Transaction costs are an enormous consideration when buying or selling real estate. To buy and sell can cost somewhere between 8 and 10% in transaction costs. Unlike renovations or home improvements, transactions costs are dead money. Therefore, your goal should be to limit transaction costs. Its best to only purchase properties that suit your long term strategy, whether it’s your primary residence or an investment.
Stamp duty on a property purchase in NSW is about 4%. On the day you purchase a property, you need it to rise in value before you have broken even. Too many home buyer’s only realise the full extent of transaction costs after they have exchanged contracts.
Time is very kind to the real estate investor, yet transaction costs can destroy the profits if you are speculating on a making a quick buck.
Owner occupiers will benefit from purchasing undercapitialised properties that can be extended overtime, avoiding the need to sell and upgrade. The money saved in transaction costs can be redirected to renovation costs.
A full chapter is dedicated to managing transaction costs in Real Estate Uncovered.