Scared of RPGT but willing to wait and risk?

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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