Buy-to-Let Investments: Property in Malaysia

Buy-to-Let Investments: Property in Malaysia

Buy-to-let property means that you are buying a certain building in order to rent it out to tenants. In this case, the structure becomes either a medium or long-term investment addition in your portfolio. The Sun Daily reports that even with rising property prices and affordability, there is an increased interest in the Malaysian real estate market. Just take a look at the demand and supply of rental units for property project like OUG Parklane in Old Klang Road, investors are renting out their units at an immense rate. This means purchasing a property now offers infinite possibilities for investors in the near future. However, how do you know if this is the right vehicle for you?

A Buy-to-Rent Property is Right for You When:

-You are more comfortable making investments that are tangible compared to shares and stocks.

-You are willing and capable of tying up a significant amount of money for a long period.

-If you understand that house prices do fluctuate (they can go up as well as down).

-If you are willing to accept the knowledge that the investment may not necessarily offer you profits overnight.

-When you understand and accept the additional risks that come with borrowing money for the purchase of premises.

-You understand and are willing to shoulder the amount of input, in terms of time and costs, that is required to successfully own and run a rental property as well as the impact this is likely to have on potential return.

What Does Buy-to-Let Mean?

A buy-to-let investment is not the same as owning your own home. As the landlord, you are actually running a small business that comes with an income stream and serious legal responsibilities. Here are the three most important things you should remember as a landlord:

-You do not own the house any more. Tenancy means that you are selling that space to the tenants for a period of time. You have to allow the leaseholder to occupy the house without interference.

-You are responsible for ensuring the residence is in good condition. This means that you have to ensure that water, electricity and sanitation systems are in proper working condition at all times.

-The only way to evict a tenant is through the courts. Yes, if your tenant wants to stay on beyond the due day, you will have to serve the proper notice on him or her and proceed to court to obtain an order for possession.

How Buy-to-Let Investments Work

To purchase that residential dwelling you have had your eye on in Malaysia, you can use your own cash savings or obtain a buy-to-let mortgage after you make a cash deposit. Remember, taking out a mortgage comes with risks. If you have to sell your building at a loss, the sale price may not be enough to cover all that you owe on mortgage. Also, when tenants leave, you’ll have no rent coming in, but you’ll still have to make your expected mortgage repayments. You can purchase buy-to-let properties with a bank loan. This means that your total capital and gains are based, not the amount you have paid back, but the value of your estate. The gains are in effect from money, in reality, that is not yours yet. On the other hand, investing in the stock market would require you to make an upfront payment – leaving your investment vulnerable to economic fluctuations.

This also offers you satisfactory capital growth that is long term. This is because housing is a primary human need that is always in demand with shortages being the norm. This makes this asset, although affected by economic hiccups, more resilient to other vehicles you may be considering.

Once you purchase the premises, you income stream will come in through:

-Capital growth. This is the profit you are likely to gain should you decide to sell your land for more than you paid for.

-Rental yield. This is the profit from tenants’ rent money, minus running and maintenance costs like agent fees and repairs.

The Risks and Returns

Purchasing buy-to-let is a big commitment that comes with risk and return in equal measure. Some of the things you should be aware of include:

-The amount you can charge your tenants depends on various factors, including market trends beyond your control. It is also safer if you can remember that being paid is not guaranteed.

-If you cannot find tenants you might have to reduce your fee.

-When the housing market is doing well, you will be in a better position to sell your estate at a profit.

While choosing the building you would like to purchase, it is critical that you consider it as a long-term investment. Select one in terms of its ability to attract tenants in five, ten, or even fifteen years after you get your first tenant. If the building is located in an area that is already showing signs of decline, avoid it.