Malaysia, with its booming cities like Kuala Lumpur, Penang, and Johor Bahru, offers a myriad of opportunities for property investors. And if managed well, rental property investments can indeed become a reliable source of passive income. So, here are seven tips tailored for you to ensure your property rental venture is successful.
Location is Key in Rental Property
In Malaysia, certain areas are always in higher demand.
Places close to LRT and MRT stations, popular shopping districts like Bukit Bintang, and educational institutions such as the University of Malaya are examples.
What you’ll want to look out for is the potential tenant base: students, working professionals, or families.
For instance, properties in Cyberjaya are sought-after by tech professionals and students attending nearby universities. Whereas properties in Bangsar, attract both expatriates and locals due to its cafes, international schools, and connectivity.
Understand the Local By-laws and Regulations
Each state in Malaysia might have variations in their property laws. For example, Penang has regulations on property ownership for non-Penangites.
It’s essential to understand local regulations, especially regarding rent control, tenants' rights, and maintenance responsibilities.
Another example of this would be that in certain regions, the local councils might have specific requirements for homestays or short-term rentals (think Airbnb).
Overlooking such regulations can lead to fines or even eviction of tenants.
Setting the Right Rental Price
This is because, overpricing can lead to extended vacancies, but underpricing means you're leaving money on the table. Also, consider if the rent includes utilities, furniture, or maintenance fees.
A formula you can follow to determine the right rental price is:
Annual Rent = (Monthly Rent x 12) - (Vacancy Rate x Monthly Rent x 12)
So, if you rent out a property for RM2000/month with a 10% annual vacancy rate, your net annual rent would be RM21,600.
Draft a Comprehensive Lease Agreement
This is crucial. Work with a lawyer familiar with Malaysian rental laws to draft a lease that covers everything from the rental amount, duration, maintenance responsibilities, to terms of lease termination.
It’s also standard practice in Malaysia to ask for two months' rent as a deposit plus an additional half month’s rent as a utility deposit.
Ensure Proper Maintenance
A well-maintained property not only fetches a higher rent but also attracts responsible tenants.
Given Malaysia's humid tropical climate, regular checks for mould, timely paint jobs, and ensuring functional air-conditioning units are essential.
Vet Potential Tenants
Just like you'd vet a potential employee, screening your tenants can save a lot of future hassle.
Ask for references, preferably from previous landlords. Some landlords in areas like Desa Park City even have informal groups to share feedback on tenants.
Consider Hiring a Property Management Company
Especially if you own multiple properties or if you’re based overseas, companies like IQI Global or Bumbung can handle tenant-related issues, and maintenance, and even help in sourcing potential renters.
So, for example, let’s say you own a property in Johor but live in KL. A pipe leakage issue could take days for you to address personally, leading to disgruntled tenants. A property management firm in Johor could handle it within hours.
Renting out property in Malaysia as a source of passive income is a lucrative venture. However, like any investment, it requires due diligence, market understanding, and regular oversight. With these seven tips in mind, you're on a solid path to making the most out of your Malaysian property investment.
Subscribe to our financial newsletter for the latest news, insights, and advice on personal finance, investing, and more. With every email, you’ll gather the confidence and knowledge to make informed decisions to achieve your financial goals.