05-Mar-09 NEW: Sell or Rent Out Calculator
This "Sell or Rent Out" calculator was created specifically for a friend of mine (we'll call her Anthea) who came to me with a problem:
"I bought a buy to let property... Should I sell it now or rent it out ?"
Here's a screen shot: 
The big killer for her is the fact that the service charge is so high, and the rent so low that the mortgage is not even covered thus creating a cash black hole. She's also locked into a fixed rate mortgage with a redemption penalty.
Even assuming a property boom in 5 years time, she's still better off selling now.
There are 2 files here...
One with EXAMPLE values that we played with
One with zero values that you can download and enter your own numbers
Training Video explaining how to use the calculators on ExcelExperts.com:
- This one is for the "Buy or Rent" calculator but the principles are the same
Sell Or Rent Out Training Video:
Enter your own values, make your own market assumptions, and use at your own risk !
| Attachment | Size |
|---|---|
| sell-or-rent-out-zero-values.xls | 63 KB |
| sell-or-rent-out-example-values.xls | 75 KB |
Equity question
Really interesting calculator, thanks so much! In reviewing, I noticed that "equity" only increases by the home price change increasing. This seems to neglect the fact that you've also been paying down your mortgage during the rental period. Does that need to be adjusted or am I missing something?
interest only
hi
It's an interest only calculator because interest only is essentially the same as renting - you will never own the property.
interest only
but the purpose of the calculator is to understand if it is a better financial decision to continue owning for some period of time (but rent the property during that time) or if you should sell the property now. building equity would seem to be a key consideration. i'm not sure i understand your explanation.
interest only
I suppose I could add it, but I don't think it has a significant impact on the results unless there's a large difference between the amount you can earn post tax on your investments vs your mortgage rate.
I think it has to make a
I think it has to make a significant difference, because you're not taking into consideration a key component of the analysis. For instance, if you bought a house today with a $450k mortgage at 4.25% and were trying to make this decision of selling the house or renting it out, at month 60 of that mortgage, you would owe $20k less in principal than you do on day 1. The deeper a buyer is into their mortgage, the more their monthly payments are contributing to principal as opposed to interest, so continuing to adjust your equity in the home seems imperative to me, especially as you get deeper into the mortgage life. I've adjusted this in your model by adding an amortization table of my own, but I was just more trying to understand conceptually why that part had been omitted.
interest only
The model looks at your overall wealth, not your housing equity... so any money you might have spent on repayments is simlpy in your bank account instead earning interest...
interest only
sorry that i'm not understanding. to be more precise, no money from the sale of your house will be in your bank account until you sell that house. to understand your wealth when you sell, you would need to calculate as follows: (sale price less commissions) - mortgage repayment = net cash to seller at close. they way the model is calculating this, you are holding the mortgage amount constant throughout the life of the analysis. however, since you're paying down the mortgage of time, the size of the mortgage is shrinking which makes net cash to seller increase. can you explain how that is incorrect, or how any money spent on repayment is in your bank account until you've sold the house and paid off the loan in full?
protected cells
what's the password to unlock the cells?
thanks
Agreed. This calculator
Agreed. This calculator doesn't let me go to $2,000,000 purchase price. I would love to be able to use it. What's the point in locking it? Will you sell an unlocked version?
Impact of owning on income taxes?
If you are in a high income tax bracket, aren't there income tax benefits of owning that might offset a low or negative cashflow result when just looking at the cash returns from the rental property itself?