Just when you think you have made that tidy profit "flipping"...

By The Folks @PropTalk - January 20, 2010 1 Comment

Let's say you have bought a 1000sqft apartment in a new project (unconstructed) for $1.25 million back in September 2009, and have taken a loan of $1 million from the bank to cover the purchase.

You realize today that in just four months, the price of the unit has jumped by $150/sqft. This means you have made a cool $150K in profit! So you decide to engage an agent and managed to sell the apartment for $1.4 million.

Before you head out and start spending that $150K, here are some food for thought:

Buying Price of unit: $1,250,000
Selling Price of unit: $1,400,000
Profit: $150,000

HOWEVER, you have to pay
Agent's Commistion (usually 2%): $29,960 (inclusive of GST)
Stamp Duty you paid on purchase:  $32,100
Penalty for undisbursed loan (assuming 100% undisbursed at 1%): $10,000
Legal fee (on purchase): $2500
Legal fee (on sale): $2500
Stamp fee: $502
=======================
Nett Profit: $72,438
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So the supposed $150K profit has suddenly shrunk by more than 50%. Some may argue that 70 grand over 4 months is still pretty decent money, but the sale is definitely not as fantastic a deal as originally perceived....

Pardon us if we are stating the obvious here, but the math has recently dawned on the wife and I when we had the chance to ponder over a similar deal. Hopefully, this may set some of you thinking too.

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1 comment to ''Just when you think you have made that tidy profit "flipping"..."

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  1. This is an eye-opener. Maybe you can create an excel sheet with all the itemised costs and formulas built into it and let your viewers/fans download it for use? It would be really helpful. Thanks!
    EQ

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