How to use the Buy vs. Keep vs. Sell Analyzer

The decision that doesn't get easier with time

You've been holding a rental for five years. Maybe ten. Tenant turnover happens, maintenance costs stack up, and every time you run the numbers you wonder: should I still own this?

The property has appreciated. You've claimed depreciation. There's equity—maybe a lot of it. But you're also tired of managing tenants, or you want to invest in something else, or the local market is changing and you're not sure if holding makes sense anymore.

The problem is that every option has trade-offs. Keep the property and you're locking up capital but collecting cash flow. Sell and pay taxes, and you walk away with less than the sale price suggests. Do a 1031 exchange and you defer the tax bill, but now you need to find another property within 45 days and close within 180, which is its own stress.

Most landlords sit on this decision for months—sometimes years—because they can't see the numbers clearly enough to commit. The Buy vs. Keep vs. Sell Analyzer exists to fix that. It compares all three options side by side, accounting for cash flow, appreciation, depreciation recapture, capital gains, and 1031 exchange costs, so you can make the decision with actual data instead of vague intuition.

This guide walks through how to use it, what each input means, and how to interpret the results.

What the calculator does

The Buy vs. Keep vs. Sell Analyzer runs three scenarios:

1. Keep the property: Hold for X years, collect cash flow, benefit from appreciation, then eventually sell at the future value. This shows what your total return would be if you stay invested.

2. Sell now (pay taxes): Sell today, pay capital gains tax on the appreciation and depreciation recapture tax on the depreciation you've claimed, and walk away with the net proceeds after tax. This shows what you'd have in your bank account if you exit today.

3. 1031 exchange: Sell today, defer all taxes by reinvesting proceeds into a like-kind replacement property, and keep the full equity working minus transaction costs. This shows what you'd have available to reinvest into another rental.

The calculator then compares these three outcomes and tells you which strategy produces the highest financial result based on your specific situation.

When to use this calculator

This tool is most useful when:

• You're considering selling a rental property you've held for several years and want to understand the tax implications
• You're debating whether to keep collecting rent or exit the investment
• You're curious whether a 1031 exchange makes financial sense given the transaction costs and hassle
• You want to see how different appreciation rates or holding periods affect the decision
• You're trying to decide between staying in the same property versus upgrading to a better one via 1031

If you're looking at a property you've owned for less than a year, this calculator is less relevant—short-term capital gains are taxed as ordinary income, and 1031 exchanges typically make sense only when there's substantial equity and deferred tax liability.

The inputs: what to enter and where to find the numbers

The calculator has four sections of inputs. Here's what each one means and where to get the numbers.

Property details

Current property value: What the property is worth today. Use a recent appraisal, a Zestimate, or what comparable properties in your area have sold for recently. If you're unsure, use a conservative estimate—you can always run the calculator multiple times with different values to see how sensitive the decision is to price.

Original purchase price: What you paid for the property when you bought it. This is on your closing statement from when you purchased.

Current mortgage balance: How much you still owe on the loan. Check your latest mortgage statement or log into your lender's portal. If the property is paid off, enter 0.

Years owned (for depreciation): How many years you've owned the property and been depreciating it. This is critical for calculating how much depreciation recapture tax you'll owe if you sell. If you converted a primary residence to a rental partway through ownership, only count the years it's been a rental.

Income and expenses (if keeping)

This section is only relevant for the "keep property" scenario. It projects what your returns would be if you hold the property for several more years.

Annual rental income: Total rent collected in a year. If the property rents for $3,000/month and is occupied 11 out of 12 months, that's $33,000. Be realistic—don't assume 100% occupancy if your area typically has 1-2 months of vacancy per turnover.

Annual expenses: Everything you spend annually to operate the property—property taxes, insurance, maintenance, repairs, HOA, property management, utilities you pay. Don't include mortgage principal or interest; those are financing costs, not operating expenses. Also don't include depreciation; that's a paper deduction, not a cash expense.

Years to hold property (projection): How many more years you'd hold the property if you decide to keep it. Five years is a reasonable default. Ten years if you're thinking long-term. The longer you project, the more appreciation and cash flow compound, which makes "keep" look better relative to "sell."

Annual appreciation rate: Your estimate of how much the property will increase in value each year, expressed as a percentage. Historically, U.S. real estate has appreciated around 3-4% annually on average, but this varies widely by market. If your area is growing fast, you might use 5-6%. If it's stagnant, use 2% or less. This is the most speculative input—run the calculator with both conservative and optimistic rates to see how much it matters.

Tax rates

Federal long-term capital gains rate: The federal tax rate on gains from assets held longer than one year. This is 0%, 15%, or 20% depending on your income. Most landlords fall into the 15% bracket. If your taxable income is under $47,025 (single) or $94,050 (married filing jointly) as of 2026, you're at 0%. If over $518,900 (single) or $583,750 (married), you're at 20%. Use the rate that applies to your income level.

Depreciation recapture rate: The federal tax rate applied to the depreciation you've claimed over the years. This is capped at 25% by law. Use 25% unless you're certain a different rate applies (unlikely).

State capital gains tax rate: Some states tax capital gains as ordinary income; others have no income tax at all. If you're in California, use around 13.3% (top bracket). Texas, Florida, Nevada, Washington: use 0%. Check your state's tax rate for long-term capital gains.

1031 exchange details

1031 exchange transaction costs: The cost of executing a 1031 exchange, expressed as a percentage of the property value. This includes the qualified intermediary fee (typically $800–$1,500), legal costs, and other administrative expenses. A reasonable estimate is 2% of the sale price. If you have specific quotes, use those instead.

A worked example: Kevin's Columbus duplex

Kevin bought a duplex in Columbus, Ohio in 2019 for $280,000. He put 20% down and financed the rest. It's now 2026, and the property is worth $380,000. His mortgage balance is $175,000. He's owned it for seven years and has been depreciating it the entire time.

The duplex generates $42,000/year in rent. After property taxes ($4,200), insurance ($1,800), maintenance ($3,000), and occasional turnover costs, his annual expenses are about $15,000. That leaves $27,000 in annual cash flow before debt service.

Kevin is considering three options:

1. Keep the duplex for another five years
2. Sell it now and pay the taxes
3. Do a 1031 exchange and buy a small apartment building instead

He's in the 15% federal capital gains bracket and Ohio taxes capital gains as ordinary income (roughly 4% for his bracket). He estimates the duplex will appreciate about 3% per year going forward.

The inputs

Kevin enters the following into the calculator:

Property details: - Current property value: $380,000 - Original purchase price: $280,000 - Current mortgage balance: $175,000 - Years owned: 7

Income and expenses: - Annual rental income: $42,000 - Annual expenses: $15,000 - Years to hold: 5 - Annual appreciation rate: 3%

Tax rates: - Federal long-term capital gains rate: 15% - Depreciation recapture rate: 25% - State tax rate: 4%

1031 exchange: - Transaction costs: 2%

The results

The calculator runs all three scenarios.

Keep property:

Kevin's current equity is $380,000 - $175,000 = $205,000.

If he holds for five more years at 3% annual appreciation, the property will be worth about $440,500. Over those five years, he'll collect $27,000/year in cash flow (after expenses but before mortgage payments), totaling $135,000.

Total value after five years: $205,000 (equity) + $60,500 (appreciation) + $135,000 (cash flow) = $400,500.

Return on equity: ($400,500 - $205,000) / $205,000 = 95.4%.

Sell now (pay taxes):

Kevin's cost basis: $280,000 - (depreciation of $280,000 × 0.8 ÷ 27.5 × 7 years) = $280,000 - $57,309 = $222,691.

Capital gain: $380,000 - $222,691 = $157,309.

Depreciation recapture tax: $57,309 × 25% = $14,327.

Capital gains tax (on the $100,000 gain after recapture): ($157,309 - $57,309) × 15% federal + 4% state = $19,000.

Total taxes: $14,327 + $19,000 = $33,327.

Net proceeds after taxes: ($380,000 - $175,000) - $33,327 = $171,673.

Return on equity: ($171,673 - $205,000) / $205,000 = -16.3% (he loses money relative to his current equity because of the tax hit).

1031 exchange:

Exchange value: $380,000 - $175,000 = $205,000 (same as current equity).

Tax deferred: $33,327.

Transaction costs: $380,000 × 2% = $7,600.

Net value for reinvestment: $205,000 - $7,600 = $197,400.

Return on equity: ($197,400 - $205,000) / $205,000 = -3.7% (slightly worse than his current position due to transaction costs, but he keeps the full equity to reinvest).

What Kevin should do

The calculator recommends: Keep Property.

Holding the duplex for five more years produces the highest total return ($400,500), mainly because the annual cash flow ($27,000/year) and continued appreciation ($60,500 over five years) outweigh the tax burden he'd pay by selling now.

If Kevin sells and pays taxes, he walks away with only $171,673—less than his current equity. The tax bill eats $33,327 of his proceeds.

If Kevin does a 1031 exchange, he defers the tax and can reinvest $197,400 into a new property, which is better than selling outright but still worse than just keeping what he has—unless the new property he buys performs significantly better than the duplex.

Kevin decides to hold. The duplex is low-maintenance, the tenants are stable, and the numbers clearly show that staying invested is the right financial move for now. He'll reassess in three years.

How to interpret the results

The calculator's recommendation is based purely on which strategy produces the highest dollar value at the end of the analysis period. But that's not the only consideration.

Keep property is recommended when:

• Cash flow is strong and the property is appreciating
• You're comfortable continuing as a landlord
• The property doesn't require major capital expenditures soon
• You don't have better investment opportunities for the capital

Even if "keep" wins, you might still choose to sell if you're burned out on landlording, need liquidity for something else, or believe the market is peaking and appreciation will slow or reverse.

Sell now (pay taxes) is recommended when:

• The property has weak cash flow or is losing money
• You need liquidity for another investment, debt payoff, or personal use
• The property requires major repairs you don't want to fund
• You want to simplify your life and exit real estate

The tax hit is real, but sometimes paying the taxes and moving on is the right choice—especially if the alternative is holding a property you resent or that's dragging down your returns.

1031 exchange is recommended when:

• You want to upgrade to a better property
• You have significant equity and deferred tax liability
• You're committed to staying in real estate
• You can handle the 1031 timeline and rules

A 1031 exchange lets you defer taxes and keep your equity fully deployed, but it comes with strict timelines (45 days to identify replacement property, 180 days to close) and transaction costs. If you're not confident you can find and close on a suitable replacement property, don't force it.

Common mistakes when using the calculator

1. Using overly optimistic appreciation rates. If you assume 7% annual appreciation because that's what the property did over the past three years during a hot market, the "keep" scenario will look unrealistically good. Use conservative estimates—3-4% is reasonable for most markets over a long period.

2. Forgetting to include all expenses in the "annual expenses" field. Property taxes and insurance are obvious, but maintenance, repairs, vacancy costs, and property management also reduce cash flow. If you only include the easy-to-track expenses, the "keep" scenario will look better than it actually is.

3. Not accounting for the time value of money. The calculator assumes you hold the property for X years and then sell at the appreciated value. It doesn't discount future cash flows to present value. If you're comparing a $200,000 lump sum today versus $300,000 in ten years, they're not equivalent—money today is worth more than money in the future. For rough comparisons this is fine, but for precise financial planning, work with a CFP or CPA who can run a discounted cash flow analysis.

4. Ignoring non-financial factors. The calculator tells you which strategy produces the highest return, but it doesn't know that you're exhausted from tenant calls, or that you need cash to start a business, or that your spouse wants to sell and travel. Financial optimization is important, but it's not the only factor.

Understanding depreciation recapture

One of the most important (and most misunderstood) parts of selling a rental property is depreciation recapture. This is the tax on all the depreciation deductions you've claimed over the years.

While you own the property, you get to deduct a portion of the building's value each year (residential rental property is depreciated over 27.5 years). This reduces your taxable income, which saves you money on taxes annually.

But when you sell, the IRS requires you to "recapture" that depreciation and pay tax on it—at a rate of up to 25% federally, which is higher than long-term capital gains rates.

Here's the part that surprises people: even if you didn't claim depreciation on your tax returns, the IRS still assumes you did. Depreciation recapture is calculated on the depreciation "allowed or allowable," not just what you actually deducted. If you owned a rental for seven years and never claimed depreciation, you still owe recapture tax as if you had.

The calculator accounts for this automatically. It assumes you've been depreciating the property correctly, calculates the total depreciation taken based on years owned, and applies the 25% recapture rate when modeling the "sell now" scenario.

If you want to dive deeper into how depreciation recapture works and strategies to minimize it, read Depreciation recapture on rental property: what happens when you sell.

How a 1031 exchange defers the tax bill

A 1031 exchange (named after Section 1031 of the Internal Revenue Code) allows you to sell a rental property and reinvest the proceeds into another "like-kind" property without paying capital gains or depreciation recapture tax at the time of sale. The taxes are deferred—not eliminated—but you get to keep your full equity working in real estate instead of handing a chunk to the IRS.

The rules are strict:

• You must use a qualified intermediary (a third party who holds the sale proceeds and facilitates the exchange—you can't touch the money yourself)
• You have 45 days from the sale closing to identify potential replacement properties (up to three, or more with specific rules)
• You must close on the replacement property within 180 days of selling the original property
• The replacement property must be of equal or greater value, and you must reinvest all the equity (if you take any cash out, it's taxable)

If you follow the rules correctly, you defer 100% of the taxes and keep the full equity to invest in the new property. The deferred tax liability carries forward—you'll eventually pay it when you sell the replacement property without doing another 1031, or when you pass the property to heirs (at which point they receive a step-up in basis and the deferred tax may be eliminated entirely).

The calculator models the 1031 exchange by showing how much equity you have available to reinvest after paying transaction costs (qualified intermediary fees, legal costs, etc.). If the calculator recommends a 1031 exchange, it means deferring taxes and reinvesting into a new property produces a better financial outcome than either keeping your current property or selling and paying taxes now.

If you're considering a 1031 exchange, work with a qualified intermediary and a CPA who specializes in real estate. Mistakes disqualify the exchange and trigger immediate tax liability.

What to do after you run the calculator

Once you've run the calculator and reviewed the results, here's what to do next:

If "keep property" is recommended and you agree: Do nothing. Keep collecting rent, stay on top of maintenance, and reassess in a year or two as the market and your situation evolve.

If "sell now" is recommended and you agree: Talk to a CPA to confirm the tax calculations, then list the property. Expect to pay capital gains tax and depreciation recapture tax in the year you close. Set aside cash for the tax bill so you're not surprised in April.

If "1031 exchange" is recommended and you agree: Start researching qualified intermediaries and potential replacement properties before you list your current property. The 45-day identification window starts as soon as you close on the sale, and it goes fast. Have a shortlist of properties or markets you're interested in before you trigger the exchange.

If the calculator recommends one thing but your gut says another: That's fine. The calculator optimizes for financial return, but you might value liquidity, simplicity, or peace of mind more than an extra $50,000 over five years. Just make sure you understand the trade-off. If you're leaving money on the table, do it consciously and for a reason that matters to you.

When the decision isn't purely financial

The Buy vs. Keep vs. Sell Analyzer answers the question: Which strategy produces the highest financial return? But that's not always the right question.

Maybe you inherited a rental property and you don't want to be a landlord. Maybe you're an accidental landlord who planned to sell years ago but got stuck and now you just want out. Maybe the property cash flows fine but the tenant calls give you anxiety and you'd rather invest in index funds and sleep better.

Those are valid reasons to sell even if the calculator says "keep." Money is a tool, not a goal. If selling and paying the tax bill improves your life, do it. Just go in with your eyes open about what it costs.

Conversely, if the calculator says "sell" but you love owning the property, the neighborhood is improving, and you think the appreciation estimate is too conservative, trust your judgment. The calculator uses the inputs you give it—if you believe the future is brighter than the numbers suggest, adjust the inputs and see if that changes the recommendation.

Related reading

• Inherited rental property: should you keep renting it or sell? — A deep dive into the unique considerations when you inherit a rental property with tenants in place.
• Becoming an accidental landlord: what to do when you can't sell your property — What to do when you need to move but can't sell your home, and renting becomes the default option.
• Depreciation recapture on rental property: what happens when you sell — How depreciation recapture works, what tax rate applies, and strategies to defer or minimize the tax hit.

Use the calculator

Ready to run the numbers on your property? Use the Buy vs. Keep vs. Sell Analyzer to compare your options side by side.

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If you're managing rental properties, ManorKeeper automatically tracks your property purchase price, improvements, and annual depreciation so you always know your adjusted basis and potential recapture exposure. See how accounting works in ManorKeeper.