Sell property before loan period?

[Patapon2]

Hi Peeps,

Assuming there is a new launch that I am prepared to purchase for investment purpose.

Purchase Price:$1,001,300.00
Downpayment:$250,325.00
Loan Amount:$750,975.00
Standard Stamp:$24,639
Legal Fee: $3,000
Loan Tenure (years): 30 years

If I plan to sell it off on the 4th years(assuming end of the 4th year) to avoid incurring seller stamp duty, what will happen to the remaining loan?

Outstanding Principal (End of 4th Year): $703,399.88
Monthly Instalment (4 Years Total): $86,251.11

In addition, if I managed to sell off the property at the 4th Year mark, how much would my return on investment be?

Assume selling it off for: $1,200,000
1) pay down remaining home loan: $703,399.88 + $86,251.11 = $789,650.99
2) Agent Commission: 2% of sale price: $24,000
3) Misc Fees (legal etc): $3,000
4) Initial Downpayment & Stamp Duty

ROI is (sell price - purchased price - all cost) / cost price

Sell Price: $1,200,000
Purchase Price: $1,001,300.00
All Cost: Agent Commission (sell) + Legal Fees (Buy & Sell) + Buyer Stamp Duty + Difference between (Outstanding Principal+Monthly Instalment at Year 4) -(Loan Amount) to account for borrowing cost = $24,000 + $6,000 + $24,639 + ($789,650.99-$750,975.00)= $93,314.99

Hence:
($1,200,000 - $1,001,300.00 - $93,314.99) /($1,001,300.00+$93,314.99) =0.1 = 10% or in absolute terms, the profit is $105,385.01



Is my calculations correct? Huge Thanks in advance!

 

[SBC]

Stamp duty is $24,652.

SSD will not be payable after end of 3 years.
Legal fee during initial loan: typically 2.5 to 3k

Your ROI calculation is wrong. Consider purchase purchase, not your cash outlay.

 

[Patapon2]

Stamp duty is $24,652.

SSD will not be payable after end of 3 years.
Legal fee during initial loan: typically 2.5 to 3k

Your ROI calculation is wrong.

Hi SBC,

Amended the figures based on your inputs. I am basing off a spreadsheet to derive the initial figures as provided by the loan officer.

Can share how the ROI should be?

 

[alocacoc]

Should minus off downpayment ?

 

[Mecisteus]

Assume selling it off for: $1,200,000

You assume only the positive?

There is a good chance this property will be 10 to 20% under water in the next few years.

 

[Patapon2]

Should minus off downpayment ?

Hi alocacoc,

Realized my mistake after SBC highlighted it. Have amended it and ROI reduced to 9%

Did I missed out any other fees?

 

[Patapon2]

You assume only the positive?

There is a good chance this property will be 10 to 20% under water in the next few years.

Downside risks do exists, but for now I am assuming that I am able to sell it off at the 1.2M, work out the sums before making the final decision.

 

[SBC]

Think ROI is (sell price - purchased price - all cost) / cost price.

Annualise it to get ROI %.

 

[Patapon2]

Think ROI is (sell price - purchased price - all cost) / cost price.

Annualise it to get ROI %.

Hmmm, this is the part I am getting confused. Since the loan period is for 30 years and I am intending to sell at the 4th year mark, what will happen? I believed the ROI formula above works if I have paid off all remaining loan to the bank?

Read online articles that mentioned the buyer taking over the remaining loan if it's the same bank etc.

 

[Mecisteus]

Hmmm, this is the part I am getting confused. Since the loan period is for 30 years and I am intending to sell at the 4th year mark, what will happen? I believed the ROI formula above works if I have paid off all remaining loan to the bank?

Read online articles that mentioned the buyer taking over the remaining loan if it's the same bank etc.

At 4th year, you must pay back remaining principal to bank.

Don't forget, the buyer will pay your selling price of the property. You assume $1.2M.

So just net off everything including any other potential transaction costs.

List out all the cash flows. Make use of the Excel XIRR function to find your annualized returns.

 

[Mecisteus]

Some of the cash flows are:

1) Initial capital outlay (DP, stamp, comms, etc)
2) Regular monthly mortgage
3) Net sale proceed (Selling price, principal balance, fees, comms, etc)

Then use Excel XIRR.

https://m.youtube.com/watch?v=imMecSjIQcQ

 

[chopra]

i think he jus wan a simple formula (i agree).

roi = profit / cost_including_installment * 100% / number-of-yrs


agree with mike u can use xirr in excel

 

[Patapon2]

At 4th year, you must pay back remaining principal to bank.

Don't forget, the buyer will pay your selling price of the property. You assume $1.2M.

So just net off everything including any other potential transaction costs.

List out all the cash flows. Make use of the Excel XIRR function to find your annualized returns.

Let me figure out the XIRR func before using it. Meanwhile, I have amended the ROI formula based on SBC to do a quick calculation.

 

[cscs3]

Hi Peeps,

Assuming there is a new launch that I am prepared to purchase for investment purpose.

Purchase Price:$1,001,300.00
Downpayment:$250,325.00
Loan Amount:$750,975.00
Standard Stamp:$24,639
Legal Fee: $3,000
Loan Tenure (years): 30 years

If I plan to sell it off on the 4th years(assuming end of the 4th year) to avoid incurring seller stamp duty, what will happen to the remaining loan?

Outstanding Principal (End of 4th Year): $703,399.88
Monthly Instalment (4 Years Total): $86,251.11

In addition, if I managed to sell off the property at the 4th Year mark, how much would my return on investment be?

Assume selling it off for: $1,200,000
1) pay down remaining home loan: $703,399.88 + $86,251.11 = $789,650.99
2) Agent Commission: 2% of sale price: $24,000
3) Misc Fees (legal etc): $3,000
4) Initial Downpayment & Stamp Duty

ROI is (sell price - purchased price - all cost) / cost price

Sell Price: $1,200,000
Purchase Price: $1,001,300.00
All Cost: Agent Commission (sell) + Legal Fees (Buy & Sell) + Buyer Stamp Duty + Difference between (Outstanding Principal+Monthly Instalment at Year 4) -(Loan Amount) to account for borrowing cost = $24,000 + $6,000 + $24,639 + ($789,650.99-$750,975.00)= $93,314.99

Hence:
($1,200,000 - $1,001,300.00 - $93,314.99) /($1,001,300.00+$93,314.99) =0.1 = 10% or in absolute terms, the profit is $105,385.01



Is my calculations correct? Huge Thanks in advance!

You also need to check with bank if there is penalty for early payment.