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What is flipping? Is it short term speculation?

A good friend commented the other day that I am a ‘safe’ investor. She said that I am not a flipper. (Also known as a short term speculator). Well, the conversation started with some Facebook campaigns which said that ‘flipping is the best strategy’ for primary market. After some thoughts, I think I am also a flipper. Just that I am not a short term flipper. I am a medium term flipper. Haha. Well, I buy a property, rent them out and sell when the price reaches a number I want and proceed to reinvest into new secondary properties, what should I call myself? An investor? Hmm…
Actually, my personal opinion about rental income is simple. Once we have built a portfolio big enough that the rental alone can cover our current pay, please do not change strategy. Just let it run continuously. However, in the progress towards this goal, if some of the properties have appreciated so much that when I sell, I can use it to buy two more rental properties, I would choose to sell one and buy two more instead. It meant that I have just added one additional property to my portfolio. Perhaps the rental income for these two new ones would not be as healthy as the one I sold. Maybe even a little negative every month! Truth is, I will start to enjoy potential capital appreciation for two properties now instead of one.
Remember, even if our property has appreciated in price, it is just paper gain and if we do not take advantage of this, then that appreciation remains just idle money doing nothing to enhance our portfolio. Relying on just the positive rental surplus of RM300 per month would give us only RM3,600 per year. Saving this amount for 10 years would still not be enough for another new high-rise rental property. Of course, this is applicable to those who still think their rental income is still not sufficient and they are still young enough, perhaps below 40? I think the advantage of doing this diminishes as we get older because we could no longer stretch that loan to as long as we wanted.
Yes, we can sleep well when we are debt free and the home that we stay has been totally paid but I think it’s a huge wastage if I am staying in a house worth RM700,000 that I have fully paid for! I prefer to sleep better, knowing that I am in progress towards financial independence instead of aiming at only debt-free. Please note that this is for me because my friend disagreed which I think is good because we should do whatever makes us sleep well at night. Thats why even before we buy unit trusts, a test is done to gauge how much risk that we can assume. As we all know, some may get a heart attack if the market suddenly fall even if they do not yet need the money.
So, I think flipper is not a term only for the short term speculators. For those, let’s just call them speculators instead. As I am nowhere near my retirement, I think I would still continue to be a medium term flipper. When I am closer to my retirement age, I do not think I would be that adventurous anymore. By then, capital preservation is much more important than risking it all. Happy doing what you are happy for. Do not mind too much what others are doing because many times, it may not be what you are comfortable with anyway.
written on 28 Sept 2015
next suggested article: Speculators, Interest Rates and Over-Leveraging
 

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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