July 11, 2026 · 5 min read
Rent it out or sell it: the number most landlords never calculate
Return on equity is the number most landlords never run. We analyzed 580 King County rentals and the median answer surprised us.
Four tenths of one percent.
That is the median cash return on equity in a simulation we ran across 580 King County rental properties, using honest inputs: itemized property tax, insurance, professional management, a maintenance budget, a vacancy allowance, and a real amortizing mortgage payment instead of an interest-only shortcut. The median owner in that group collects rent all year, pays every bill, makes every loan payment, and keeps about 0.4 percent of the equity parked in the property.
Not four percent. Four tenths of one percent. And 43 percent of the properties in the simulation run cash-flow negative once the full amortizing payment is counted.
Why the number hides
Most landlords judge a rental by the deal they made years ago. The property cash-flowed against the purchase price, so it still feels like a winner. But return on purchase price is a historical fact. Return on equity is a current decision, and it is the number that actually describes what your money is doing this year.
Here is the mechanism. When you bought, you likely controlled the property with a modest down payment. Leverage made a small cash flow look like a strong return on the cash you had in. A decade of Puget Sound appreciation later, the equity has grown many times over while the rent grew on an ordinary schedule. Same house, same tenant, same cash flow, but the denominator exploded. The return quietly collapsed, and nothing on the monthly statement announces it.
If you have not run this number since you bought, you are not alone. Almost nobody does. That is the entire point of this post.
The three levers, all of them
Cash flow is only one of three ways a rental pays you, and an honest comparison has to count all three.
The first lever is cash flow: rent minus expenses minus the full loan payment. For the median owner in the simulation, that is the 0.4 percent above.
The second lever is principal paydown. Every mortgage payment retires a slice of the loan, and the tenant funds it. In the same simulation the median owner builds about $7,100 a year in equity this way. It is real wealth, even though it never lands in a checking account. It is also modest next to the equity already at stake.
The third lever is appreciation, and it is the big one. Assume 3.5 percent annual appreciation, roughly in line with long-run regional history, and the median total return in the simulation rises to about 7.3 percent: cash flow plus paydown plus the growth in value. That is a respectable number, and any fair analysis says so plainly. The case for holding is not imaginary. It simply rests almost entirely on this third lever.
Running the number yourself takes ten minutes. Estimate what the property would sell for and subtract the loan balance: that is the equity. Then take a full year of rent, subtract every real expense including management even if you do the work yourself, subtract the entire mortgage payment, and divide what is left by the equity. Do the same for the paydown by comparing the loan balance now to a year ago. Most owners who run it for the first time find a number they did not expect, in one direction or the other.
The comparison worth making
Now run the other side. Suppose the property sold, estimated selling costs came out, the loan was paid off, and the net proceeds were redeployed at a generic 5 percent. That is a placeholder rate, not advice about any particular investment, and you should choose your own.
Against cash flow alone, redeploying wins for 94 percent of the owners in the simulation. Against cash flow plus principal paydown combined, it still wins for 87 percent. The result is not fragile: push all-in selling costs to 11.5 percent and cut the redeploy rate to 4 percent, and redeploying still comes out ahead for 75 percent.
What redeploying does not automatically beat is the total return with appreciation included, because 7.3 is bigger than 5. So the real question is not whether to hold or sell. It is narrower and more useful: do you believe the appreciation assumption, and are you comfortable being paid 0.4 percent in cash while you wait to find out? An owner who answers yes to both has a coherent hold. An owner who hesitates has a number to investigate, not a verdict.
There are also second-order pieces that belong in a full picture: rents change, expenses age with the roof, and taxes on a sale are their own subject. If a sale would fund another property, the deferral rules have a clock that starts earlier than most owners expect; we walk through it in the 1031 clock starts before you sell. And if most of the win is already banked, have you captured the premium? covers that arithmetic.
Where this fits in your journey
None of this says any particular owner should sell. It says the decision deserves a current number instead of a remembered one. A rental bought in 2014 was one investment. The same rental in 2026, carrying five or ten times the equity, is a different investment that happens to live at the same address, and it competes for your capital against everything else you could do with the proceeds. Where that lands depends on where you are in your real estate journey.
Questions worth sitting with
- Is your equity working as hard as you did to build it?
- If you would not buy this property today at today's price, what does that tell you about holding it?
If one of our letters brought you here, your private Property Brief includes a keep-or-sell calculator with your property's numbers already started: go to sellerradar.io/d and enter the code from the letter.
Seller Radar analyzes public-record, property, ownership, and market data to help real-estate professionals identify likely seller opportunities earlier.