In the property market, there are two types of property investors, a flipper and a buyer. What’s flipper? A flipper is a property investor who purchase properties for profiting purposes by turning a quick resale profit, capital appreciation, within a year. As for property buyer, they are also as known keeper that holds the property at least a year. Regardless of the properties that you buy, a condominium in Selayang or a luxury penthouse in KL City Centre, if your intention is to reap profits from capital gain, you’re a flipper but if you’re awaiting for opportunity to arise, you’re definitely a buyer/keeper. Apart from that one year interval for selling behaviour, there are other criteria to determine a real property flipper and property buyer.
Property Flipper
Behaviour
- They hold their principles strongly on ‘Buy low sell high’ where they build up their cash to roll their real estate investment.
- They are willing to pay for Real Property Gain Tax (RPGT).
- They are not keen to handle properties and dealing with tenants.
Preferred Property
- Properties that have the high potential in capital gain or appreciation in short time.
- Properties that do not require tedious and minimal cost for renovation rather than major repairs.
- Most of their properties to be sold in urgent.
Gains
Year 2010, Purchase Price = RM500,000
Year 2015, Selling Price = RM 680,000
Capital gain (ONE TIME)
= (680,000 – 500,000) / 500,000 x 100
= 36%
However, if they are required to pay for RPGT, the amount of capital gain could be reduced. Click here for the updated RPGT table.
Although, it may look lucrative to be property flipper especially when the market or area has demand and high population that needed residential properties in Selayang or Cheras. But not all property flippers are always in their bed of roses, they are always constantly under pressure from the banks or even worse, the downturn of property market. That’s when they start freaking out and chase the time to quickly sell out the properties. If they are not sensitive enough towards the property market, they will slip and fall from the cycle. They have to be cautious and observant with the price movement of their property and the area. If they sensed there’s something not right with the market situation, they got to have backups and react fast as property transaction make takes up to months or year to complete.
What’s property buyer’s traits?
Behaviour
- They are monthly passive income earner.
- They have patience to wait till properties price appreciates further.
- They wouldn’t mind to manage properties and tenancy matters.
Preferred properties
- Have potential to fetch higher rental returns more than 6%.
- Most of the property types are high rise such as apartments or condominiums.
- With the result of higher rental yield, they can fix the flaws.
Gains
Purchase price = RM500,000
Monthly rental = RM2,600
Capital gain (YEARLY)
= (2,600 x 12) / 400,000 x 100
= 7.8%
Have not included other expenses like assessment, taxes, quit rent, maintenance fees and etc into the capital gain.
While the number for yearly gain may not look as attractive as the one time capital gain but usually the property buyers are the far-sighted and have patience to wait and manage properties. They are fine with managing tenants and their agreements as their annual affairs. With a good location and strategic place, the property buyer don’t see the reason why must they sell their properties in the hurry and keep it to earn some monthly side income. Furthermore, if you’re in the good run, you may earn high monthly wage for yourself. For example, renting out your condominium in Selayang as it is near to school could generate demand for families who are looking to stay near the schools.
Eventually, not all property flipper flips all the time and not all property buyer keeps everything. If they are sensitive enough towards the property market, it’s always a cycle. If a regular flipper or buyer are aware of the market, they will transact or react according to the market unless they see potentials in the property and location that’s commensurate to the demand and supply of the market. Every property investors have their own style and personality when it comes to property investment. Check here out for more investors’ personalities. At the end of the day, property investors would like to ensure they earn their profits and roll their wealth.
