Wondering how everyone factors the selling costs of a property into the ROI. I think of the purchasing closing costs as an additional cash laydown when combined with the down payment, but I’m not sure how to account for the selling costs. I tend to take more of a life-cycle approach to my investment analysis, and being able to get out of an investment is important in my view.
To give an example, suppose I purchased a $100k house, with 5% down and $3k of closing costs. Let’s assume that the property never appreciates in value through my ownership period (I’m not generally comfortable making appreciation assumptions), and I make a sale “x” years later, again at $100k, but this time, with closing costs equal to about 7.5% total (with realtor commission being the lion’s share). In transactional fees alone, I’m in the hole by $10,500. Does this mean that I have to have made cash and equity returns of at least $10,500 to break-even? Seems like the break-even time frame would be around 5 years for the average property in my area.
With this view, it’s putting somewhat of a damper on my hopes of RE investment. Am I looking at it the wrong way? Help!