Planning to sell an investment property is not just about the sale price. Between your loan payout, selling costs and capital gains tax, the cash you end up with can be very different from the headline number.
This guide walks through the steps, the costs to budget for and how to plan your next move. For the tax side in detail, see our capital gains tax on investment property guide.
How to Sell an Investment Property: 5 Steps
- Check your loan. Ask your lender for a payout figure. Fixed rate loans can have break costs, and there may be a discharge fee.
- Get a valuation and agent quotes. Compare commission, marketing costs and the agent's recent sales in your suburb.
- Estimate your tax. Work out your capital gain using our capital gains tax calculator Australia guide and set money aside for it.
- Plan the timing. The sale date is the date you sign the contract, which decides which financial year the gain lands in.
- Line up your next finance. If you are buying again, get your borrowing power and pre-approval sorted before you sell.
Costs When You Sell an Investment Property
| Cost | What to know |
|---|---|
| Agent commission | Negotiable. Get quotes from at least 2 or 3 agents |
| Marketing and advertising | Photos, online listings, signage and styling |
| Conveyancer or solicitor | Contract review and settlement |
| Loan discharge and break costs | Ask your lender. Fixed rate loans may charge a break fee |
| Capital gains tax | Paid in your tax return, not at settlement |
Selling costs such as agent fees and legal costs can usually be added to your cost base, which reduces your capital gain.
Worked Example: Cash From Selling an Investment Property
| Item | Amount |
|---|---|
| Sale price | $850,000 |
| Less: loan payout | − $450,000 |
| Less: agent fees and marketing | − $20,000 |
| Less: legal and discharge costs | − $2,500 |
| Cash in hand at settlement, before tax | $377,500 |
Capital gains tax is then payable on top, depending on your gain and income that year. See how much it could be in our capital gains tax rate Australia guide.
Illustrative only. Figures vary by property, lender and agent. Speak to a registered tax agent about your situation.
Tax When You Sell an Investment Property
- 50% CGT discount. Available to individuals and trusts if you owned the property for more than 12 months.
- Marginal rate applies. The discounted gain is added to your income, so selling in a lower income year can reduce the tax.
- Exemptions. If you lived in the property first, check the main residence exemption and the 6 year rule capital gains tax exemption.
- No rollover for reinvesting. In Australia, using the proceeds to buy another property does not defer or remove the capital gains tax.
Selling an Investment Property to Buy Another
Many investors sell one property to fund the next. The key is to get the order and the finance right.
| Approach | Upside | Watch out for |
|---|---|---|
| Sell first, then buy | You know exactly how much you can spend | You may miss the property you want while you wait |
| Buy first, then sell | No rush to find the next property | You may need to carry two loans for a while |
| Use equity instead of selling | No CGT triggered, and you keep the asset | More debt, so check your serviceability |
Releasing equity can be an alternative to selling, because it does not trigger capital gains tax. A broker can model both paths. Learn more about investment loans and how to calculate negative gearing on your next purchase.
Common Mistakes When You Sell an Investment Property
- Forgetting to set aside money for capital gains tax.
- Not checking fixed rate break costs before you list.
- Selling just before the 12 month mark and losing the 50% discount.
- Missing cost base records such as stamp duty, legal fees and improvements.
- Buying the next property before knowing your borrowing power.
Selling an Investment Property?
Talk to a Melbourne mortgage broker about your payout, borrowing power and next purchase before you list.
Try Our Free Calculators Book a Free ChatSelling an Investment Property FAQs
How much tax do I pay when I sell an investment property?
Can I avoid capital gains tax if I buy another property?
When do I pay capital gains tax on a property sale?
What costs can I deduct when I sell an investment property?
Is it better to sell or keep an investment property?
This article is general information only and is not tax or financial advice. Speak to a registered tax agent or accountant about your situation.
