1.0 Rental Properties (Buy-To-Rent)

One of the most popular ways to build long-term wealth is through rental properties, also known as the 'Buy-To-Rent' strategy. This option can be a very stable and low-risk investment when done correctly.

The first step is finding a suitable property. It's essential to find a property in a valuable location with potential for future growth, typically near universities or business districts with plenty of conveniences and amenities nearby such as this property. You can find upcoming and existing properties with a proven record of high rental yield here.

The next step is determining your property's return on investment (ROI).

How to calculate rental yield? Here's a quick guide.

Gross Rental Yield (General calculation)

Annual Rental Income = Monthly rental fee x 12 months
Property Value = Purchase Price or Current Market Value

Net Rental Yield (Detailed calculation)

Annual Expenses = Installment / Maintenance fee / Quit rent / Sinking fund / Property assessment

The last step is to rent the property as quickly as possible. One of the few ways to do this is by marketing the property on real-estate platforms, ensuring the property is attractively decorated and equipped, or simply offering a lower price than the competition.

Every investment strategy has pros and cons, and the buy-to-rent method is no exception. Here are some examples:

Pros:

You can often get good returns on your investment.
It can be an excellent way to diversify your portfolio.
It can be a good approach to hedge against inflation.
It can provide a steady stream of income.

Cons:

Your tenants may cause damage to your property.
You may face tenants skipping out on rent.

2.0 House Flipping (Buy-To-Sell)

House flipping is a process where an investor will purchase a property and then resell it as a sub-sale property for a profit. The goal is to buy low and sell high, and this can be a very profitable venture if done correctly.

Now, why would anyone want to buy a sub-sale property? There are a few reasons that explain the demand for it:

High-traffic location
The completed township offers fantastic accessibility and conveniences compared to when it was still building
High occupancy rates lead to more favourable opinions of the area
Attractive rental yield potential

Next, there are a few things to consider when flipping a house.

Holding power: You will need the financial capability to hold the property until it is purchased.
Commitment to maintaining the property's condition: The property is best to be in 'selling condition' during the holding period.
Dedication to source for potential buyers: This may take some time. You can either do it yourself or choose to outsource for professional assistance from our list of channel partners.

Here are the pros and cons of this approach:

Pros:

Quick profit if done correctly
High returns

Cons:

Poor township development
Property with low capital appreciation

To ensure a successful buy-to-sell strategy, it is vital to do due diligence research on your investment property from multiple angles, such as location and developer track record or get the right professional expertise to do it for you.

3.0 Short-term Rentals (Buy-To-Airbnb)

One option that is growing in popularity is renting out a property through Airbnb. Like hotels, short-term rentals work by renting rooms or entire units to guests for a few nights or a week or two.

Renting your property on Airbnb can produce a significantly higher profit margin and lucrative profit returns compared to the traditional long-term buy-to-rent strategy on a day-to-day basis.

However, before diving right into it, do consider the pros and cons of this strategy:

Pros:

You can charge more for short-term rentals than long-term rentals, and you can get more bookings since people are often looking for last-minute accommodations. In some cases, you can charge up to triple the price of a traditional rental.
Faster profit returns and better cash flow.
You'll get to know new people. When you rent out your property on Airbnb, you'll get to know people from all over the world.

Cons:

It can be a lot of work. It's basically like running a hotel business. You have to be available to check in guests, clean the property, and handle any problems that may arise. You also have to keep up with changing regulations and restrictions.
Some property management may not allow such arrangements, so do check with the management before venturing into this strategy.

Conclusion

Investing in property can be an effective way to build wealth over time. This article outlined three of the best property investment strategies in Malaysia. If you are interested in learning more about property investment or looking to engage professional assistance, please click this link to find out more.

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