how you work out your profit or loss on a property transaction?

T

true_blue

Guest
Hi Folks,

My question is how you work out your profit or loss on a property transaction?

Ok say I have this make belief scenario
I have bought a place for 345,000(100% interest only) and want to sell after 3 years, say appreciation rate on average over 3 years is 7%
So after 3 years i would look to sell my flat for

345,000 * (1 +.07)^3 = 422,639.35

So heres the bit that im not sure of, is it as simple as saying 422,639.35 - 345,000 = my profit(ok minus purchase costs,CGT,sale costs etc etc)

or do i need to bring the value of 345,000 if i assume inflation of 5% on average over 3 years to the value of what it would be in 3 years time
345,000 * (1 +.05)^3 = 399,380.63

so 422,639.35 - 399,380.63 = 23,258.73

say CGT of 20% on 23,258.73 = 4651.73

So 23,258.73 - 4651.73 = 18606.98

Say purchase costs of 10,000
18606.98 - 10,000 = 8606.98

Sale costs of 1% of sale price(estate agent for selling it)
8606.98 - 4226.39 = 4380.59

profit = 4380.59.


So just wondering how do you work out whether you made a loss or a profit?? What is the magic formula ;)

Thanks for any help,
true_blue
 
Re: Calculate profit

Check the revenue website - there are specific indexes used for inflation in calculating your CGT liabilities. You can't just make up your own!
 
Re: Calculate profit

Calc something along the following lines


Selling Price............................................423K
Less - Selling Costs (Legal & Auctioneers).......3K
Total.....................................................420

less Purchase Costs ...........345
plus costs............................2

Total.....................................................347

Liable to CGT............................................73
 
Re: Calculate profit

Am I right in thinking you've used the cost of cgt to reduce your profit?

Eh, it doesn't work like that.
 
Re: Calculate profit

Am I right in thinking you've used the cost of cgt to reduce your profit?

Eh, it doesn't work like that.
Click to expand...

What do you mean?
It is called a Capital Gains Tax so you are taxed on the gain you made on the transactions. The transactions also includes purchase and selling costs.

Stamp Duty is also considered an expense and can be deducted from the profit. (I didn't include it in my calc above)
 
Re: Calculate profit

asdfg: So heres the bit that im not sure of, is it as simple as saying 422,639.35 - 345,000 = my profit(ok minus purchase costs,CGT,sale costs etc etc)


?
Maybe I misread it.
 
Re: Calculate profit

For CGT you need to get the property cost index linked. Im not sure what the extra amount is for three years ago but the Calculation is like this

Sale price less costs

minus

cost price plus costs*index link(circa 1.05-not at all sure, check revenue.ie)

equals

liability*20%.
 
Re: Calculate profit

is it as simple as saying 422,639.35 - 345,000 = my profit(ok minus purchase costs,CGT,sale costs etc etc)
Click to expand...

Yes


For CGT you need to get the property cost index linked. Im not sure what the extra amount is for three years ago but the Calculation is like this
Click to expand...

Index linking is no longer available on property bought since 2003
 
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