Malaysia - Buy-to-let Investment

Malaysia boasts a healthy, growing economy, allowing for excellent buy-to-let opportunities. Below is a guide to the factors to be taken into account when considering investing in your property to let in Malaysia.

The term "Buy-to-Let" simply means the purchase and ownership of a property through normal purchase procedures and when completed, the owner seeks to rent this property out for a regular income, often exceeding annual mortgage repayments.

The "Buy-to-Let" Market in Malaysia

A huge increase in tourist numbers to Malaysia has brought about the need for more holiday accommodation in the luxury tourist resorts that have sprung up in many coastal regions. In addition, city investment in Kuala Lumpur has seen much growth over recent years, while large international businesses, particularly from Japan, China and the US, are realizing the financial benefits from establishing their premises here. This has created a surge in the requirement for top class real estate rentals to offer an affluent expatriate market.

Rental yields in Kuala Lumpur stand at a respectable 7.4 to 8.7%, while corresponding figures remain just a little lower in the tourist resorts. Holiday rentals are also big business in Malaysia, particularly in areas in and around Port Dickson, as are commercial premises within the city.

Purchasing a property to let in Malaysia involves careful consideration as to whether or not the property is ideal for your intended market. Careful analysis will need to be done on matters such as local or tourist amenities and accessibility to airports and road infrastructures. Early investment and a carefully planned formula to suit your market will bring you excellent returns on your buy-to-let property in Malaysia.

Buy to Let (Example Only)

Case Study

John decides to purchase an investment property and he decides that the "Buy-to-Let" investment strategy is for him.

John has savings of around €80,000.

Investment property X is a new development with beautiful sea views and priced at €250,000.

Initially John pays his reservation fee of €3000 to hold the property.

Next John pays a 30% deposit of €75,000 (minus his €3000 reservation fee already paid)

Our investment specialists negotiate a mortgage for John for the remaining €175,000 at a rate of 2.75% (example only) this translates to a monthly mortgage repayment of €481.00 (interest only) which is equal to €5772.00 over 12 months.

John starts to rent his new property immediately and during the 3 months "High Season" he receives €2000 per month in rental income. These rental payments exceed his annual mortgage repayments and still leaves John with 9 months of rental potential to make a further profit.

If we assume that average rental rates for Johns new property are as follows (conservative figures):

  1. High Season - €2,000 Per Month
  2. Low Season - €1,300 per Month

Now we assume that John decides to go on a short term rental strategy maximizing his income over the High Period. He easily rents his property for 3 months during the high period earning €2000 per month. After this period he has a delay in getting his next tenants but over the course of the year he rents his property for a further 6 Months only.

  1. 3 Months x €2,000
  2. 6 Months x €1,300

Total Rental income = €13,800 after subtracting the €5,772 mortgage repayments John has made a profit of €8,028.

* During this example we have not included any rental management or community fees that may apply but also we have only assumed rental income for 9 months of the year and with many holiday makers now booking private accommodation via the Internet this is very achievable.

Short-Term letting v Long-Term Letting

The final decision to be made by the "Buy-to-Let" investor is which letting strategy to use. It is obvious that the highest income is made by the property owner by short term letting during the high season. However you must bear in mind increased overheads due to constantly finding short term rental clients, as well as maintenance costs between clients.

Long-term rentals typically pay less per month but usually require far less input from the property owner. Some property owners choose to rent long-term during the low season, then short-term to higher paying tourists during the high season. The decisions to be made regarding your letting strategy are usually answered in part by the type of property you purchase.

The “Buy-to-Let" strategy is an important formula to get correct as even in a very busy market there is still competition. In order to maximize occupancy rates it is vital that you correctly select your location, property, unit and monthly rental charge as these factors will directly effect occupancy and, in turn, your rental income.

This type of investment brings the added benefit that during the time your property is being rented out and earning you an income, it is still appreciating in value at one of the fastest rates available, while someone else is paying your mortgage. Meanwhile it is providing an off-peak holiday home for your personal enjoyment.

Buy-to-Let investments are catching on fast in Malaysia and investors now consider them to be a very sound investment decision.

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