Recently, I met a couple who are preparing for retirement and are unsure whether to sell their home in Seattle or rent it out. They plan to move to another area but haven't decided whether to sell or lease their property.

The median home price in Seattle is approximately $865,000 as of March 2026 (Houzeo). The monthly rent is around $1,925 (Zumper, August 2026). The annual rental income is $23,100, resulting in a total return on investment of only 2.67% when divided by the purchase price.

Seattle is part of King County. The effective property tax rate is about 0.85%, and the median annual tax is $6,745 (propertytaxalmanac.com). When you add insurance, maintenance costs, management fees, and vacancy losses, you arrive at the net operating income. Using the 50% rule, the net operating income would be $11,550 per year, and the cap rate would drop to 1.34%.

If you already own a home like this couple, the remaining mortgage balance is crucial. If there is little debt left, the cash-on-cash return is likely to stay around 1%, similar to the cap rate. Conversely, if there is a significant amount of debt remaining, the principal and interest payments could exceed the net operating income, causing the cash-on-cash return to fall into negative territory.

From a retirement fund perspective, a cap rate in the 1% range is not very generous. However, in areas like Seattle, where home values have risen over time, the appreciation and asset growth often outweigh rental income. If you only consider rental income, you might miss this aspect.

Seattle has significant variations in school districts from neighborhood to neighborhood. There are specific areas preferred by Korean families. However, school district boundaries change frequently, so it's advisable to check the assigned school for the address before purchasing or converting to rental.

According to the 1% rule, Seattle is also far from being purely cash flow positive. 1% of the purchase price would be $8,650 per month, but the actual rent is $1,925, which is only 0.22% of the purchase price. If it's a home you've lived in for a long time, it's difficult to make a decision to convert it to a rental based solely on this number.

Seattle is considered a region where home prices have increased over the long term, despite going through several adjustment periods over the past few decades. However, there is no guarantee that past trends will repeat in the future, so decisions based on appreciation should be approached with caution.

Even within this trend, the rate of increase is not consistent every year. Some years see significant increases, while others may stagnate or decline. Even if you include appreciation in your retirement fund planning, assuming the same rate of increase for a specific year can be risky.

When converting your home to a rental, you also need to change your insurance. You should switch from standard homeowners insurance to landlord insurance, and if you have a remaining mortgage, you may need to inform your lender about the rental conversion.

When selling or converting a long-held home to rental, capital gains tax or tax reporting methods may change. This can vary significantly based on individual circumstances, so it's advisable to discuss this in detail with an accountant before making a decision.

For the couple, I presented calculations for both selling and converting to rental side by side. Selling provides a lump sum at once, while renting offers a steady cash flow each month while retaining the asset. Which option is better depends on their post-retirement living expenses and other asset situations, so rather than deciding on a single answer, I recommended comparing both scenarios.

Deciding whether to sell or rent is not a question that can be answered solely by the cap rate. It's better to compare the accumulated asset growth and future cash flow together. This article does not constitute investment or legal advice, and it is recommended to consult real estate and accounting professionals before making any actual decisions.