Sorry for my ignorance but I am hopeless with these details.
Just say I bought a unit for 160000. How much do I need to sell it for to not make a loss?
I can't seem to find a complete list of costs.
Thanks in advance for any help.
NathanHard to answer
Costs involved.- Selling commission to real estate agent to sell property
- Original Mortgage set up fees
- Original Mortgage insurance cost
- Break costs if fixed term on mortgage
- Advertising to sell property.
- Legal fees for solicitor
- Holding costs – this is usually the negative gearing cost minus the tax return deduction you get back.
- Capital gains tax (at marginal tax rate) discount of 50% may apply
- Factoring in CPI to work out cost of $160,000 in real terms. eg 3% CPI $4800 or 0.6% = $960
If you want a rough rule of thumb I would say the transaction costs of buying and selling a property are about 10%. So, if you bought for $160, you'd need to sell for $176 to come out in front. This is assuming you haven't spent any money on the property and that you are breaking even on holding costs. This is normally the reason why property is not generally a shortterm investment.
Ok, this may be a stupid question – but why are you so worried about whether you make a small loss or come out even? Is it just a pride thing, so you don't have to say you made a loss on the property?
I would think that if you want to sell the thing, then just sell it. If you can't even work out whether you're making a loss or not (I agree it's tricky) then who cares?
Am I oversimplyfying here??
If you have legitimate reasons for selling, then do so. I wouldn't be too concerned about calculating numbers that are largely irrelevant in my opinion. Personally, I like to hold properties forever. I've only ever sold one property the "traditional" way, and all my other properties I've sold using vendor finance, because it suits my goals better.
Can I ask why you are selling??
Andrew
Thanks guys for the info. It is muchly appreciated and useful.
I am selling for personal reasons Andrew. Got myself into a bit of financial mess and just trying to fix it.
I am not concerned about selling for a loss at all, I decided that I need to sell the property I have for personal reasons and was simply wondering if I would make anything on it from when I bought it.
It's actually not a bad place, you can check it out on homesales.com.au – address is 112/199 sheridan st, carins north.
Positive cashflow property if you can get the interest rate for low enough (which I didn't – and fixed it at the time so can't refinance affordably).
Thanks again all.Andrew, you'll also need to factor in stamp duty on purchase (if any), legals on purchase over and above Duckster's inclusions.
Hey Nathan
I just read your last bit about being fixed interest rate. Im not sure on the specifics, but you may be up for break fees for selling the house as well, similar to refinancing.
Yeah I plan on selling the property but leaving the loan in place until the fixed period is over. I can pay down most of the loan without breaking out of it, and the fixed period is up in bout 18mo or so.
If you have the property as security on the loan then you wont be able to sell and keep the loan – maybe if you can use another property or something else though.
The bank or a broker should be able to tell you for sure though
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