How To Flip A Property – 4 Essential Tips

Nice picture of a Lake Belva bungalow

Warning: This mini-guide is going to be controversial. With the rapid escalating of prices of Malaysia property being blamed squarely on speculators, the act of “flipping” is quick seen as taboo. In fact, calling yourself a “property flipper” these days is like walking in the backlane of Old Trafford with a Manchester City jersey on your back. You’re just askin’ for a case of severe ass kicking, that’s what.

crazy-baby

There are some instances, however, that flipping seems to be the right thing to do, especially when you are able to secure some properties which are below market value (for our previous guide on how to calculate a property’s fair market price, click here). There may be properties that you may find it hard to rent out (especially when rental yield is taking a severe beating for the past 36 months). You may be able to make some nice chunk on the side too which you can then use to fund your long-term property portfolio building. πŸ™‚

Remember that if you sell a property within three years upon purchase, you’ll need to pay the maximum RPGT rate of 30%. This rate falls to 20% and 15% in the third and the fourth year respectively.

I’ve recently caught up withΒ The Mentor who adopts the “short term cash to fund long term plans” approach to real estate investment, and he has got this to say about how to flip a property in the Malaysia market:-

I’ll only go on full “flipping mode” when the market is on the uptick. This means that it’s easy to unload the properties that I buy – especially when I can find newbie investors who typically do not do their deal hunting thoroughly. This means that they do not expect large discounts because they have been conditioned by the prices they see in the newspapers or online.
The Mentor

This means that if you’re going into the market to look for flipping opportunities, you might want to check if these conditions are fulfilled:-

  • The market is going upwards
  • Availability of motivated buyers
  • Availability of motivated sellers

Tip #1: Get A Kickass Property Agent

Savvy investors have agents bring them deals all the time. If you don’t know any good agents, it’s time to start getting to know some!

I’ve always had a preference for agents who specialize in a certain area (for example, KLCC or Ampang Hilir) and who have ready stock of properties as well as a buyer database to tap into. Those with exclusive deals will usually win out in this game, and it’s your job as an investor to get into the inner circle of these brokers. πŸ™‚

Of course, you’ll only want to work with a property agent with a good work ethic, and is able to knowledgeably advise you on the market conditions (especially on the selling price). Developing relationship with a small number of agents will make sure that they push your property a little harder.

If you’d like to use my contacts to get in touch with good agents (who I work with regularly), then check out the GoodPlace DealMatcher service.

Commissions are fixed in this business, but you can be creative on some other ways that you can sufficiently “motivate” your agent to work harder for you. πŸ˜‰

Tip #2: Run The Numbers

The Mentor is a conservative flipper (and that may be the reason he is successful), and his rule of thumb when it comes to choosing a property to flip is this:-

If I am going to flip a property, I’m going to only look at properties which are priced 30% less than the fair market value.
The Mentor

The 30% margin is indeed huge, but you’ll need some buffer for the following considerations:-

  • You’ll need to “pimp the place” to make sure that it looks sell-able (see the next tip)
  • You’ll need to hold on to the property until it gets sold off (depending on the hotness of the market)
  • You’ll want to sell the property at slightly below market value (~5%) so that it appeals to the buyer

If you need help finding undervalued properties, you may want to check out this guide. Also, use this sample calculation on valuing a property to help you figure out the pricing baseline.

Tip #3: Pimp The Place

More often than not the best “under market price” properties that you can buy will look like, well, crap (that’s why they get unloaded cheaply in the first place). This means that you’ll need to dress them up so that they look appealing to the buyer.

Property viewing is often more emotional than rational. Homes which have been “dressed up” routinely commands +10% premium over old and tired units in the same area. Cosmetic improvements work, and deliver good returns.

Remember to set aside a budget to do some minor touch-ups or even apply a fresh layer of paint to brighten up the place. Freshen up the living hall with deodorant (remember – first impression counts) and remove the rubbish from the front yard. Also, the kitchen is important especially if the prospective buyer is female – make sure it’s clean and tidy.

Tip #4: Stay In The Game

The Mentor’s final piece of advice was simply: “to win the game, just remain in the game.”

Sidenote: Read my previous conversation with The Mentor on branded residences in Kuala Lumpur.

Given the lackluster Malaysian subsale market, your property won’t get sold that quickly under normal circumstances. This means that while holding on to the property you will need to cover some costs. These are, for example, maintenance, minor repairs, interest on the home loan, etc. The longer it takes to sell off the property, the higher the holding cost will be obviously.

The sales cycle time can be drastically different even between adjacent locations. For example, some newer KLCC condominiums that were launched last year got sold off pretty quickly (1-2 months) although the average KL condominium usually takes 4-24 months to be sold.

Again, ask your agent about the duration of the sales cycle, or make a trip down to JPPH to look at transactional records. Do take note that the JPPH may take a couple of weeks (and sometimes months) to update its transaction database.

About Khai Yin

When I am not writing for GoodPlace.my and helping my readers find properties though the DealMatcher service, I spend time doting on my three kids: Wenyi, Qinyi and Eian. My personal stuff, some published essays and contact details can be found at khaiyin.com

Comments

  1. david lim says:

    Send me more property tips

  2. david lim says:

    more tips???

  3. hi, could you give some advise or perhaps write an article on wholesaling property in Malaysia? that would be very useful!

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