Hi Guys
I've said both here and elsewhere that before you count your capital gains you need to inflation adjust them.
This is important because the money you paid at time X for a property is now worth (due to inflation) more at time Y.
This means you get less profit than you expect when you sell a property in a few years time, because the money you spent on it is worth more in real terms than the nominal value that you paided at the time.
The question is how do you work this out if you are trying to decide to sell a property?
Do you take present price, subtract old price then subtract holding costs, taxes & selling costs call that the profit then inflation adjust that amount?
Or do you take present price, inflation adjust old price and subtract this from present price then subtract holding costs, taxes & selling costs and call that amount the profit?
Both methods give you different amounts, but which one is a better representation of what really goes on?
Or if that was too confusing let me know and I will try to provide an example.
Cheers
David
I've said both here and elsewhere that before you count your capital gains you need to inflation adjust them.
This is important because the money you paid at time X for a property is now worth (due to inflation) more at time Y.
This means you get less profit than you expect when you sell a property in a few years time, because the money you spent on it is worth more in real terms than the nominal value that you paided at the time.
The question is how do you work this out if you are trying to decide to sell a property?
Do you take present price, subtract old price then subtract holding costs, taxes & selling costs call that the profit then inflation adjust that amount?
Or do you take present price, inflation adjust old price and subtract this from present price then subtract holding costs, taxes & selling costs and call that amount the profit?
Both methods give you different amounts, but which one is a better representation of what really goes on?
Or if that was too confusing let me know and I will try to provide an example.
Cheers
David
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