Property Flipping: Here’s Why It Doesn’t Always Work

Property flipping is the process of buying a home, making lots of DIY improvements, then selling it. The aim is that you make enough improvements to significantly increase the property value, selling it for more than you bought it for. Also, when factoring in the cost of your improvements, the final sale of the house will still provide you with an overall profit. It’s one of the most common ways of making money from houses, with many people experience exceptional success. 

Nevertheless, there are instances where property flipping won’t work. Lots of things can make this idea fail, but there’s one particular issue we’ll focus on today: taxes. Sometimes, you are charged a tax fee when selling a house, which can take off a portion of your profits. As it happens, we can turn our attention to Malaysia to see this in action. The Malaysian government charges people when they make a profit on their house – and the rate can be as high as 30%! Effectively, you hand over a third of your profits when selling the property, which could end up making the sale turn into a loss. 

This is called Real Property Gains tax, and it does differ for different people in the country. There’s an infographic below that explains it neatly, showing the exact rates depending on who is selling the home. While you may not have a Malaysian property, this graphic does make you think about the rules in your country. After reading through it, you should check out your own property gains tax laws to see if you have to hand over some of your profits to the government.

Infographic designed by: PropertyGuru Largest Property Portal in Malaysia