Estimates only — not financial, tax, or professional advice.
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What it calculates: Net Profit, Total Cost Basis, Return on Purchase Price.
Updated 5 June 2026 · Transparent assumptions
$65,000 of transaction costs and improvements sit between the two
Selling at $500,000 a home bought at $350,000 looks like a $150,000 gain. It is not. Buying costs of $12,000 and improvements of $15,000 raise the cost basis to $377,000, and $38,000 of selling costs come off the proceeds. The actual profit is $85,000, and the return on the $350,000 committed is 24.29%.
The $65,000 difference is the part people forget, and it is not small. Transaction costs on residential property are high in both directions — agent commission alone typically runs 5-6% of the sale price — which is why short holding periods so often produce a loss on a property whose price rose.
Around 8-10% in most markets, before any gain at all
With roughly 2-4% of costs on purchase and 6-8% on sale, a property must appreciate about 8-10% simply to return what was put in. At 3% annual appreciation that takes three years or more, which is the arithmetic behind the conventional advice not to buy unless you expect to stay at least five.
The calculation is worth running before buying rather than after selling. A household likely to move within two years is usually better off renting on pure cost grounds, however strong the case for owning over a longer horizon.
Capital improvements add to basis; maintenance does not
Improvements that add value, extend the property\u2019s life or adapt it to new use belong in the basis: an extension, a new roof, a rewire, a replacement kitchen. Repainting, fixing a leak and routine maintenance do not — they preserve the property rather than improve it.
The distinction matters twice: for computing true profit, and for capital gains tax, where an improved basis directly reduces the taxable gain. Both depend on records kept over years or decades, which is the practical reason to file receipts for major work at the time rather than reconstruct them at sale.
Everything you paid while owning it, and tax on the gain
Mortgage interest, property tax, insurance and maintenance across the holding period are outside this calculation, and over a decade they usually exceed the profit. Against them sits the rent you did not pay, which is the correct comparison and which this page does not attempt.
Capital gains tax is also outside it. Many jurisdictions exempt a principal residence entirely or up to a threshold, so the taxable position can be zero, but an investment property is usually taxed in full. The profit here is pre-tax, and for anything other than a main home the after-tax figure will be materially lower.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Returns are assumptions, not guarantees. Actual results may vary because of market performance, taxes, fees, inflation, and timing. This is an educational projection, not investment advice.
Published the calculator with its formula, worked example, assumptions, limitations and a bespoke guide, and added an automated formula test suite covering it.
Verified that buying costs and improvements raise the cost basis while selling costs reduce proceeds, so all three lower the reported profit.
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