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Selling Percentage PPOR/IP

Discussion in 'General Property Chat' started by ross100, 11th Dec, 2015.

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  1. ross100

    ross100 Well-Known Member

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    When selling your PPOR or investment property, what percentage of profit will you look at before selling (atleast/minimum) in years.
    example: 2 years - 10% increase sell/hold
    3 years - 25% increase sell/hold
    Hope it make sense
     
  2. pdp

    pdp Member

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    I'll put it in an example.

    IP example (Melb property):
    Buy for $500K (stamp duty, legal, other fees add another $30K) so brings it up to $530K, lets just say you choose to sell in the first year and it's gone up (in a good scenario) better than average 15% year on year (but understand that normal average year on year growth is 5-8%). So year 1 it's worth ~$575K and you sell for this amount.

    Selling costs $20K lets say consisting the below:
    - Agent commission 2% of $575K sell price ~$11K plus advertising ~$3-4K
    - Legal and other discharge fees etc $2K
    - Minor touch up or renovations costs

    Also factor in your holding costs:
    - Lets say it rents for $400/wk, after management fees, water rates, council rates, insurance, land tax etc. you get $15K/yr
    - The bank is generous and borrows you 100% including stamp duty so $530K from the bank IO 4.5% repayment for the interest only part would be ~$24K/yr
    - That means you're ~$9K out of pocket in holding costs ($24K - $15K).

    So ~$20K (selling costs) plus~ $9K (holding costs) = ~$30K

    $575K selling price minus $30K selling cost and minus $530K PP including all the fees that only leaves you with $15K profit. That $15K profit, 50% of it is $7.5K subject to CGT.

    As you can see it's not worth the hassle to flip in the short term. Unless your property for some reason went up buy a ridiculous amount 30%+ year on year. Buy and hold long term is always the best thing to do. Don't sell unless you have to. Hope this helps.
     
    Last edited: 11th Dec, 2015
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  3. Scott No Mates

    Scott No Mates Well-Known Member

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    @pdp & @ross100 - also add mortgage insurance for 100%.

    You'd be scratching to make a profit.
     
  4. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    ^ ^ this!
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Selling can be good in some situations. It can help in debt recycling and can incorporate getting rid of a lower performer for a property with more potential. Don't forget spousal sales.
     
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  6. ross100

    ross100 Well-Known Member

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    Great example PDP that's answers it all...
    one thing to clarify when you say year on year that means it has to hit 5-8% average rise each year and not look at for example 15% rise in 5 years