Trading Real Estate Can Be Costly

Posted on 21/06/2019  
Trading Real Estate Can Be Costly

Investors considering selling one property and buying another need to consider the high costs of those transactions.

Mark Shorrock, Managing Director of Bluestone Property Management, says the best strategy for most investors is accumulate assets in a growing portfolio of properties, rather than trading in real estate.

One of the key reasons is the costs of buying and selling - and buying again.

“If you’re thinking about selling your investment property, it’s worthwhile considering not only the costs associated with selling the property, but also the out-of-pocket expenses you incurred during the purchase of the property,” Shorrock says.

The transaction costs can seriously erode any capital gains made while owning the property.

A further impact comes from the costs of buying a new property to replace the one sold.

Shorrock provides this case study, based on a typical Brisbane suburban property:

Sale Of Investment Property

Agent Commission (Based on 2.75% inc GST):        $13,750

Advertising:                                                                 $  3,000

Legal Fees/Conveyancing Fee:                                  $  1,000

Total costs:                                                                 $17,750

Investors also need to consider the $16,494 in out-of-pocket expenses they incurred to purchase that investment property:

Purchase Of Investment Property

Stamp/Transfer Duty:                                                 $14,175

Transfer Fee:                                                               $  1,132

Mortgage Registration Fee:                                        $     187

Legal fees/Conveyancing Fee:                                   $  1,000

Total costs:                                                                 $16,494

Total Expense To Turn Over Property

Purchase of Investment Property                                $16,494

Sale of Same Investment Property                             $17,750

Total costs:                                                                 $34,244

Shorrock says that if you’re selling one investment property to purchase another, you can expect to add the additional costs of that transaction, bringing the overall total of purchase/sale costs to $50,738 ($16,494 + $17,750 + $16,494)

We hope that this open and transparent information helps you make educated, well informed and calculated decisions about selling your investment property.

NOTE: Mark Shorrock joins Hotspotting founder Terry Ryder in a free webinar “Why a good property manager matters more than ever – and a worth every cent” on 26 June. Register here 

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