When we are looking at buying a new house, and we are checking prices, we like to see what the previous owner paid, and compare their current asking price, and obviously try to give them as little profit as we can 😉
So, what are the real costs that the home owner might have incurred in buying, and will incur in selling.
Here is an example:
House Cost $420,000
But what might be the REAL cost of the initial ownership of this house:
|$ 420,000||House Buying Price|
|$ 6,915||Government Duty and fees|
|$ 250||Buying Costs|
Then it comes time to sell…
The owner does not want to sell below the cost price, so how much do they have to sell it for?
In this example, the break-even selling price is $447,526, to receive the original cost of $433,724 back.
This increase gives the owner ZERO profit.
|Selling Price||$ 447,526|
|Less Agents Commission||$ 12,802|
|Less Legal Costs||$ 1,000|
|NET result available to homeowner.||$ 433,724|
The overall cost of the buying of the property, with small minor improvements, and then selling, could easily have totaled $27,526 or about 6.6% of the original base buying price.
- If they have owned the house for ONE year that works out at $529 per week cost, before rates, insurance etc (+$60pw).
- If they have owned the house for TWO years that works out at $264 per week cost, before rates, insurance etc. (+$60pw)
It may be cheaper to rent, for short term, even if property prices do rise by 6% or 7% in a year… !!!
Buying a house does not always work well for the short term.