• Joshua Loo

How Much Commissions For Your Property Agent? [Updated 2020]

Updated: May 28

Whenever you seek the assistance of a property agent, this will be a topic that will come into the discussion. Before you decide on how much commissions to pay your property agent, always factor it into account of your net profit after the eventual sale.


For Example:


Price Bought at: $2,000,000

BSD & ABSD (Assuming 2nd Property, 12%): $304,600

Legal Fees: $2,000

Transacted Price: $2,500,000

Agent Commissions: 2% of transacted price, $50,000 (Inclusive of GST)

True Net Gain: $143,400


This is in regards to a strict sale & purchase, without involving other factors like net rental yield over a longer period of time. Should you seek the assistance of a real estate agent in securing a rental, the overall rental yield will be affected. Let us look at another example.


Price Bought at: $1,800,000

BSD & ABSD (Assuming 2nd Property, 12%): $272,600

Initial Downpayment Incl. Stamp Duties: $990,000 + $272,600 = $1,262,600

Legal Fees: $2,000

Mortgage: $3,269

Rental: $4,000

Agent Fee: $4000 (Equivalent of 1 month rental)


The agent takes 2 months to source for a tenant


$4,000-$3,269= $731


1st Year Net Rental Yield: $731* 10/ $1,262,600 *100% = 0.57%


In the case where you do not enlist the help of a real estate agent, you will most likely take a longer time to source for a tenant due to the limited marketing tools you will have at your disposal.


You take 8 months to source for a tenant


1st Year Net Rental Yield: $731 * 4/ $1,262,600 * 100% = 0.23%


The Difference: 0.57% - 0.23% = 0.34%

0.34% * 1,262,600 = $4292.84


In this case, the difference is marginal, but you will have to take note that there are other fees that were not included such as maintenance of the unit which could further impact your cashflow.




Want to find out if now is a good time to be selling or buying properties? Contact me at Joshua.loo@orangetee.com or +65 96329840 to learn more!




The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's employer, organization, committee or other group or individual. The author does not accept any responsibility whatsoever for any harm or loss arising from accessing or relying on information contained in this blog post.

 

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