Property flipping

  It is no question as into how would people keep their value of money. The clue of it is in this quote: "Everyone wants a piece of property. It's the only sure investment. It can never depreciate like a car or a washing machine. Land will double it's value in 10 years.In Less than that. Land is going up every day" 
So smart people will "preserve" the value of money in properties i.e land.

  There is no doubt about it that successful people would keep the value of money by investing it in a property be it residential or commercial. While some people would "use" real estate as a "get rich quick" scheme whereby flipping property would ensure fast money (usually within the period of 3 years).  This is more lucrative in the yesteryears before cooling measures were introduced. Today I am going to talk about the pros and Cons of flipping a property. Let us take a look at some statistic about flipping condos in Malaysia

Lets take the new Zenith Kelana Jaya for example
Launching date: End of 2010
The completion date : August 2013

Built up: 710sqft (taking the lowest as a benchmark)
Launching price : 324,150

Pricing as of December 2013: Asking price RM470,000
Percentage of return: 44% within 4 months after completion date

Pricing as of April 2014: Asking price Rm500,000
Percentage of return (first owner) : 54% (8 months)
Percentage of return (after subsales in dec): 6.4% (4 months)

* All prices are based on Iproperty asking prices
* Assume DIBS is in place for this project. Therefore instalment payment only start from the date of completion.
* All computation are based on simple calculation and have yet to take other expenses i.e loan interest, stamping duty, RPGT into consideration.

With only minimal down payment of 10% and all instalment payment are only made after completion with previous incentives like DIBS in place coupled with low RPGT rate it is no wonder why flipping would seem so attractive.

However with cooling measure that had been introduced by the government i.e no more DIBS and increased in RPGT rate, investor should be more aware on the pros and cons of flipping.

Pros
1. Less Risky
   As mentioned above, the pricing of the property is expected to go up (seldom down) and this would have protected time value of money. As compared to other kind of investment like stock market which at times can be unpredictable.
2. High ROI
   The property flipper can make a higher return on investment as seen from the example above.

Cons
1. Liquidity
    Property in the market are considered as illiquid asset. For a whole process of finding buyer to sell your house can take up to 1 year. It might pose as a challenge if the money is needed quickly.

2. Unforeseen circumstances
    Sometimes, there are some of the situation which are out of our control mainly delays of the project. Sometimes situation like increased in BLR rate, net income in borrowing (Bank Loan article), Loan margin income and etc. After all is part of the business and a good buffer of time and money would be required.

3. Other Cost
    Transacting a property would definately incurred expenses like stamping duty, MOT fees, RPGT  penalty fees for early settlement and etc. Those cost have to be taken into consideration. However if those cost are calculated and managed well, a healthy profit margin is still possible.

That's all from me on property flipping, for personalised advice please do email me at jasminbong@reapfield.com . Do like my facebook page and subscribe for latest updates on property development in Klang Valley!!