Selling Percentage PPOR/IP

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

 

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.

 

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

You'd be scratching to make a profit.

 

^ ^ this!

 

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.

 

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