How Much Commissions For Your Property Agent? [Updated 2020]
Updated: May 28, 2020
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.
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
Agent Fee: $4000 (Equivalent of 1 month rental)
The agent takes 2 months to source for a tenant
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.firstname.lastname@example.org or +65 96329840 to learn more!
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