What are the costs of selling property and should you sell if you’re an investor?

Investment property - time to sell?

At some point, you may find yourself asking the question, ‘should I sell my investment property?’  Before doing so, you also need think about the costs of selling property, so you can estimate your costs and be sure it’s really worth selling.

To have an estimate of the costs, you first need to determine the price you’ll be able to achieve for your property (you can read our article here to help you determine the price of your property). Once having established the price range that your property will fall into, you’ll then be able to estimate how much it will cost to sell your property.

The Costs of Selling Property

There are three main costs associated with selling property:

  • Sales commission (estate agent fees)
  • Marketing costs and conveyancing fees (legal fees)
  • Early repayment charges
  • Capital Gains Tax

It will be relatively easy to determine the agent’s fees for selling your property, the marketing costs and conveyancing fees that you will incur. 

Speak to several local estate agents for a guide as to their charges based on your anticipated sale price. Fees and charges will vary depending on your location and whether you appoint one or multiple agents.

If you’re unsure of whether to appoint more than one estate agent, you can read our top tips for appointing an agent.

Speak to solicitors to ascertain their costs and charges for handling the sale of your property. They will likely charge different fees depending on the price of your property.

You’ll also need to speak to your mortgage lender (if you have a mortgage on the property) as there will likely be an early repayment charge associated with paying off the mortgage early.

The primary cost consideration for you as an investor will be Capital Gains Tax (CGT). CGT is a tax that is levied on the difference between the sale price of an asset and its original purchase price. Tax on capital gains is only generally triggered when an asset is sold, meaning even though the asset may increase in value every year, Capital Gains Tax is only paid at the point the property is sold. So, if you do not sell the property, you will never pay capital gains tax.

Many investors may be better off simply re-financing rather than creating a Capital Gains Tax event unless there is a specific reason to release capital from a sale.

Is it worth selling your property? Ask yourself a some important questions first…

For many investors, the costs versus the return will simply mean that the property is not worth selling. Your decision to do so will probably be driven by the following:

  • Is the situation going to change in the market? Would you be better off waiting to sell at some point in the future?
  • Can you do something else with the money you will receive from selling the property. Your exit costs and acquisition costs are likely to be substantial. You are more than likely to be better off refinancing your existing property and purchasing another property with your gained equity. If you do not have enough equity in your existing property you may well be far better off holding off until you are more liquid.

Capital Gains Tax is complicated and can be a substantial cost. Make sure you seek independent tax advice from an accountant before disposing of your assets  

Capital Gains Tax isn’t applicable in certain scenarios in certain countries such as New Zealand, you’ll find more detailed information about property investment in Australia, New Zealand and the United Kingdom in our Buyers Guides.  

We hope you have found this article useful, feel free to comment or ask any questions.  For more information on overseas investment property also check out our other articles.

Important notice:  Proptech Pioneer and its associated companies seek to provide investors with guides, information and tools, but we cannot guarantee this information to be accurate or perfect.  You use the information at your own risk and accept no liability if you rely on this information.   Proptech Pioneer is not a tax advisor, accountant, conveyance, lawyer, financial advisor or mortgage advisor.  You should seek independent advice from independent professionals before making any investment decision