Are you trading or investing?

Today I wanted to talk to you about the difference between trading and investing. You see, many people confuse the two so I wanted to help you ensure you won’t make the same mistake, especially when calculating the capital gain on a property.

Trading involves buying and selling something and is about achieving a SHORT TERM gain.

Investing, on the other hand, is a LONG TERM strategy where you don’t sell.

Many people who don’t understand the difference make the mistake of trading and then turn around and say “property is terrible”, when they lose money.

However, as a general rule, if you invest and hold on to your properties it is difficult to lose money in the long term.

When you sell a property and buy a new one you have to pay ‘on costs’ like stamp duty and capital gains tax, which usually add up to around 10% of a property’s value. Here’s an example:

Let’s say you have a property worth $500,000, which achieves a capital gain of $200,000.

You decide to sell it and buy another in order to realise your capital gain.

Let’s say that your on costs are around 10%, or $70,000. Now, instead of achieving a $200,000 gain, you have cut your profit down to only $130,000.

If you held on to the property you would still have the full $200,000 gain.

It makes sense right? Why would you want to lose a huge chunk of your profits, every time you buy and sell your properties?

If you’d like to learn more about trading and investing, please visit:

http://www.RealEstateSecrets.com.au/accountant

Warm Regards

Hans Jakobi – Your Wealth Coach®
Real Estate Secrets