Ask what a property has to sell for to come out even and most people add the purchase price, the duty and anything they spent on it. That misses two things, and both of them grow.
The first is holding cost: rates, insurance, maintenance, body corporate and the gap between rent and the mortgage, net, every year you own it. The second is that agent commission is charged on the sale price, so the break-even price has to be large enough to cover the commission charged on itself. The break-even sale price calculator solves that circularity rather than approximating it.
What the numbers do over time
Take $750,000 with $20,000 of duty and purchase costs, $15,000 spent on improvements, $16,000 a year of net holding cost, 2.2 per cent commission and $5,000 of legal and marketing to sell.
After one year the break-even sale price is $824,130.88, which needs 9.88 per cent growth. After three years it is $856,850.72, which is 14.2 per cent in total but only 4.54 per cent a year. After ten years it is $971,370.14: 29.5 per cent in total, and 2.62 per cent a year.
Two things are happening at once and they pull in opposite directions. The annual growth rate you need falls steadily, because the fixed costs of buying and selling spread across more years. The total price you need keeps climbing, because holding cost does not spread, it accumulates: $16,000 a year is $48,000 over three years and $160,000 over ten.
The first year is the expensive one
Needing almost ten per cent in year one is the figure that surprises people, and it is why short holds so often lose money in a market that looked like it went up. The transaction costs are front-loaded and symmetrical: you pay to get in and you pay to get out, and a year is not long enough to spread either.
It also explains why the same property can be a poor one-year decision and a reasonable ten-year one without the market doing anything differently. Nothing about the asset changed. The denominator did.
Where the costs actually sit
At ten years, $221,370 of that break-even price is costs rather than purchase price, and most of it is the holding cost rather than the headline transaction items. That is worth knowing before the transaction items absorb all the attention, since they are the ones that get quoted and compared.
For the week to week version of the same figure there is the property holding cost calculator, and for the duty component, which is usually the largest single purchase cost, duty from a bracket scale. Every rate on all three pages is a field you set, because duty scales, commission rates and holding costs vary by jurisdiction and by year, and a number built into a page would be wrong somewhere the day it was written.