Property Flipping vs Rental Income Malaysia: Which Strategy Wins?

Property flipping looks spectacular on paper. Buy at RM400,000, renovate for RM50,000, sell at RM550,000. Profit: RM100,000. Except RPGT takes RM30,000 if you sell within three years. Agent commission takes RM16,500. Legal fees take RM5,000. Your actual profit is RM48,500 — and you spent 6-12 months of active work to earn it. Meanwhile, the buy-and-hold investor next door collected RM24,000 in rent from a similar property, paid almost zero tax, and still owns the asset.

RPGT is the flip-killer in Malaysia. This guide compares flipping vs rental income with real numbers, shows when each strategy makes financial sense, and introduces the hybrid approach that gives you the best of both worlds.

Flipping: The Numbers Nobody Shows You

Flipping means buying a property, adding value through renovation, and selling for a profit within a relatively short period. The profit comes from the gap between your all-in cost and the sale price.

The RPGT Problem

Real Property Gains Tax (RPGT) is applied to the profit from property sales. For Malaysian citizens:

For permanent residents, rates are identical. For non-citizens and non-PRs, rates are higher (30% for years 1-5, 10% from year 6).

The 30% rate in years 1-3 is brutal for flippers. A "quick flip" — buy, renovate, sell within 18 months — loses nearly a third of its profit to tax before any other costs.

Worked Example: The Flip

Now subtract selling costs and RPGT:

You invested RM484,000, worked for 6-12 months, and walked away with RM25,200. That is a 5.2% return on capital — barely better than a fixed deposit. And it required active work: finding the deal, managing renovation, marketing and selling the property.

What If You Wait Until Year 6?

If you hold until year 6 (0% RPGT for citizens), the same scenario improves:

But if you hold for 6 years, you are not really flipping anymore. You are buy-and-hold with a renovation component. At that point, you might as well collect rent for those 6 years and sell when it suits you.

Rental Income: The Slow and Steady Numbers

Buy the same RM400,000 property. Renovate it. But instead of selling, you rent it out.

Worked Example: Buy and Rent

Post-renovation rental rate: RM2,200/month (5.9% gross yield on RM450K total cost).

In year one, the rental property is slightly cashflow-negative. But here is what happens over time:

By year 10, you are earning RM1,105/month net — RM13,260/year — and you still own the property. Assuming 3% annual appreciation, the property is worth approximately RM537,000. Your equity position:

• Property value: RM537,000
• Remaining loan: ~RM295,000
• Equity: RM242,000

Plus you collected ~RM49,000 in cumulative net rental income over 10 years.

Total return over 10 years: RM291,000 on RM106,000 cash invested = 275% total return = 14.2% annualized.

Compare that to the flipper's RM25,200 profit in year 1.

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Side-by-Side: Flip vs Rent Over Different Periods

Same property (RM400K purchase, RM50K renovation, post-reno value RM550K).

Flipping wins only in the very short term (under 2 years), and even then the margin is thin after RPGT. Rental dominates from year 2 onward — and the gap widens exponentially.

When Flipping Works

Despite the RPGT headwind, flipping can be profitable in specific situations.

1. Severely Undervalued Properties

If you buy at 30-40% below market value (lelong, foreclosure, distressed seller), the built-in margin absorbs RPGT and selling costs.

At 30-40% below market, the flip margin is large enough to justify the RPGT hit. But finding properties this far below market requires skill, connections, and often cash-only purchase capability.

2. Structural Renovation Adding 30%+ Value

Not cosmetic renovation — structural changes that fundamentally alter the property's value. Converting a shophouse ground floor into premium retail space. Adding a mezzanine floor. Reconfiguring a large apartment into two smaller units (where legally permitted).

These transformations can add 30-50% to property value, creating a profit margin that survives RPGT.

3. New Launch Flip (Subsale Before Completion)

Buy a new launch at developer price. Sell the SPA before completion (subsale of the agreement). No renovation needed. Profit comes from capital appreciation during the construction period (2-4 years).

Risk: if the market softens during construction, you cannot exit without a loss. This strategy works in rising markets and fails spectacularly in flat or declining ones.

4. Year 6+ Flip (0% RPGT)

Buy, renovate, rent for 6 years, then sell at 0% RPGT. This is technically a flip in slow motion. The 6-year holding period eliminates RPGT entirely. You collect rent the entire time. And the property has appreciated for 6 years.

This is arguably the best strategy — but it requires patience and the willingness to be a landlord for half a decade.

When Rental Wins (Most Cases)

Rental income wins in the majority of scenarios because:

1. No RPGT on income. Rent is taxed as income (at your marginal rate), but deductions reduce taxable rental income to near zero in early years. Flip profits are taxed at 15-30% with fewer deductions.

2. Leverage continues working. Each year, your tenant pays down your loan. Equity grows without additional capital from you. A flipper must deploy fresh capital for each new project.

3. Compounding rent increases. Rent grows 5-10% every 2 years. Your mortgage stays flat. The gap widens every year, eventually generating substantial positive cashflow.

4. Tax efficiency. Loan interest, maintenance, insurance, depreciation — all deductible against rental income. Flippers cannot deduct these against RPGT (only acquisition cost and renovation costs are deductible from the gain).

5. No selling costs. You avoid agent commission (2-3%), legal fees, and the time/stress of marketing and negotiating a sale.

The Hybrid: BRRRR Strategy for Malaysia

BRRRR stands for Buy, Renovate, Rent, Refinance, Repeat. It combines the best elements of flipping (value-add renovation) with the best elements of renting (ongoing income and asset retention).

How It Works

1. Buy below market value or a property with renovation potential
2. Renovate to increase the property's value and rental appeal
3. Rent to a tenant at the new, higher rental rate
4. Refinance based on the new, higher valuation — pulling out your renovation capital (and sometimes your original downpayment)
5. Repeat with the recovered capital

Worked Example: BRRRR in Malaysia

You now own a property worth RM480,000, generating RM2,200/month rent, with only RM19,000 of your own cash tied up. Your cash-on-cash return is extraordinary. And you have RM69,000 freed up to repeat the process.

BRRRR Risks

• Refinancing stamp duty. You pay 0.5% stamp duty on the new loan amount (RM1,920 in this example). Factor it in.
• Valuation may not meet expectations. If the bank values the property at RM420,000 instead of RM480,000, you recover less cash.
• Renovation cost overruns. Budgets frequently blow out by 20-30% on Malaysian renovations.
• Lock-in period penalty. If your original loan has a lock-in period (typically 3-5 years), early refinancing triggers a penalty of 2-3% of the loan balance.

Decision Framework

For RPGT details and rates, read our RPGT guide. For lelong buying process, see our lelong guide. For understanding rental yield, check our yield calculation guide. To calculate RPGT on a potential flip, use the RPGT calculator. And to model rental cashflow, use the cashflow calculator.