Rent & Returns | Malaysia's Most In-Depth Property Investment Blog
Rent and Returns is a property management company that helps property investors handle all of their short-term rental needs virtually hands free. Our aim is to help you reap the most from your rental income without you having to do any of the hard work, such as cleaning and dealing with tenants and guests.
As you’ll soon be able to tell from the data, just like not every creative rental strategy is equal, not every location in KL has been created equal, some have very different Airbnb earnings from others, and just a handful stand out from the rest.
Some Things To Take Note Of
There are a few things to bear in mind though when looking at this data, that this is ONLY earnings from the Airbnb platform (and also Homeaway but if you go to the site, you’ll see that only about 1% of these listings are on Homeaway – This platform seems to not generate much revenue at all at the moment, and is perhaps why more hosts don’t bother to use it).
This is not taking into consideration other high revenue platforms such as Agoda, Booking.com and Expedia. This means that this isn’t the total revenue that one can expect to earn from a unit in these areas – it will be significantly higher.
These other high revenue platforms make up about 30% of the revenue for the units that are under our management. So, we would expect majority of the hosts referenced in this data set to have a significant portion of their revenue come from the other platforms as well.
This data appears to be averaged over a period of 6 months and the current average figures displayed may not be the yearly average.
And, just one last additional thing to note also, is that there are some areas on AirDNA that do not fall into any zone and thus are left out from the data.
With all that in mind, let’s take a closer look at the data and see what it tells us…
Just what are the best areas in KL at the moment for turning it into an Airbnb?
The Top 5 Highest Earning Airbnb Locations in Kuala Lumpur are:
3. Dang Wangi
4. Jalan Cochrane
I think you’d find yourself quite surprised at the data. I certainly was – at first.
After investigating further however, I noticed that the data does tell us an interesting story about just why these might be the Top 5 Highest Earning Airbnb Locations in Kuala Lumpur this year.
Airbnbs in Setapak come out right on top, in first place.
If you look carefully, you’ll notice that the number of Setapak rentals are very low at the moment with just 34 listings but it also has the largest average number of guests at 8.2 per booking.
This combination means Setapak Airbnbs are low in supply and able to accommodate a larger amount of people, allowing higher nightly prices, while holding a decent average occupancy rate of 42%.
Considering there are only a few listings, I believe there is sufficient room for growth of these kinds of large units in Setapak. I also do believe that these kinds of units are in higher demand than it is made out to be.
I presume that this desire for larger units has something to do with the number of tertiary education centers and universities in the area, with the main one being Tunku Abdul Rahman (TAR) college. Uni students often do getaways in larger groups.
It is also important to note that there are some very interesting developments coming up in the area too, like KL Trader’s Square.
Due to the high nightly room rate, these kinds of large units can charge a high price per night, even a low occupancy rate can make sense during the low seasons because you are likely to make back the shortfall during the peak periods.
The proof is right here, in the data on Setapak, that maximizing your number of guests for your Airbnb seems to be one of the most surefire ways to maximize profitability on your Airbnb investment.
Coming in at number two were Airbnbs in Brickfields, which had the highest daily rate despite having a relatively good number of rentals and a lower average number of guests! The occupancy rate is also very decent at 54%.
This implies that Brickfields is indeed very, very popular and is a real hotspot for Airbnbs!
It seems that Brickfields is a huge attraction to tourists coming to KL.
It is probably not the most ideal location for most travelers but it is near enough to KL that people are willing to pay more as compared to staying inside Kuala Lumpur City Center where competition is absolutely insane with a whopping 3538 Airbnb rentals compared to Brickfields 340.
There are numerous articles about Brickfields and Little India that have made it a ‘must-see’ (or ‘must-makan-place’ item) for many western travelers. If you’ve spent any time in Brickfields at all you’d notice that there are an awful lot of tourists.
Brickfields is also right beside KL Sentral which that makes it very desirable for ease of transport throughout the city and also has direct access to transport to the Airport.
This is why I believe Brickfields truly has desirability – in its strategic location.
It is simply a strong post Airbnb hotspot in KL now and I believe it still can accommodate a lot more supply before prices come down.
Airbnb Dang Wangi
Dang Wangi comes in at third place which is actually just an extension of the City Center, Bukit Bintang, Chow Kit and Kampung Bahru.
This part of the city seems to be able to charge more due to the units here being able to accommodate slightly more guests, likely meaning bigger units. This location just seems to be the best and least clustered location in the city center with larger units.
There’s no real need to go over why KL City Center is the Airbnb hotspot that it is. It will always be the largest attraction of any city (almost anywhere in the world), will have the most number of travelers passing through because city centers are normally every traveler’s main point of arrival before they head anywhere else in the country.
What’s interesting here, is that the City Center isn’t the absolute highest earning airbnb location in Kuala Lumpur anymore.
Airbnb Jalan Cochrane
Coming in at fourth is Jalan Cochrane which is a very interesting ‘up and coming’ area! This is the area surrounding Mytown Shopping Center and Sunway Velocity. If you’ve not been to either of these places, you should definitely take a look and avoid doing this during the weekends!
Ikea is also located here and if you’ve not been to Ikea on a weekend, it’s definitely something to experience. (If you have the patience for it) Be prepared for looooong queues and thousands of people everywhere. After anyone who does any renovation or furnishing in Malaysia on their own knows that you can save quite a bit on some of the items sold here.
And surprisingly enough Cheras is in fifth – not a destination most people would immediately associate with Airbnbs but it turns out that it has a very healthy occupancy rate at 58% and a good average daily rate of RM174.
I think Cheras is another area that is certainly very promising already and it is actually the area right around Jalan Cochrane, so it’s very close by to the 4th best area in KL and less than 5km from KLCC. The township is extremely well connected by highways and also boasts 11 MRT Stations as part of the Sungai Buloh – Kajang MRT line.
Cheras also will continue to add Airbnb capacity over the coming years with thousands of units at developments like YouCity and Cheras South and many others.
I believe there’s considerably enough attractions in Cheras to attract travellers whether local or Foreign and it appears to be evident in the fact that Cheras finishes far above a lot of other areas which people might believe to be more promising.
One other area that deserves a special mention are Airbnbs in Pudu. This area has the highest average occupancy rate out of all the other areas in Kuala Lumpur at a stunning 84% from 631 rentals at RM130 per night.
Pudu might not be the most lucrative area but if during the low half of the year, it already has 84% occupancy, there is a lot of demand and possibly even a lack of supply during the peak season.
This could have something to do with the bus station being in the area but with most of the bus companies having moved out to TBS, i’m quite surprised at Airbnbs in Pudu having a crazily high occupancy rate.
It also has one of the lowest average number of guests per stay at 4. High volume of small groups are passing through Pudu on a regular basis.
It’s quite possible that oversupply may continue to bring down prices as a whole but what the data shows is that there not all locations are the same and there will always be places that are simply more in demand than others…
And right now, Setapak and Brickfields look like the top places to be at be with Jalan Cochrane and Cheras, as alternative hotspots to the usual KL City Center.
Airdna provides a wealth more of information through their paid version of Market Minder which are locked and not visible above. If you’re an investor looking to use Airbnb to supplement your rental income, I highly recommend you check it out.
They charge RM300 a month for 18 months of data for all of Kuala Lumpur and if you just want single location data, depending on location subscription starts from RM60 per month for each area.
If you’re looking to make a few hundred-thousand-dollar decision on where to purchase your next investment property, it might just be worth it.
Check them out through our affiliate link here – Airdna.co.
They offer a 7-day money back guarantee so if you’re not happy with your purchase, feel free to get a no questions asked refund from them.
The property market in Malaysia is experiencing a slowdown and long-term rental rates are dismal to say the least. What we need as property investors, is to Maximize Rental Income Using Creative Rental Strategies.
The main issue that property investors face these days is that it’s extremely difficult to cover their property loan repayments by doing things the old-fashioned way and simply looking for a good long-term tenant.
Rental rates are far below your property loan repayments and renters are spoiled for choice. Simple supply and demand dynamics give the renter the power to negotiate on price because there are so many vacant units with owners slashing their prices in desperation to secure a tenant.
After buying a property in the hopes of getting some passive income, are we instead going to become a slave of our own making?
Working to pay off our new bosses at the bank who demand money from us each month if we want to keep our so called ‘investment property’?
What we need to do as investors, is be nimble, adaptable and creative in how we rent out our properties.
We need to figure out how we can Maximize Rental Income Using Creative Rental Strategies.
Just what are creative rental strategies?
Anything other than long-term rental would be defined as a creative rental strategy.
Here are some out-of-the-box ideas on how you get more out of your investment property.
The reason for this is quite simple – the returns beat long-term rental rates in almost every case.
There are exceptions to this though however where certain units may not be suitable due to location or age of the building (or heat from unwelcoming JMBs). In some instances the location is simply not one that is near enough to any amenities or attractive to people for short-stays and Airbnb will not be able give an owner substantial returns. However, when this is the case, rental rates are also normally poor as well.
Let’s take a look at Airbnb as a creative rental strategy to maximize rental income.
We’ll take a look at a real life example of a unit in Putrajaya, or Conezion specifically where we operate about 20 units. (Since everyone only talks about KL City Center when it comes to Airbnb and forgets that outskirt areas have decent potential as well)
Average room rates are about RM160 for a two bedroom unit and average occupancy is about 60% per month. That means returns are on roughly RM2880 per month (gross income) before expenses. Less your utilities (RM200), internet (RM120), you’re looking at RM2560, if you manage the unit yourself.
Compare that to the average long term rental rates for a unit at RM1600 for a fully furnished unit, you’re almost at a RM1000 deficit.
This is quite significant (RM12,000+) when you stretch it out over a year and also note that you get the luxury of having your unit available for your own use, be it friends or relatives when the unit is not occupied by guests.
Most of all, you know that your unit is not being steadily worn away by your long term tenant which is a common occurrence when it comes to long term rentals. You won’t have to set aside another RM20,000 to refurbish your place again once they leave just so you can get a new tenant.
This is also a relatively well-known concept as well these days which involves turning a particular property in a ‘hostel’ of sorts.
Not like the movie, or what most people will have in their mind when you say hostel, the idea is basically making use of partitions to maximize the use of the space of the property to add more rooms which can then be rented out individually.
Thus, maximizing rental income.
Taking the 2D layout of the property and applying some clever hand-drawn lines, you can then split rooms up and add rooms where common areas once were to maximize the use of the space.
The rooms will then be rented out to students or working adults looking for a room to rent. Where there used to be 3 rooms, now could be 5 or where there were 4 rooms, there now could be 7!
It really all depends on the layout and size of the property in question. The more square the unit, the easier it is to divide up the space. It all really depends on how creative you are.
We’ve seen some properties that have been able to triple up their rental yield using this creative rental strategy. One case which we were able to help an owner achieve this, was in Cheras, where we turned his unoccupied 30-year-old, 2-storey, 4 bedroom terrace house into an 11-bedroom unit.
From just RM1700 rental for his unfurnished unit, we were able to increase his rental income to RM5000 per month at full occupancy!
I’ve even spoken to one very savvy property investor who took this concept to the next level and turned entire abandoned block of shop lots into foreign worker quarters plus rented an accompanying canteen and convenience store space, netting her almost 20% yield on her total investment!
Much like the hostel mentioned above, this is the commercial property alternative. As commercial office space has seen a huge downfall in Malaysia in recent years, people have come up with this very creative rental strategy to make use of the vacant lots to rent individual desk space out.
These companies offer some amazing office space for freelancers and entrepreneurs who don’t need a full office space on their own but also want the access to the full amenities that an office space offers such as fast and reliable Wifi, printing facilities, meeting rooms and storage space.
The problem I find with setups like this, is the high up front cost which can actually cost upwards of RM250,000 to complete (at the very least).
The returns can be really good however, as these companies charge hefty fees for tenants to work in these beautifully created spaces.
Prices vary depending on the location but on average they charge:
On top of this, they also have things like daily and weekly passes as well as charge fixed rates for meeting room and event hall use.
Personally, I feel a huge market segment that is being left out, is the minimalist co-working office space without the fancy-schmancy office setup. The average person looking for an office space on his own, might find RM600 a bit steep for a regular office space, especially if he’s just starting out.
On the other hand, I also feel that the person with the commercial property might not want to dump RM250,000 into his unit or even have this kind of spare cash lying around.
I’d say there is a product-market fit for a much simpler facility that would benefit both parties looking for something that operates like this with a significantly lower price tag.
Lower the renovation costs and add value such as free black & white printing services and meeting room use that is on a booking basis and not chargeable, whatever else there is that is more suited for businesses just starting out that can’t afford paying upwards of RM1000 to house its 3 man team for a month at one of these spaces.
Event spaces are reserved mostly for commercial properties and is an alternative use case for spaces where co-working spaces are not suitable. They also should be able to hold a large amount of people or are located in very open spaces.
Some of the venues listed here can go for anything from RM700 up to RM7,000 per night, there’s even a hangar that you can book at Subang for RM18,000!
As you might have guessed though, with single day booking rates like that, designing and building spaces like these are going to be very costly.
Depending on the space however, the costs may be quite comparable to designing one of these upmarket co-working spaces so it could be a very good option for those of you who have significant amounts of cash lying around.
In these difficult times, we need to be fluid in our ideas and methods to make sure that we can reap the rewards from property investing.
The old ways are simply not sufficient for us to get positive cash flow from our investment properties and failing to come up with creative strategies to maximize rental yield will only lead to our own undoing as property investors.
Short-term Rentals, Hostels, Co-working spaces and Event Spaces are unique rental strategies for you to stay ahead of the market and should definitely be given a closer look.
In the Malaysian furnishing market, it’s very common to see overpriced and under-qualified suppliers pouncing on inexperienced property buyers, charging upwards of 50% more than fair value – it brings the question to mind, “How to Avoid Overpaying for Furnishing and Renovation?”
The furnishing cost upon receiving the unit, however, often comes as an unpleasant surprise.
This lack of knowledge and not having the right contacts result in many property investors paying way too much for furnishing. Here’s how to be as smart and cost-efficient about it as you can.
What is Your Intention for the Property?
First, you should decide whether the property is for investment, or if you would be staying there yourself. The reason for this is simple: if you plan to move into the place, then you should not have to set a low spending limit to furnishing the property, that is, if you can afford it.
After all, you and your family will be spending years of your lives in the place. If, however, the property is for investment purposes, then you should be as cost-efficient as you can to maximise the yield, or return-on-investment (ROI).
If you intend to rent the property out for long-term tenancy, fully furnishing the unit would be the recommended option.
Keep in mind though, that fully furnishing a unit for long-term tenancy shouldn’t cost too much, as the priority here is functionality.
To give you an idea, fully furnishing a 2-bedroom, 2-bathroom apartment with existing aircond and water heater units (very common nowadays) should not cost more than RM25,000.
This should include everything from electrical fixtures to decorative items to increase the appeal to potential tenants.
If you do it yourself, with the right suppliers and decisions, you can even get it done for RM20,000 – RM25,000. Do not get persuaded by contractors to install unnecessary, expensive fixtures and high-quality furniture.
Doing this will only minimise your ROI, and very often, long-term tenants will damage them anyway.
If you intend to manage or have the property managed as a short-term rental (eg Airbnb) listing, the furnishing cost increases.
The reason for this is because you would need to purchase slightly higher quality fixtures and furniture to appeal to potential guests.
Additionally, you would need to make your property “Airbnb-Ready”, which means topping it up with items and amenities such as linen sets, a drinking water filter, crockery, cutlery and consumables like soap and shampoo.
Furnishing a 2-bedroom, 2-bathroom unit to be “Airbnb-Ready” should not cost you more than RM40,000, all in.
Doing this yourself can be a little tricky, as many people tend to go overboard on the furnishing and décor, thinking the more they spend, the higher they can charge guests to stay there.
The truth is, guests look for 2 main things: high occupancy (the number of people you can accommodate) and practicality (things like WiFi, a cooking stove and a washing machine).
Done right, you can keep costs low, and still beat the long-term tenancy market rate for your property.
Questions to Ask Your Interior Designer/Contractor
Since most people have full-time jobs and families, hiring a professional to furnish your property would be the best choice.
If you find the right company, they can not only save you money through their resources, they can get the job done in 3 weeks to 1 month.
Here are some questions to help you determine if you have chosen a good company.
Do you have a portfolio?
Any good company would have a portfolio of furnishing projects, which they would gladly show you. If they do not, be careful – they could be inexperienced and result in you spending more than you should.
How long will the job take?
Typically, a good ID company can get the job done in a month or less – assuming it isn’t the holiday season. If the estimated timeline is 2 months, or unspecified, that’s a red flag.
Do you have a registered company?
A professional ID company would have a registered company and business premise they use to conduct their business. If in doubt, request to visit their office, or do a background check on SSM on the legitimacy of the company.
What are the payment terms?
A furnishing project would typically require a down payment of 50%-60% upon confirmation, and the remainder upon completion. Do not make the balance payment before inspection the finished job.
Do you charge for conceptualisation/planning?
This is a trick many companies use to increase their profits. As it is, the furnishing project itself should already include their profit margin, without including planning and conceptualisation, which some companies charge by the square footage. Unless it’s an intricate and complex project, there should not be any such charges.
What is NOT covered in your quotation?
The quotation given should, by right, include everything from disposal of the debris and packaging to a post-renovation clean-up. You wouldn’t want to be unpleasantly surprised by unexpected costs from the company halfway through the job.
Can I use my existing furniture from another place?
A good ID company can work around existing furniture and fittings you would already have, perhaps from another home, or extras you have lying around. Unless they are in bad condition, the company should not refuse having you bring your items over.Remember – if you feel uncomfortable at any point, you always have the option of going with another company. Do not be pressured or afraid to say no. Do not be afraid to ask questions like the material of the sofa, the thickness of the mattresses and the level of sunlight the curtains keep out.
Tips for Furnishing the Property Yourself
If you have the time and an interest in design, then taking the job on yourself can not only be an invaluable learning experience, it can also save you a lot of money.
Where, however, would you start? Getting suppliers off Google and looking for second-hand furniture on Mudah may get the ball rolling for you, but this will most certainly delay the entire project by a lot, and, as a result, delay your investment yield.
Here are some tips to get you started.
List down the suppliers you need
Typically, you will need professionals for your curtains, wallpaper/painting, kitchen cabinets and installation of electrical fixtures and appliances. Even if you have experience doing repair works at home, installing these yourself would not only stretch your timeline, it can be dangerous.
Ikea can be friend
Even among interior designers, there are a lot of items at Ikea that are affordable and are of decent quality. The trick is to not be pulled into buying unnecessary items, and to stay away from the expensive ones.
Online shopping platforms like Lazada, Shoppee and Taobao often connect you direct to furniture suppliers and cheap offshore items. Always go for the highly-rated items, and don’t be pulled into buying sub-par quality items. Remember – if it’s too cheap to be true, very often it is.
Buy what you can yourself, and have it installed
Items like lighting fixtures, ceiling fans and wall décor, if purchased yourself, can save you money, as contractors often have a mark-up on the price of the items themselves, on top of the installation charges. Be careful though, you want to make sure you get the items with the correct specifications, like the diameter size of the lights, for example.
For investors, there’s no better feeling than seeing your investment gain you yield while it appreciates in value.
Don’t be afraid to ask your friends and family if they have experience in the field, or have any trustworthy contacts for interior designers, contractors or suppliers you can utilise.
For those who prefer to leave all the work to the professionals, you can always get in touch with us!
So you’re considering if you should buy a property under a company in Malaysia? There can be significant benefits to doing so depending on your current situation. Read on more as I discuss how buying a property under a company can be used to your benefit.
Some of you more seasoned property investors might have heard about buying a property under a company instead of buying it under your personal name.
But you won’t find much useful information out there on the web on this topic. None of the websites really tell you clearly, exactly what the reasons you should consider buying a property under a company name are.
I’m going to go through with you the reasons why you might be considering buying a property under a company name in detail. So, if you fall into any of these categories, you can see which reasons make this a viable option to increase your property investment portfolio, and also those which don’t.
This is probably the most popular reason for someone to consider buying property under a company name – when your DSR (Debt Service Ratio) or the maximum amount that the bank will lend you based on your income and expenses, is already maxed out and you want to be able to borrow more. (In Malaysia, this varies from bank to bank but it is about 60 – 70% of your income minus your other commitments, such as loans and credit card debt)
If you’re looking for other methods of pushing your dollar so you can get some of that delicious financing from our banks and also if you’re not too comfortable buying something under someone else’s name (a proxy) – buying a property under a company to get the DSR based on the company’s earnings and not yours, might seem like the most logical option.
But is it really?
The problem with this, is that the business entity, though not being you – is still going to be granted the loan (provided the company accounts show that it’s capable) BUT with you as the guarantor. This means that the bank will still assess your personal capability to pay back the loan should the company wind up.
Therefore, your eligibility to take the loan under the company for the property purchase is still based on your current DSR. So, it basically leaves you right back at square one.
If you can’t take the loan yourself, it’s unlikely that you’ll be able to take the loan under the company.
If you’re looking to reduce your exposure to risk from your investment, this is also not the option for you. As mentioned above, you’ll still be the guarantor for the loan that you’ve taken, even though through the company, so if your company fails and you are unable to repay the loan, the banks are going to come after you.
Your risk will still very much be your own and it won’t be offset in any way, shape or form, unless of course, you’re looking to spread out your risk with other investors – which you’ll find out more of how this is done below.
Buying a property under a company means that you will have to fork out a larger down payment as banks only lend company’s 60% of the total property price, compared to the 90% which they offer to first time buyer individuals.
60% is even lower than the 70% cap that’s on your third property or more, under your own name, so it really isn’t a useful option here at all.
One thing a lot of people might not know, is that this only applies to residential properties.
Where it comes to commercial properties the LTV is 85% for the first property, second and even third property onwards.
Most of these units are under a ‘commercial’ title but they are not considered commercial developments. Commercial units in this case refer to Office, Retail and Industrial lots.
But before that light bulb goes off in your head and you leap for joy at being able to get 85% LTV – you’ll find that this is actually the same LTV that will be granted to individuals making a commercial property purchase under their own name, for the first or any others thereafter.
So, trying to stretch your LTV by buying a property under your company doesn’t really help you do any better than you would have been able to if you were buying it under your own name.
Lowering Your Taxes
For the big boys in property investment, this is definitely something always on their mind. Properties taxes can be quite scary for the average investor, but things can really get out of hand when your portfolio starts to grow.
A lot of investors think they can ’siam’ (or reduce) some taxes by buying their property through a company instead of being under their own name.
Is this really possible?
The short answer is – yes.
But it’s not applicable to most of us.
It is only possible to offset some of your income tax provided you have plenty or properties that are generating a significant amount of rent or it simply isn’t worth the hassle of paying for a company secretary and all the other fees that come about with setting up your own company.
It is possible to offset some of your rental income by declaring it as earnings from your business instead of your personal earnings but as businesses are taxed at 20% at the lowest bracket, this is also the same with personal income tax.
So, there isn’t much you can gain here by doing so unless you are being taxed at a much higher bracket.
You’ll also be able to offset some of that rental income by deducting expenses which you would not be able to do so if the property was under your name, such as renovation and furnishing expenses for the property itself.
Whether this is really worthwhile for you will depend on your current situation and it would be best to talk to your accountant as I’m no tax expert and they will certainly be able to advise you better.
As most foreigners who are keen on investing in the Malaysian market, you’ll know that you’re only allowed to purchase properties that are above 1 million ringgit in KL and 2 million ringgit in Selangor.
The various property price minimums for foreigners described by state can be found – here.
By being the director of a Sdn. Bhd. Or LLP in Malaysia (that has the majority of its directors who are Malaysia) in the company, you will be able to purchase a property that is below the cap because the property is considered a Malaysian entity that has been registered in Malaysia.
You’ll be able to gain access to cheaper properties, but you’ll still only be able to get limited financing due to the LTV limitation when buying residential units but it’s a lot more useful if you’re after some commercial units.
This however does require your other Malaysian directors to be keen to take on the loan and are also capable to take on the loan based on their own DSR.
So it can be quite useful here to help you gain access to the market as a Foreigner.
Investing as a Group
This is actually where buying property under a company in Malaysia makes the most sense. When you and your business partners are interested in investing in a property together, (diversifying your risk among one another) there is simply no better structure to buy in a group, than through a company.
Buying a property under a company with your business partners takes away a lot of the headaches that come about when making a joint property purchase.
Firstly, all the business owners will have joint ownership and while you are unable to put an unlimited number of non-(blood or legally)-related names down on your SPA, you can have 5 or more unrelated people who have joint ownership as directors of the company.
It will also allow you to avoid any issues should one of the directors who signed the SPA pass away. There will be no legal issues as to who the property belongs to following their passing as the property will clearly belong to the company and not solely to his next of kin or spouse (they still may inherit his shares if this is what was stipulated in the partnership agreement but there will not be any dispute between the company and them for full ownership).
It also makes for easy transference of shares of the property between the investors in the group. If one investor wants to opt out of the investment, it’s also easily done by simply transferring shares from one member to another at just 0.3% share transfer stamp duty compared to 3% property stamp duty if there was to be an actual name transfer.
Buying a property under a company in Malaysia can be beneficial depending on your circumstance.
The gist being that if you are trying to get more loans from the banks by using the company as a proxy to increase your DSR, reduce your exposure, or get a better LTV – this is not the solution for you.
It’s only useful when you are considering buying property as a group, trying to buy properties as a foreigner, and also possibly reduce some of your tax (provided you’re a whale when it comes to property investment).
Would love to hear more from you guys if you know how else this can be useful, please leave a comment below and tag us @rentandreturns!
You guys may have heard about Sunway Velocity 2: The Best Property Investment in Malaysia in 2019? Or at the very least Sunway Velocity?
If not, let me clue you in on what might just be, the best property investment opportunity in Malaysia in 2019.
Sunway Velocity is a relatively new fully integrated development located along Jalan Cheras by Sunway Group. The location is completely unique compared to all the other new integrated developments in Malaysia. Its strategic location has it right in the middle of 3 MRT stations and 2 LRT stations – Maluri, Cochrane (no LRT station) and Chan Sow Lin (being completed).
The MRT and LRT stations are all connected via covered walkways and are no further than 1km from the link bridge of the development to the entrance of the station.
The first phase of the project, Sunway Velocity 1 was completed in 2013 and consists of residential serviced apartments, a shopping mall, a hotel and a medical center. It is just 3.8KM from KLCC and apparently was the last piece of freehold land in in Kuala Lumpur. It is also within walking distance to Ikea and MyTown Shopping Center. (If you haven’t been to MyTown yet, you’ll be impressed by the retail occupancy rates of the mall)
As far as amenities are concerned, this development has access to everything you could ever want and maybe even slightly more.
Being on the fringes of Kuala Lumpur’s ‘Golden Triangle’ you are going to have to expect some pretty intense prices. Sunway Velocity 1’s units were sold at RM1,100 psf and recent transacted values show that they currently go for around RM1,200 psf.
So what are Sunway Velocity 2’s prices going to be like? RM1,400? RM1,500?
Surprisingly, the units are being sold cheaper than Velocity 1!
Yes, you did read that right.
At just RM850 psf (after rebates) you’re getting a 30% discount on what people paid for their properties 4 years earlier to be at almost the same exact location (and don’t we all know how important the location is when making a property purchase).
The only reason I can see for this justification is that Sunway Velocity 1 is freehold and Sunway Velocity 2 is leasehold.
But does that really warrant a 30% reduction in the price to be able to enjoy the same premium location?
You’ll have to be the judge of that.
If you were to ask me though, I think it’s not, and this deal looks ever more attractive to me.
If that’s still not enough discount for you however, you’ll be happy to find out that the discounts don’t stop just there. There’s an additional 5% bumi discount plus a 7% standard rebate and 4% early bird rebate packaged together with the regular deals of free SPA legal fees and also interestingly loan legal fees as well!
If the SPA is signed on the preview weekend on 16th March 2019 there will be an extra RM8,000 – RM12,000 additional signing incentive. You’ll have to put your booking fee of RM10,000 before the 10th of March 2019, to be eligible for this added incentive though.
Let’s do a quick recap of all the discounts and deals that you’ll be entitled to so far, just so that you can keep track of them all.
30% off Sunway Velocity 1 prices
5% Bumi Discount
7% Standard Rebate
4% Early Bird Rebate
Free SPA Legal Fees
Free Loan Legal Fees
Free MOT Stamp Duty
RM8,000 – RM12,000 Signing Incentive
The units come in a variety of sizes from 635 sqft up to 969 sqft with different configurations 1+1 bedrooms up to 3 bedrooms. Some of the units also have the possibility of being turned into dual key units with some slight renovation works (of which have been approved by the developer).
No. of Units
1+1 Bed, 1 Bath
2 Bed, 2 Bath (DK)
2 +1 Bed, 2 Bath
3 Bed, 2 Bath (DK)
3+1 Bed, 2 Bath
* Type G Units are no longer available and have been converted to other unit types
# (DK) signifies Dual Key conversion capability
The project density is also on the low side with its two towers only consisting of a total of 436 units (whereby the first tower’s units have all been completely sold out). From what I’ve heard, the first tower was completely sold out within just the first 2 weeks. This is by no means a high density development.
Bear in mind that with only one tower left, there’s only a total of 436 units available, so time is of the essence here.
Short-Term Rental Income
The deal is definitely starting to sound like an amazing one but what are the rental rates like here? Are you going to be able to supplement your property investment with rental income?
Let’s take a look at the Airbnb rates for Sunway Velocity 1.
Taking a look at Airbnb we can see that the room rates at this low season range from RM135 – RM280 per night, which really isn’t all that bad. Assuming 40% occupancy (12 days) and taking the middle range of 200 per night is about RM2,400 per month in revenue before expenses, which isn’t all that bad considering the cheapest unit starts at RM570,000.
Where it does become much more attractive though, is when you look at the dual key potential of the units. Let’s dive a little deeper and see what the returns look like for a dual key setup.
Single Bedroom – RM135 per night
Two Bedroom – RM175 per night
It’s important to note here that the single bedroom unit is really quite small compared to the studio 1+1 bedroom so we will take the lower limit of what other Airbnb listings are charging instead of taking the middle pricing of RM200 per night like we did earlier for the single unit. With both rooms at 40% occupancy that makes your monthly returns Rm1,620 plus RM2,100, bringing your monthly income to RM3,720 per month!
There will be some seasonal fluctuation in occupancy and room rate pricing but for the sake of keeping things simple, I think the above used room rates are fairly conservative and will take into account these fluctuations for a good overall view of what kind of earnings can be expected throughout the year.
The Clock is Ticking
Sunway has done an amazing job developing this area and the next phase looks like a steal at the current prices and combined with the free MOT you’ll get this year due to the property oversupply, it certainly looks like an amazing opportunity to say the least.
Do drop us an email or get in touch with us if you’re interested to see how you can find out more about the project. Remember, there’s only 436 units up for grabs and you’ll have to get your booking fee in before the 10th of March 2019 to be eligible to attend the unit balloting session on 16th of March.
So, don’t hesitate and get in touch with us today at +6012 935 6495 or drop us an email at email@example.com.
*I have vested interest in promoting this project. I do believe the project is a good buy and a worthwhile investment property based on the reasons described above.
Heard about Admiral Residences: A Property Investment Gem in Melaka? I’ve written about Airbnb in Melaka before but had not had the opportunity to head over and take a look at the opportunities present until about 2 weeks ago.
If you have not already heard about the massive land reclamation site that is Kota Laksamana in Melaka, then it would definitely interest you to read on.
Originally a sea area alongside Taman Melaka Raya, the up and coming area known as Kota Laksamana, has seen tremendous development over the past few years and is set to be the site of Impression City, Melaka. The 138-acre integrated mixed development site is set to turn Melaka into a modern city center similar to what Johor Bahru has become over the past 10 years.
If you have ever wanted the opportunity to travel back in time, today might just be your lucky day.
Property in Melaka
Melaka is one of those places that has been left relatively undeveloped but has all the potential to become a bustling city center.
The state currently lies in a very strategic location that is 128 kilometers from Kuala Lumpur and 250 kilometers from Singapore. That’s not all that far away from two of these major city centers, not to mention Johor Bahru, which is even closer than Singapore is.
What does this have to do with time travel though?
The fact that Melaka has remained undeveloped means that there has not been a lot of money coming in from outside the state or even out of the country. This has resulted in property prices in Melaka to have remained relatively low compared to the rest of Malaysia.
Just how low? Let’s take a look and see how property prices have changed over the years in Melaka, Johor and Kuala Lumpur.
Looking at the graphs above, you’ll notice that median property prices in Melaka (200RM psf) have remained lower compared to Kuala Lumpur (430RM psf) and Johor (280RM psf). You’ll also notice that median property prices at city centers tend to decouple from the median price of the entire area which is very normal (property prices are highly correlated to proximity to nearby amenities), except in the case of Melaka.
Right now, Melaka median property prices in its city center are almost on par with property prices located anywhere else in the state. This presents a very interesting opportunity for a state with so much untapped potential. It is quite likely that property in the city center will become significantly more expensive than property elsewhere in the state much like it has done so in KL and Johor in the coming years.
One thing to remember though, is that Melaka is home to some of Malaysia’s most visited tourist attractions. The state had 16.79* million tourist arrivals in 2017 with majority of those travellers coming from China, Singapore, Indonesia, Hong Kong and Taiwan.
Believe it or not, Kuala Lumpur only received 12.29* million tourist arrivals in the same year.
(* I am not sure how accurate these figures are, but both were published in local newspapers on separate accounts. Honestly, I’m quite sure KL would have had more visitors.)
Melaka Chief Minister, Idris Haron, has also stated publicly that the state is targeting 20 million tourists by 2020.
2017 was also Melaka’s record high number of tourist arrivals whereas tourist arrivals in Kuala Lumpur saw a 3% decline from the previous year.
What’s driving tourists to Melaka though?
Melaka offers a look at Malaysia’s culture, heritage and tradition in a town with a very long history that appears almost as if it’s been frozen in time.
As a UNESCO world heritage city since 2008, the city was also named by Lonely Planet as one of the Asia’s Top 10 travel destinations in 2017. The British Post also ranked Melaka fifth in list of the world’s trendiest holiday destinations.
From Jonker Street to the plethora of museums in the city, there are tourist attractions in such close distance to each other. This makes it a one-stop holiday location that you can fully immerse yourself in, without having to travel long distances.
To add to its already long list of attractions, Melaka looks poised to become a flourishing city center as China sees Melaka as an interesting stop along it’s One Belt One Road initiative. The economic power house has invested US$7.2 billion in the 1,366-acre Melaka Gateway project.
With the completion of Melaka Gateway and Impression City, Melaka is going to be transformed into a bustling city center like its peers but still retain its eclectic charm as a UNESCO Word Heritage city. Combined with its record high tourist arrivals, there is little to say that Melaka’s property prices will remain low in the coming years.
All this leads us to the opportunity that is – Admiral Residences: A Property Investment Gem in Melaka.
Admiral Residences is a new development by Tanjung Ratna, in the heart of Kota Laksamana, Melaka. It is currently under construction and is set to be completed by end 2021. The development is located in a prime area just 10 minutes away from the center of Melaka City where all its tourist attractions are.
It’s actually part of the developments which are closer to the city center compared to where Impression City will be located (Encore Melaka is the first of the developments at Impression City).
It is not very often that you will come across a piece of property that has the potential to provide you with an amazing opportunity for some very nice positive cashflow and huge capital gains.
Just how good an opportunity?
Let’s crunch the numbers together, as the astute property investors we are:
First, let’s take a look at similar projects in the area and how they price comparatively.
PSF Cost (RM)
The Wave Residences
*Exact psf cost and final price will be slightly different depending on time of purchase, size and level, etc. These prices may no longer apply.
Looking at the table above we can see that Admiral Residences is by far the cheapest development in the area at the moment (more than 50% cheaper! – Talk about below market value!). Even though it will have the greatest number of units, it is still not a significantly larger amount compared to the number of units at Atlantis Residences.
Bear in mind that Admiral Residences is right beside The Wave Residences (Also called Faithview Hotel).
Admiral Residences is also NOT positioned as a ‘low-cost development’ by any standard and is a direct competitor in terms of development quality with both Wave and Atlantis Residences.
Admiral Residences is also jam packed with holiday goer amenities such as an infinity pool, a kid’s pool, SPA, Sauna, Jacuzzi, tennis courts, badminton courts and basketball courts and is perfect for an Airbnb.
After all, those 20 million tourists are going to need somewhere to stay when they visit Melaka and with the current trend of tourists choosing to stay at Airbnbs instead of a hotel, it should go without saying that there’s no better use for a property like Admiral Residences for an Airbnb.
Wave and Atlantis Residences already have numerous Airbnbs operating and the data is very encouraging. Nightly rates range from 130RM to 230RM per night for 1 and 2-bedroom units.
Considering that Admiral Residences smallest units are 3-bedroom, a safe bet would be to say that the nightly rate can be fixed initially at 220RM per night.
Let’s now do some projections at these rates and take a look at what the rental yield would look like running an Airbnb at Admiral Residences.
Considering that hotel data in Melaka shows occupancy rates are currently at 60% in Melaka (Averaged for a year) in 2017. We can expect Airbnb occupancy to be similar. So, let’s have a look at two different scenarios and see what our rental yield looks like.
Based on the two scenarios above, it becomes quite clear that as a property investment, It’s more than just a good opportunity. At 7% rental yield you’re definitely getting some good monthly gains and that’s just at 9 days occupancy per month which by Airbnb standards is poor and would be considered as a non-performing unit.
So, assuming that your unit is not performing well, you still can get some pretty amazing rental yield on one of these units.
Looking then at 50%, which is what you can expect from an Airbnb unit that is performing at a decent rate, (this is still far from what you can expect during peak season occupancy which will be upwards of 70%) – 12% rental yield on a property is considered phenomenal returns!
At just a 50% occupancy rate you can comfortably cover your entire investment upkeep inclusive of loan repayments, maintenance fees, electricity and Wi-Fi bills with the possibility of an extra bit of cash every month.
And if your unit performs well, you can expect regular net positive cashflow on your property investment, which it should, if you manage your Airbnb right.
Don’t forget about the massive opportunity for capital appreciation on your property that we talked about earlier. Melaka property prices are low compared to other cities in Malaysia and with so much planned development on the way and the rising number of tourists visiting the state each year, it looks like property prices will not stay at current levels for long.
If you haven’t yet felt like you travelled back in time, you should re-read the article and study the opportunity at hand. It’s a lot like having the chance to buy a piece of property in Kuala Lumpur’s golden triangle many years before the property boom there.
Remember to do your own research and find out more. Perhaps you might want to take a trip down to Melaka and see what all the fuss is about.
To find out more about Admiral Residences or to visit the showroom you can get in touch with Mr. Allan Chee at 014 668 9209.
*This post has been sponsored by Tanjung Ratna Sdn. Bhd. but has still been written from an objective point of view based on facts and figures from external sources. Please feel free to share your thoughts and comments below.
Rent and Returns’ Malaysia Budget 2019: Property Sector Review is meant to give you a clear and detailed understanding of all of the property related items included in the budget and what you can expect with the upcoming changes mentioned in the budget.
In order to try to slow or prevent a property market crash the new Malaysian government Pakatan Harapan has decided to make a variety of amendments to existing housing policy.
According to the latest 2019 budget:
Companies, non-citizens and non-PR holders, real property gains tax will be increased from 5% to 10%. While for citizens and those with PR, real property gains tax will be increased from 0% to 5% even after the first 5 years.
Stamp duties for property transfers worth more than RM1mil will be raised by 1 percentage point from 3% to 4%.
Real Estate and Housing Developers’ Association Malaysia (Rehda) agrees to reduce house prices as much as 10% for houses which are not subject to price control for new projects.
Fall between 5% and 10% following the Sales and Services tax (SST) exemption on construction services and building materials.
First-time homebuyers get an exemption on stamp duty for properties priced between RM300,000 and RM1 million, for a limited period of six months starting Jan 1, 2019.
First-time homebuyers will get a stamp duty exemption on sale and purchase agreements as well as loan agreements of up to RM300,000 for a period of two years until December 2020.
Bank Negara will be setting up an RM1 billion fund to finance the first house purchase for those with a monthly income not exceeding RM2,300.
Introduction of FundMyHome Crowdfunding Scheme
What does all this mean for property investors?
Let’s take a look at the changes one by one and see what the possible implications are for the property sector in 2019.
Firstly, let’s tackle the elephant in the room – The increase in RPGT.
Well, it isn’t the best news, it means that it’s going to be significantly hamper profits from selling properties. Prior to Malaysia’s Budget 2019, it was possible to avoid your property sale profits getting smashed by RPGT by simply holding on to the property for at least 5 years before selling it off.
This meant that only ‘flippers’ were affected by this policy. The new ruling however changes this.
Property sale profits will now be slashed by 5% across the board regardless of whether you keep it for 5, 10 or even 20 years – At least for the moment anyway.
This means that if you experience gains from your property sale of RM100,000, you will have to pay the government a relatively small sum of just RM5000. It’s not all that bad until you make considerably larger gains on your property sale – a profit of RM500,000 would see you having to cough up RM25,000.
In all honesty, this isn’t as big a deal as people are making it out to be and really only affects those making huge gains on their property sale. A 5% reduction in the profits is not life changing.
Another thing to remember is that the Malaysian Budget is a yearly change and that means that even though the new RPGT is fixed at 5% indefinitely, it will also be subject to review each and every year depending on how the property market is going.
The new Pakatan Harapan Government seems to be very focused on assisting the B40 group (Bottom 40% of income earners) in the country. This is a good thing. There are still many opportunities to be had for those outside this group and by improving the lives of the nation as a whole will only be more beneficial to everyone in the long run.
Stamp Duty Increase
Of the 2 increments in property taxes (RPGT and Stamp Duty) described in the Malaysian Budget 2019, increasing the Stamp Duty price for properties over a million ringgit is probably the more painful of the two.
A 1% increase in Stamp Duty for a RM1,000,000 property will work out to another RM5,000 if they still keep the tiered tax system that they have in place.
[To Find Our More About Property Taxes in Malaysia, including RPGT and Stamp Duty – Click Here]
Based on a RM1,500,000 Property:
Stamp duty Fee 1% : For First RM100,000 = RM1000
Stamp duty Fee 2% : RM100,001 To RM500,000 = RM8000
Stamp duty Fee 3% : RM500,001 to RM1 million = RM15,000
Stamp duty Fee 4%: RM1 million to RM1.5 million = RM20,000
Compared to this being pre-budget:
Stamp duty Fee 1% : For First RM100,000 = RM1000
Stamp duty Fee 2% : RM100,001 To RM500,000 = RM8000
Stamp duty Fee 3% : RM500,001 to RM1.5 million = RM30,000
I am not sure if this will be the structure moving forward but as you can see, it is also not a very extreme measure. Property buyers will definitely feel a slight burn here, but I am certain that average purchasers buying property over a million ringgit will be able to bear these costs without too much concern.
Those who will feel the brunt of the burn are those buying luxury properties above RM3 million ringgit.
First Time Home Buyers Stamp Duty Exemption
This is the best thing about the Budget 2019 for property related items. A waiver for property stamp duty for first time buyers on properties priced between RM300,000 and RM1 Million is huge! It’s so much better than even their My Deposit Scheme which ran earlier in the year.
Taking the median property price in this range at RM650,000, let’s see how much savings a first time home buyer will actually be getting:
Stamp duty Fee 1% : For First RM100,000 = RM1000
Stamp duty Fee 2% : RM100,001 To RM500,000 = RM8000
Stamp duty Fee 3% : RM500,001 to RM650,000 = RM4500
Total = RM13,500
That’s a total of a whopping RM13,500 of savings! As property stamp duty is normally the main upfront cost for property purchases, this exemption makes buying a new house amazingly affordable to first time buyers.
The government has also said that it is going to waive loan agreement stamp duty and property stamp duty for properties below RM300,000 up to December 2020! So, this bargain will really help those buying affordable homes prices below RM300,000.
As Property Stamp Duty is normally paid in cash, it’s true out of pocket savings. This will definitely give the housing market some much needed CPR and breathe some new life into purchases to eat up that current oversupply.
The government has even given it a timed lifespan of just 6 months! This will make for an exciting first half of 2019 in the Malaysian property market. I foresee there to be a lot of property purchases in the first half of the year simply due to this policy.
REHDA 10% Reduction in Housing Prices & SST Exemption
REHDA has said that they will reduce new housing development prices by 10%. It has been mentioned in various news sources that they will be able to achieve this by working with developers to bring down the prices due to the SST exemption given to many building materials.
This will be only for new developments that have not begun construction yet. The reduction in price has only been made possible through the reduction in the cost of building materials.
Whether or not developers will be on board or if they will simply mark up their prices before reducing them is not known. I find it hard to see developer’s dropping their prices by 10% solely off the SST exemption in building materials.
As these will be prices on future developments which are normally already priced at future prices, there will really be no way to say for sure if the prices (once they are made known to the public) for these projects have been actually reduced.
RM1 Billion Financing Fund for Low End Income Earners
Finance Minister, Lim Guan Eng has shared along with the 2019 budget that a new fund will now be set up to help low income earners with monthly income less than RM2,300 to be able to purchase homes priced up to RM150,000.
The new fund will be available from Ambank, CIMB, Maybank, RHB and Bank Simpanan Nasional at the amazingly low rate of just 3.5%.
Considering everyone else who is buying their homes is getting their loans at abut 4.45%, this is almost a whole percentage point less and when it’s almost a quarter off the average interest rate, it’s basically a 25% discount on your home loan interest!
Lim Guan Eng has said that the fund will last for a period of 2 years or up until the fund runs out. It’s most likely to run out way before the 2 years as there’s so much affordable housing still available from the current property oversupply and many will be looking to use the opportunity to get their first home.
FundMyHome Crowdfunding Scheme
The new FundMyHome scheme owned by Edgeprop has been touted as the solution for those who are having a difficult time keeping up with property loan repayments, thereby giving them the option of ‘simply’ coming up with 20% of the value of the home and have the remaining 80% paid off by investors.
Something about this scheme right off the bat doesn’t seem to make much sense.
As a property investor myself, I find it difficult to come up with even 10% for a sub-sale down payment and am always looking for delicious rebates from developers to help me build my property portfolio instead of coughing up such a large chunk of cash.
If I did have that much capital to spare, I honestly don’t think I’d have any problem paying off my monthly instalments.
Diving deeper into the scheme, you’ll soon find out that if you were having problems keeping up with your loan repayments and somehow managed to get 20% cash to pay for your down payment, this is definitely not something that’s for you.
Fintechnews.my wrote up a brilliant article – here, that goes over all the nitty gritty details of the scheme showing that it is actually more of a high-end investor scheme rather than a home ownership scheme.
Here’s an excerpt from the article:
“The scheme will put your 20% into a trust account that will be used to pay off the annual 5% investment return to the investors for five years.
During those five years, you’ll be able to live in the house without the need for rentals or repayments. After five years, you’ll have the option of either divesting your share of the home or getting a mortgage to own the rest of it.
But here are some things to note:
If you choose to go the mortgage route in 5 years, the prices are based on the current value of the house. If it has appreciated, you’ll be looking at paying much higher for the 80% of the house you don’t yet own, at least according to the below figure provided by FundMyHome in their FAQ.
Similarly, if you choose to divest, it will be at the price of the property at the time. So, if the property has appreciated, you’ll have made a profit on the home but if it has depreciated, you will have made a loss. The same risk is borne by your investor.”
As you can see, you’re hardly the home owner through this scheme, it simply didn’t make sense to me the first time I read it and after finding out more, it has become clearer on what it’s actually intended to do.
The article also did mention that it is quite likely that there will be changes made to the scheme considering all the scrutiny and bad press from their initial poor marketing of the scheme.
A Thriving Property Market in 2019
Pakatan Harapan has come up with some clever ways to breathe new life into the property market next year by keeping investors and first time home owners interested in the market with some very attractive deals.
They have structured their policies in a way to discourage flipping of sub-sale properties and encourage property buyers to look to absorb the balance properties from the current oversupply instead.
It’s very interesting to see how things will play out and if the market will truly be receptive of their new policies and attempts to solve the property oversupply issue. We hope the Rent and Returns Malaysia Budget 2019: Property Sector Review has enlightened you on all upcoming investor property matters mentioned in the budget. As to what exactly the impact will be in the market, my guess is as good as yours, but I have a inkling feeling that it will make for a very exciting and vibrant property market in the coming years.
How much does furnishing and renovation cost in Malaysia? This is a question many new property investors fail to take ask themselves when they make their first investment property purchase.
It is actually a very important question, that is so very often forgotten. Not knowing your furnishing and renovation costs can lead to you procrastinating on furnishing your unit. Not knowing exactly how much you need, can lead to you shopping around and getting quotes from many different contractors and ID companies, because you simply have no idea what the fair market rate is.
This can result in your property investment sitting on the sidelines for months on end while you burn cash every month to repay your housing loan. Even if you decided to go with your developer’s fully furnished package, you’ll realize that it’s not exactly move-in condition.
We know far too many investors who end up doing this and, in the end, regret their decision to have not acted sooner – looking at 6 months of lost rental income can be very, very painful.
It can sometimes be that you don’t have the cash set aside for your furnishing and renovation once you actually get your keys. After that, you then delay moving along with it because you aren’t really sure how much you’re going to need or even where to start.
The sooner you get this done, the better.
People tend to deliberate for ages on their furnishing, trying to save money wherever they can, not realizing that the longer they take to decide, the more money they actually lose.
How much does furnishing and renovation cost in Malaysia though?
We’ve helped you break down these costs and focus just on the most important necessities here for you though, just in case, you’re short on time.
Average Furnishing Costs in Malaysia
For a 2 Bedroom Condo All Loose Furniture*: [RM12,000]
Kitchen Cabinets & Island Table Top [RM10,000]
All Electrical Items# [RM6,500]
Fans & Lighting Fixtures [RM3,000]
Décor Items [RM2,000]
Plaster Ceiling [RM3,500]
Painting & Wallpaper [RM1,500]
* All Loose Furniture includes – Sofa, TV Console, Coffee Table, Side Tables, Bed Frame, Mattresses, Lamps, Shoe Cabinet, Dining Table Set, Clothes Rack, Wardrobe
# All Electrical Items includes – Fridge, Washing Machine, Bathroom Water Heaters, Cooker Hood and Hob, Microwave, Kettle, Standing Fans
Sure, these websites make good sense when people are looking at renovation and furnishing for their OWN home, but does the property investor really need to come up with more than RM40,000 to ready their property for a tenant or short-term guests?
Taking a quick browse around the market, you’ll notice that you’re really going to have to come up with about RM35,000 at the very least for furnishing your bare 2-bedroom unit to an acceptable standard (without the additional luxuries) and you’ll have to hope that the developer was kind enough to include aircons in your package if not you’ll have to come up with another RM3,000 for another 2 units and even more if you’d like air conditioning in your hall.
It is possible to spend less than this and beat the margins of your furnishing or ID company, but do you really have the time?
Time is Money
Ordering your furniture online or from Ikea means that it’s going to come in a box and you’re going to have to fix it together yourself. Also, some things come without screws and require a drill to be put together. (Thanks a lot Ikea!)
If you buy from Ikea, you can pay them to do this for you, but the assembly rate is 8% plus a fee per assembled item. Expect to pay a total of 20 – 30% more for your items if you want them to assemble it for you. (Other online purchases don’t offer any assembly services at all)
Most items at Ikea are already pretty expensive when you compare it with prices of things you can get elsewhere online, so with that added 30%, it really doesn’t make it worthwhile anymore at all. I’ve bought some pieces of furniture online that’s taken me more than 2 hours to fix together – not the most beneficial use of my time. (And not an experience I’d like to go through again)
I’d assume it wouldn’t be the best use of your time either.
This is also not including the time you’ll need to plan your layout, decide on furniture items, communicate with sellers, organize delivery and spend the time to be there waiting for the delivery.
If you’ve ever purchased furniture, you’ll know that delivery times are always a range. The company will tell you, delivery is from 3 – 5pm. Yet, at 5.45pm you’re still waiting at the apartment for the delivery guys cause they’ve either gotten lost or were held up at the previous place they delivered items to. Sometimes you can even lose up to a whole day waiting on a delivery.
So, it boils down to how much you really value your time or if you even have that much time to spare.
You’ll probably be able to save yourself about 20% of the costs doing things on your own if you have the time and patience, which means you’re still looking at about RM28,000.
The Investor Package
At Rent and Returns though, we’ve been through all these hassles before and looked at all the various ways to lower this price for furnishing our own units. We spent much more than RM35,000 on our first unit and we’ve steadily been bringing down our costs through new connections and relationships with suppliers.
We’ve been able to come up with a fully furnished, modern ID, ready-to-move-in, quality furnishing package (that’ll be ready within a 30 days) that includes everything from kitchen cabinets and curtains to all your loose furniture and electrical items at just RM23,888.
If you’re a property investor, you would have come across advertisements or agents telling you that you can easily earn 8% to 12% per annum off your property through Airbnb.
But are you committing a crime?
Is Airbnb legal in Malaysia?
Short-term rental platforms like Airbnb have revolutionised the property game in recent years throughout the World by introducing an entirely new channel of investment for homeowners beyond long-term tenancy and capital appreciation.
If you have clicked on a property ad on Facebook promising you good returns on your investment, chances are that you have property agents cold-calling you with lucrative promises of Airbnb if you purchase their properties.
While short-term rentals can potentially offer you much higher returns than long-term tenancy, it’s important to note that running a rental like Airbnb requires time and effort on your part.
First of all, you would need to get your place “Airbnb ready”, which means to fully decorate and equip it with everything a guest would need, such as kitchen appliances, good quality linen and amenities like shampoo, soap and tissues.
Once your listing is up and running, there are enquiries to reply to, guest check-ins to handle, special requests to cater for, and most of all, the tedious cleaning in between stays.
If, however, you have a full-time job and/or a family to take care of, then your other option would be to engage a professional operator, removing all your hassles for a management fee, which can range from 20% to 30%.
Another thing to take note of is that short-term rental platforms like Airbnb are very dependant on ratings and reviews from guests. Starting a fresh listing without ratings would usually require you to compete at low prices and increased efforts to please guests in the beginning.
Done right, over a few months, you would potentially have a smooth system and a good base of ratings and reviews, allowing you to charge a fair rate and get a good number of guests wanting to stay at your property. Well performing 3-bedroom condominiums can easily achieve a revenue of RM5000 or more during the holiday months.
Specifically, if a development has a commercial title, usually serviced apartments, SoHo and SoVo units do, then operating an Airbnb unit would not be an issue.
If, however, the unit is under a residential title, here’s where it gets a little tricky:
Is it stated in your development’s by-laws?
Don’t worry about going to jail or having a police record. If Airbnb isn’t allowed in your development, you won’t be committing a crime, you would just be in violation of your development’s by-laws, which under the Malaysian Strata Management Act 2013, is subject to a maximum penalty of RM200 per infringement.
As per the exact words in the Strata Management Act:
A joint management body may, by a special resolution, make additional by-laws or make amendments to such additional by-laws, not inconsistent with the by-laws prescribed by regulations made under section 150, for regulating the control, management, administration, use and enjoyment of the building or land intended for subdivision into parcels and the common property, including all or any of the following matters:…
(i) Imposition of fine not exceeding two hundred ringgit against any parcel owner, occupant or invitee who is in breach of any of the by-laws.
What this basically means is that if your development’s by-laws do not contain terms disallowing short-term rentals, then you’re good to go, no matter what your nosy neighbours say.
Can a development ban short-term rentals?
Well, yes and no.
In Kuala Lumpur, some property lawyers are of the notion that to officially ban short-term rentals like Airbnb from a development, the Joint Management Body (JMB) or Management Corporation (MC) can vote, during an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM), to disallow short-term rentals with an imposition of a fine for any owners found breaching the by-law.
For this to be passed, a special resolution is required. Compared to an ordinary resolution, which only requires a simple majority of the votes, a special resolution requires not less than 75% of votes.
On the other hand, the Strata Management Act 2013 also states that
“No additional by-law shall be capable of operating to prohibit or restrict the transfer, lease or charge of, or any other dealing with any parcel of a subdivided building or land…”,
If you read the previous excerpt, a JMB or MC cannot make additional by-laws inconsistent with the existing by-laws, making this special resolution, if proposed – legally debatable.
However, the sentiment is that the government of the day will be supportive when taking stance on the issue, looking at how important tourism is to our economy amidst the shortage of hotel rooms in Malaysia (23,600 rooms per day in 2017).
So seeing as how Airbnb is leal in Malaysia, if you own property and are considering listing it under Airbnb and other short-term rental platforms, now might be the best time to capitalise on this fast-growing market and influx of tourists to maximise your investment returns.
Have you ever heard of The Compression Loan: Malaysias Property Investing Secret? If there’s one thing Malaysia should be famous for; it’s for being able to get things done one way or another.
Ever wonder how people manage buy multiple properties at once?
Are they really that rich?
How do they manage to do that with decreasing loan margins?
It’s through using a process that has become known in Malaysia as the Compression Loan.
The Compression Loan is basically the idea of applying for multiple loans from different banks. That’s hardly a secret though. Most everyone will apply for loans from multiple banks to see which one gives them the best interest rate on their loan.
What’s the secret then?
Instead of applying for the same property, you apply for different ones at the same time. This way your TDSR remains the same, as you ‘technically’ don’t have any loans until you accept the offers from the banks.
This means that if you apply for loans for 5 different properties, the banks will all offer their loans and you are able to accept all 5 loans if approved.
A tip that some agents have given me is that, it is best to try keep the value of the properties all roughly around the same price (or at least within a RM100,000 of each other) as if there is a significant difference, it might raise some red flags.
So does that mean that this is illegal?
At the moment, nobody has ever been charged for this but it was noted on propsocial, that being caught doing this is an offence and can result in a jail sentence of at least 6 months.
Seeing as how nobody has ever been charged, I feel that if they were to put a stop to people doing this, they would come up with a new bill or the banks themselves will come out and change their lending rules before anyone is actually arrested.
There have been rumors going around that you are already unable to use this method as banks have tightened their lending checks but I personally know of some investors who have just recently purchased multiple properties using this method – so at the moment, it’s still possible to do but I am not sure if the new Pakatan Harapan government will continue to turn a blind eye to this.
I am not recommending anyone go out and do this, I have personally never done this before, it’s just my opinion on the matter. Don’t take whatever you read on the internet at face value – Always do your own research.
Remember that being offered 5 loans, means that you need to make 5 times the monthly loan repayments, pay 5 times the property taxes and have 5 different units to renovate. Using this technique can be useful but only when used correctly and within one’s means.
Though now having become a relatively well-known strategy among veteran property investors, ‘compressing’ your loan might not be the secret you thought it was when you first started reading.
But does there lie a deeper and darker secret behind the compression loan?
There is no data available on how many people have used this strategy, but it has me wondering whether it could have contributed significantly to the problem of Malaysia’s current property oversupply.
It doesn’t take a genius to realize that using this technique, when used in groups would bring about the most benefit to investors.
From what I’ve been told, there are legal documents that can be drawn up to protect both the person applying for the loan and the people funding the purchase.
It can be surmised that there are many large groups of relatively wealthy individuals who pool their money together to buy property this way. If one person can buy 10 under a single name, a single group would be able to accumulate vast numbers of property very, very quickly.
As with all things bought in bulk – there are always discounts.
Buying 10 or more units directly from the developer makes for an easy bargaining tool and can result in an overall reduction of at least 10% on the purchase price of the unit. Developers are more than happy to offer these deals because they know that the same group of people, are likely to buy from them again in the future. (Not to mention developers already have their units’ prices at very nice margins so, there’s a lot of wiggle room where it comes to discounts and rebates.)
Imagine if these groups were buying not just 10, but 20 or 30 units at each time, and then imagine there being at least 30 of these groups.
That’s a lot of property that ends up going to the same people at a lower than market rate price.
What are the repercussions of this going on at large scale for a long period of time?
Property developments sell out quicker, locking in developer profits and creating more free cash flow for new projects. Developers are then able to build more, simply because they can sell more.
Allowing these large groups to buy multiple properties at a low market rate also gives them a huge advantage over normal investors in the rental market. As their repayments are less, they can afford to lower their prices and bring the average rental rate down of the entire development.
This will lead to regular investors also bringing down their rental rates, resulting in an artificially low rental rate compared to the purchase price of the property. Yet these investor groups still are able to maintain positive cashflow or at the very least bleed a few hundred ringgit a month.
The Star reported earlier this year that just 6 developers would launch property developments of more than RM6.29 billion over the course of this year alone despite the fact that the number of unsold residential units increased by a whopping 40% from 2016 – 2017.
The developers definitely have this info, yet they don’t seem very concerned.
Do they know something we don’t?
How much of a part to play, The Compression Loan: Malaysias Property Investing Secret, has had in the current property oversupply and low rental rates, is hard to say for sure.
Regardless of the part is has played though, Malaysias Property Investing Secret – The Compression Loan, still stands as a very useful technique to buy up properties en masse, at least for the time being anyway…