains.
However, there is preferential tax treatment in that most expenses of the property are deductible, and the home value can be depreciated over time. Rental income and expenses are shown on a Schedule E. While the form itself is not complicated, having a rental property will complicate your tax situation and may require hiring a CPA or an enrolled agent (EA).
Non-Financial: Rental Property Isn’t Really ‘Passive’ Income
Consider the infamous three T’s: trash, toilets and tenants. Without them, being a landlord would be a breeze. It would also come with no financial benefit. To deal with such challenges, you can hire a property manager — and if you move out of town, you probably should. But that will eat into those cap rates.
The biggest complaint we hear from our clients who own rental properties has nothing to do with their ROI; it’s that they are always on call. I’m guessing that’s not how you want to spend your golden years.
Lastly, what if it’s possible you’ll move back? This is a big argument in favor of hanging on to your home. Transaction costs are so high in the real estate world that you do not want to be in a situation where you don’t like your new location, choose to move back and have to purchase a new place.
I realize that there was no clear advice here on what to do. Rather, you now have a list of the big things you should consider.
I will end on this: Dabbling in the investment property business is dangerous. The real professionals do this for a living and can make a lot of money, typically because of the leverage (loans) involved. I recommend against dabbling.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

After graduating from the University of Delaware and Georgetown University, I pursued a career in financial planning. At age 26, I earned my CERTIFIED FINANCIAL PLANNER™ certification. I also hold the IRS Enrolled Agent license, which allows for a unique approach to planning that can be beneficial to retirees and those selling their businesses, who are eager to minimize lifetime taxes and maximize income.
-
You Don't Have to Be Wealthy to Need a Wealth Manager
Navigating complex financial decisions is hard on your own, no matter how much money you have. A wealth manager can provide comprehensive financial planning, investment management, risk management and more.
-
Despite Tariffs, These Investment Experts Are Bullish on European Equities
European equities were one of the better-performing investments during the first half of 2025. They could be a good long-term prospect for U.S. investors needing to diversify, according to these investment managers.
-
How Do You Know You Are Ready for a Gray Divorce? 15 Yes-or-No Questions
As people 50 and older get more gray divorces, many splits are initiated by women who want a new path. Answer these 15 questions to see if you might need to think about how you should move forward.
-
'Buy Now, Pay Later' for Everyday Spending? This Financial Pro Thinks It's Risky
'Buy Now, Pay Later' apps can get you out of a jam when you need money quickly. But using them regularly for small purchases could create problems.
-
Five Things to Consider Before Rolling Your 401(k) into a Roth IRA
Converting at least some of an old 401(k) to a Roth IRA can offer long-term tax benefits and retirement flexibility, especially if you anticipate being in a higher tax bracket later or wish to leave a tax-free legacy.
-
From Dream Apartment to Nightmare: When Your Landlord Evicts You Through No Fault of Your Own
This is what I suggested a tenant do to get out of her lease after her landlord's inexperience and lack of action made her rental situation unsafe. It's a legal situation called 'constructive eviction.'
-
Six Steps to Being Empowered and On Track: An Expert Financial Guide for Women
While most female investors feel on track with their financial goals and empowered by managing their investments, many regret not starting sooner. Here's how you can get started and take control of your financial future.
-
Selling Your Business? This Powerful Insurance Option Unlocks Multigenerational Wealth
Private placement life insurance (PPLI) offers almost unbelievable investment flexibility, estate planning and tax advantages. And it's completely legit.