On paper, Darius’ property sale looks impressive.
Sale price: $1,100,000
Loan outstanding: $736,250
Equity/profit on sale: $363,750
But that’s not the money Darius actually walks away with.
With rent remaining at $470 per week, the property generated an annual pre-tax cashflow loss of $8,329. After allowing for Darius’ tax position, his estimated cashflow losses were:
2021: -$5,200
2022: -$4,600
Then there are the other costs:
* Stamp duty originally paid: $30,000
* Purchase costs: $4,100
* Agent commission (2.5%): $27,500
* Fixed-rate break fee: $3,000
* Sale marketing: $7,000
* Conveyancing: $2,500
* Mortgage discharge: $1,000
* Estimated capital gains tax: $60,000
The real result?
$363,750
less $9,800 after-tax holding losses
less $75,100 purchase and selling costs
less $60,000 CGT
= $218,850 estimated real profit
That’s almost $145,000 less than the headline $363,750 figure.
Darius has still achieved a strong result - but it demonstrates why investors should look beyond the difference between their sale price and outstanding loan.
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