Scared of RPGT but willing to wait and risk?

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An old friend called me up the other day. He had just got the keys for his brand new condo and he was thinking if he should sell or rent. To escape from paying Real Property Gains Tax (RPGT), it is 3 years away. To sell now, the agent was telling him that he could get RM500,000, maybe slightly more. He called up his bank who told him that based on current valuation, the property is worth over RM400,000. He said his main worry is that he would have to pay RPGT which could be as high as RM30,000. I laughed and I told him that if it is up to me, I would sell IF what the agent told me is true.

To rent out will not be easy, it would take some renovations not to mention the possibility of lower rental because now nearly every of the completed units may be put up for rent as well. Renovations would certainly need more money which would never be on top of the price that he could sell in future. To rent out empty unit meant that the type of people renting is more often the ‘lower’ end instead of those willing to pay premium for a fully furnished unit. I have never rented empty unit thus far, preferring to rent out fully furnished.

To wait for three more years to skip RPGT is likely to yield nothing, much. Assuming RPGT is RM30,000 and the wait is three year, it meant RM10,000 per year. Assuming the property is now valued at RM400,000 by the bank and it appreciates 5% per year, after three years, it would be valued at RM460,000. This is still lower than what the agent told him the condo could sell for. If he is willing to pay that RM30,000 he could sell it for slightly over RM500,000 and the proceeds could have been reinvested into another property or any other investment instruments. No idea what would happen but three years later, it should easily have exceeded what he paid for in the RPGT.

He also said he was worried the buyer would not be able to obtain the loan since the bank said the said condo’s value is merely RM400,000 instead of the RM500,000 potential sale price. I told him that buyers of today may not be buying it by himself. My Penang’s condo was sold to a lady whose father paid cash for her. My brother’s lawyer friend told me that she had just handled a RM300,000 property where the father was buying in cash for his son. If the agent is honest and it could be sold at RM500,000 the last person to worry should be my friend. I said, there are LOTS of other reasons why people are willing to buy at RM500,000 too. Those OTHER reasons is not for him to worry or know. He laughed and agreed.

I have no idea what would be his final decision but based on the above scenario and I am the one deciding, I would sell. There’s a saying that a bird in hand is worth more than two in the bush. Plus, the surplus money from selling can easily help us to earn more money. There’s no need to keep thinking of the ‘loss’ but think of what’s the potential ‘gain’ instead. Disagree? Well, one can continue to keep and save that RM30,000. No losses, just a different decision, that’s all. Happy deciding.

written on 21 June 2015

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1 thought on “Scared of RPGT but willing to wait and risk?”

  1. It is agreed that to release the property might be better approach in lower risk for long term instead of keep holding on it due RPGT concern, instead, your friend may also need to consider interest rate imposed by bank as well to evaluate the risk if you keep your property, how much the charges are going to be and duration… other than RPGT from government, interest charge from bank is also one of concern to depreciate your net revenue, the longer you keep the property, the more you have to pay to the bank unless your property asset is fully paid in cash. then it would be difference discussion.

    Based on my case, i had one apartment in Tanjung bunga, it was sold off in last 2 years, there was a retired Malaysian who worked abroad for many years and plan to settle down in Penang with Family.during that time, it was quite hard to find a buyer with the asking price as there are few cooling measure had started implemented, market is gradually slowing down, eventually, it was rebated about 2.8% of the asking price, the deal was closed. it was not so bad in fact.

    I recall the decision was made previously, it was a right decision to sell off the property, in contrast, if i would keep the property, the situation is worst now as i have to serve to my loan with monthly interest about close to RM3000, by having a simple calculation, the saving of interest is certainly more than 2.8% rebate being given after 2 years. furthermore, the current market is quite slow especially the approval rate for loan from bank is not so easy, the challenge is.. where is the potential buyer from local, if the property below 1 million, foreign buyer is not eligble, so .. it is getting tough to find a buyer now unless owner would consider to give a big discount. My 2cents.

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