Buckle up because this is about to get mathematical!
You need to work out the total sum of the expenses you incurred while you owned your property, then deduct any rental income received. If the property is your primary residence, deduct a reasonable estimate of the rental that you would have paid had you been renting instead of owning.
For example, consider a house bought 10 years ago for R1,5 million. The table below describes the main costs related to owning a property. Note: These figures have nothing to do with the market value of the property, but you can use them to check whether the market value at which the property might sell will deliver a profit or a loss.
100% bond: The property was paid by taking out a R1,500,000 bond. In reality, most people will fund a portion of their property with cash or savings and take out a smaller bond.
No inflation was taken into account: We used hypothetical numbers; you should use the actual amounts paid for or received over the years.
This person owned the property for 10 years.
So, according to our example, if you bought a house for R1,5 million in 2012, you’ll have to sell it for at least R1,892,390 to break even.
But wait! Don’t forget about the estate agent’s commission… This is negotiable but usually falls into the range of 3.5–7%. If you pay 3.5% commission, you’ll have to sell for at least R1,959,000 to make it worthwhile.
From the example, you can see that one of the main costs of owning a property, besides the purchase price, is the interest you pay on your home loan. Read more about how interest works and what you need to know.
Buying and selling property can be nerve-wracking. But if you do your homework, you’ll feel empowered to make the right call. Good luck!