Since 2012, the housing market has risen each year, achieving a record high 18% increase in 2021.1 While the growth rate has since cooled, home prices are still well above what we saw even just five years ago. By the end of 2019, the median price of a home was $327,100. But by the end of 2024, that median sale price rose nearly $100,000 to $419,200.2
If you’re a homeowner, your home is likely the biggest asset you own—especially if it’s been a decade or longer since you purchased the property. While home values vary by region (and even by neighborhood), odds are you could be sitting on a decent amount of equity. When the time comes to move on, you’ll need to decide whether to keep or sell your home based on your financial needs, life goals, and other important factors.
When it comes time to enter your next chapter, should you sell your home and cash in on all that equity? Or is it better to rent it out and continue to (hopefully) build more equity over time? There is no right or wrong answer, but there are a few important—and personal—considerations to make as you decide.
While we mentioned some national housing trends before, remember that real estate and rental markets are highly localized. The San Francisco housing market won’t look the same as rural Kentucky’s housing market, and neither may follow what’s going on at a national level.
So, how do you make the decision to rent or sell based on your local market? Consider what the need is in your area. Are the majority of people looking to buy homes or rent them out? And in either scenario, who is your target demographic?
For example, if you live in a desirable neighborhood of a large city, you may have a huge opportunity to rent your home out to tenants willing to pay a premium. But if you’re in a small town surrounded by farmland, perhaps there’s a greater opportunity to sell the home instead. You might also live in an area, like a college town, with plenty of willing renters—but they may not be your ideal target market.
One of the most important factors impacting your decision to either sell or rent will be your cash flow needs.
Assuming all or the majority of your mortgage is paid off and your home has risen in value, selling would result in a sizable, one-time lump sum of cash.
On the other hand, renting the home out won’t yield any large upfront sums (aside from perhaps a deposit and a couple of months’ rent). But as long as the home remains occupied with responsible tenants, you should earn some steady, additional income each month. Eventually, you may even accumulate more over time in rental income and increased appreciated equity than you would selling the home outright now (though, like other investments, there is never a guarantee).
Consider which option is most conducive to your current financial situation and long-term goals. Let’s say you’re considering selling the home and moving in with your adult children in retirement to help watch the grandkids. Because you don’t plan on buying a new home with the proceeds from the sale, should you consider holding onto the property, collecting some rent, and hoping it continues appreciating in value? Or, would you rather sell it outright and put that equity to good use now—perhaps funding a child’s college education or padding your portfolio for future retirement income needs?
Alternatively, if you need the funds to purchase a new home, renting likely won’t be a good fit for your more immediate cash flow needs and financial goals.
With the housing market’s consistent growth, your property may be a highly appreciated asset. If you can live on your other resources without selling it, consider the role your property could play in your wealth transfer strategy.
Your inheritors won’t owe federal tax on the appreciated value of the property until it’s sold. Keep in mind there is a federal estate tax that could apply if your estate exceeds the exemption limit. In 2025, it’s $13,990,000 ($27,980,000 for married couples).3
Because the property is inherited, your beneficiaries will benefit from a step-up in cost basis—meaning they’ll only owe taxes on the difference between the value of the property at the time it’s sold and at the time they inherited it (not the time you originally purchased it).4
For example, say you purchased your home for $200,000 in 2000. In 2030, your children inherit the home, which is now valued at $600,000. Five years later, they sell the property for $700,000. Rather than pay capital gains tax on the difference between the original purchase price and sale price (which would be $500,000), they are only required to pay capital gains tax on the $100,000 profit earned since it was inherited.
If your beneficiaries choose to move into the home and use it as their primary residence for two of the past five years, the first $250,000 (or $500,000 for married filers) is exempt from capital gains tax.5
If cash flow isn’t a concern, consider the potential benefits of holding onto the property as a future, tax-advantaged inheritance for your children. Depending on the circumstances, this could potentially reduce the tax liability (or eliminate it altogether).
You very well may have an emotional attachment to your home, and that’s okay! Depending on how long you’ve owned the home, it may have been the place where you established your family tree, settled down with your partner, spent time with friends, or maybe even started a home business.
If you were to keep the property and allow someone else to rent and live in a space that feels very much like yours, how would that make you feel? Some people find the thought of renters in their home anxiety-inducing—preferring instead to make a clean break. Others may like the idea of holding onto the home for longer while allowing others to enjoy it under their care.
Let’s end here with a quick recap as you continue to consider your options.
The biggest benefit of selling your home is the lump sum payment you’ll receive upfront. However, selling the property means missing out on future equity, as it’s possible the property will continue rising in value (though again, there’s no guarantee).
Don’t forget, selling your home incurs some costs as well, which will reduce the amount you earn from the sale. Costs will likely include your agent’s commission fees, any home improvements or repairs you need to do to close the deal, and closing costs.
Renting enables you to continue building equity in the property, while somebody else pays the mortgage and utilities.
You may be considering moving out of your home temporarily (for less than a year or several months). Maybe you’re helping a family member recover from surgery or watching your grandkids over the summer. If you think you may, eventually, want to move back into your home, then renting could allow you to hold onto your home in the long term while enjoying some short-term cash flow.
Keep in mind, renting is not an entirely hands-off endeavor. Even if you use a property management company to handle most aspects of the rental process, you will still need to make decisions or answer questions from time to time about the property. And if you do end up being a hands-on landlord, consider the time and energy required to manage the property on your own.
And just like selling, there will be costs involved. You’ll be responsible for expenses including landlord insurance, property taxes, marketing the property and vetting tenants, and paying a property management company—as well as all normal homeownership costs (appliance repair, general maintenance, HOA fees, etc.).
If you’re preparing to transition into a new chapter and can’t take your home with you, it’s certainly worth considering whether you should sell or rent. Think through the pros and cons as they pertain to your unique financial circumstances and cash flow needs, and consult with a financial advisor if you have questions before making your final decision.