Buying and selling apartments as an investor sounds quick and easy but the costs associated with doing so usually mean they are better off being held as long term investments.
The reason for this lies in the fact that once you’ve bought and sold an apartment dwelling, the costs involved can equate to around 10 per cent of the value of the investment.
The costs for buying an apartment depend on whether you’re an Australian citizen or foreign buyer, which state you live in, and whether or not you’re a first home buyer or an investor.
Wood Property have laid out a hypothetical example to help better understand the costs associated with buying and selling an apartment, using a typical $600,000 apartment being bought by a local resident investor.
Costs to buy a $600,000 apartment
- Stamp Duty – $31,070
Stamp duty is a government charge and the biggest cost facing an apartment buyer.
- Conveyancer – $1,250
A conveyancer acts on behalf of the buyer in the formal transaction process and provides legal advice.
- Buyers advocate
The prices vary for employing the services of a buyers advocate and they are generally used for bigger purchases than small apartments but if a buyer does pay to use one then it’s another cost added to the transaction.
- Building inspection – $400
Again, building inspections are more common for larger house investments rather than apartments but they still get used from time to time and particularly so with older apartments.
- Finance costs – $500 – $1,000
Investors using finance to buy their apartment face borrowing costs such as a mortgage application fee, valuation fee, registration of title fee, lenders mortgage insurance and accountants fees if using their advice.
The total buying costs in this example finish up at around $33,000, which is just over 5 per cent of the apartment’s value.
Costs to sell a $600,000 apartment
Unlike buying, where costs come at you only once you’ve made the purchase, selling comes with upfront costs that are incurred before the sale has taken place.
Marketing and conveyancing costs are a burden the seller must bear before the apartment has been sold, and on top of this, the seller may also lose rental income if the apartment lays empty during the selling period.
- Marketing Costs – $6,500
Most marketing costs are associated with putting an apartment up on a website such as realestate.com.au or domain.com.au. Other marketing can include photography, brochures and social media advertising.
- Staging – $4,000
Many real estate agents swear by staging, which is paying to hire beautiful furniture and effects that suit a property and make it look its absolute best on the internet in its photos and during property inspections.
- Conveyancing – $1,250
A conveyancer prepares the contract of sale before the marketing of the apartment.
- Agency fee
The real estate agency fee for properties costing $600,000 is around 2.2 per cent of the sale price.
The total selling costs in this example finish up at around $24,950, which is just over 4 per cent of the apartment’s value.