Which one are you? Property keeper vs Property flipper

Which one are you? Property keeper vs Property flipper. We are often told to always discover and understand ourselves as a human. But when it comes to property investment, are you aware what type of property buyer or investor you are? Say you are interested to invest in a condominium located in Bandar Sri Damansara, do you buy to keep for few years for the property value to increase or do you buy to flip the condominium price immediately? However, given by the opportunity and right timing, you could be either a keeper or flipper, depending on the market and situation. Here are some differences that should be able to distinguish your property investment patterns and style. Which one are you? Property keeper vs Property flipper. 

Let’s begin with property keeper.

Symptoms of a keeper

• Focusing on passive income on monthly basis
• Has the patience to wait for the property value to appreciate
• Has the interest to manage property and leasing out the property

A keeper does not mind having the hassle to manage properties on hand as their priority is to increase their wealth by keeping their property for long term. While waiting for their property price to appreciate, they will use their property to generate passive income for them by leasing out the property and collecting rental.

Keeper’s type of property

• Rental rate of return fetching higher than 6%
• Prefers high-rise developments such as condominiums and apartments
• Does not mind a fixer-upper that results higher rental yield

Keeper’s type of favourite property is high-rise residential developments. Apart from condominiums or apartments, they are also looking into SoHo, SoFo or maybe service residences and as long as they can fetch rental return that’s higher than 6%. Besides, they might enjoy renovating or repairing the property so they are able to fetch higher return for rental or capital gain in the future.

Amount of gain

Purchase price: RM500,000

Monthly rental: RM3,000

Yearly capital gain (Not inclusive of other expenses, such as assessment tax, quit rent, maintenance fees and other fees)

= (RM3,000 x 12 months) / RM500,000 x 100

= 7.2% rate of return     

The type of return that keepers are interested is the capital gain during the waiting for the property value to increase. However, the calculation for yearly capital gain has not included the taxes and fees paid for the property, the rate of return could be lower, as long as the rate is higher than 6%, that would do.

Here’s property flipper diagnosis

Symptoms of a flipper

•     Typically a real estate investment beginner who is looking to build up or roll their wealth from profits of buying low and reselling higher
•     Willing to pay for Real Property Gain Tax (RPGT)
•     Finds managing property or dealing with tenants is a hassle

A typical flipper is always on the fast lane in building their wealth. They always carry the concept of buy low and resell higher in property investment. They would prefer to sell their property within few years and they are even more willing to pay for RPGT. Besides, they prefer to be fuss free when dealing with their property investment, the lesser hassle, the better.

Flipper type of property

• Properties that have the potential to have high capital appreciation or gain in the shortest amount of time
• Properties that require minimal cost of cosmetic work instead of major structural renovation or repairs
• Properties that urgently needs to be sold

Flipper tends to invest in properties that can give them high capital gain in short period of time. Due to their hassle free preference, their property requirements got to have minimal works and also less cost. Lastly, they don’t mind to look out for properties that needed to be sold urgently, flipper have the bargain power to negotiate for much reasonable and lower prices.

Amount of gain

Purchase price, 6 years ago: RM700,000

Current market value: RM900,000

Capital gain (One time)

= RM900,000 – RM700,000

=RM200,000 capital gain (one time)

= (RM900,000 – RM700,00) / RM700,000 x 100 = 28.75% over the initial capital

*Assuming there is no RPGT involved as has surpassed 5 years, but the capital gain can be lower due to RPGT, click here to check the RPGT rates

In the calculation for flipper’s gain, they are more into capital gain instead of rental return. But the return rate could be lower as there are no fees involved. Hence, the capital gain could be much lower and also consider that the RPGT is 0% as the selling period is after 5 years.

You don’t have to be fixated to be either one of them because it depends on your capability, economic situation and property market. The bottom line is to be objective with your investment mission and decide on your strategy before investing in property.