Consider this. 

You bought a 3-room condominium unit for RM 500,000, where you paid a 10% down payment and financed the remaining 90% with a 35-year mortgage which is worth RM 450,000 at 3.5% per year. Hence, the mortgage payment works out to be RM 1,860 a month. Inclusive of its service fees, sinking funds and all other related expenses, your cash outflow is RM 2,300 a month. 

Over here, you have three choices on how you can earn rental income from this property. They are: 


1. Rent it out as a whole unit for RM 1,500 a month. 

2. Rent out each of the 3 bedrooms separately to 3 different tenants. Here, let’s say, your unit has 1 master bedroom and 2 smaller rooms. You could charge RM 900 for the master bedroom and RM 600 each for the two smaller rooms. Thus, if the 3 rooms are fully occupied, you would earn RM 2,100 per month in rental income from this condominium unit. 

3. Rent the whole unit out on a daily basis via AirBnB, Agoda, and Booking.com. You could charge RM 180 a day for your occupants. Assuming that you can have 20 occupied days for your condominium unit, you could stand to earn RM 3,600 in rental income on a monthly basis. 


So, which of the three choices of rental strategies do you prefer? 

Obviously, based on monetary gains alone, you may prefer the third option as it generates the highest yield and positive cash flows from your property. But, the question is, ‘Is it worth it to you?’. This is because, although daily property rents may enhance your property returns, the approach to managing your property is very different. Here, let’s examine: 


Option 1: Rent Out the Whole Unit 

In this case, you deal with one tenant at one time. If your relationship with your tenant is steady, you could receive your rental income on-time for a long period of time, which can be either for a year, two years, and much longer. This means, you could be almost hands-off in managing your tenant, particularly if he or she is a sensible person. So in other words, Option 1 yields the lowest but it doesn’t require much active or physical labor to manage your condominium unit. 


Option 2: Room Rentals 

Unlike Option 1, you will deal with multiple tenants if you choose Option 2. This option is common among investors who want to boost their rental income from their properties. However, there are several major factors to be considered first before embarking on this rental strategy: 


1. Tenant Mix 

Will your unit be an all-dude, all-girls, or a mixture of male and female tenants? As smart landlords, you have to consider this and minimize such frictions. If you could do so, you would create a harmonious living condition for your tenants of the condominium unit. However, a failure to address conflicts could risk turning your condominium unit into a warzone. 


2. House Rules

This is related to your tenant’s use of the common areas in your property. Here, they include the living room, bathroom, dining area, kitchen, corridor, and even the storeroom of your condominium unit. You cannot expect all of your tenants to be clean and tidy, sensible and respectful to one another. Thus, as a landlord, you have to state your house rules and be firm to execute them. 


3. Utility Bills 

How would you split the utility bills among your tenants? One tenant may use a lot more electricity than another. In this instance, you might consider setting up meter readings for each room in the condominium unit. This could allow you to allocate utility bills more accurately based on individual energy consumption. 

By now, you could think to yourself, ‘Is it worth it to go through all these hassles to earn potentially another RM 600 per month in rental income?’. Yes, the word here is ‘potential’ as it is possible for you to have one or two rooms unoccupied based on this type of rental strategy. 


Option 3: AirBnb, Agoda, and Booking.com 

First, this option is available only if the management corporation (MC) allows it. So, let’s say you have ‘thumbs up’ from the MC to run your homestay operation with your condominium unit. Your tenants could choose to occupy your unit for a day, two days, a week, and so on and so forth. Now, assuming that you landed yourself 20 occupied days from eight different tenants, you need to ensure that your unit is clean and inhabitable every time a tenant vacates. So, would you be the one cleaning your property unit? How much does it cost to replace items in your unit if one of the tenants took them away? How much does it cost for your unit to be well-advertised in order to secure occupants consistently? 

As you can see, this is a form of side hustle as it demands more time to manage your property unit. It requires you to standby and be close to your unit because you could be required to address your tenants’ immediate needs. 


Conclusion: 

Which of the three strategies should you choose? 

Well, I can’t answer that for you. But as for myself, I would opt for Option 1 as it is less demanding in terms of my time and effort in managing the property. Yes, this option yields the least for my property. However, I believe that my time can be more productive, if I spend it on building my business or career as compared to managing the condominium unit. So, I still find Option 1 to be most suitable. 

But, if you have the manpower, time, energy and interest, you could choose the other two options as they can offer much better yield as compared to Option 1. 

So, all in all, property investment is not always about the returns. Rather, I think it makes more sense to strike a balance between returns, time, and effort spent on managing the property.


Ian Tai
Ian Tai

Financial Content Machine. Dividend Investor. Produced 500+ Financial Articles featured in KCLau.com in Malaysia and the Fifth Person, Value Invest Asia, and Small Cap Asia in Singapore. Regular Host and Presenter of a Weekly Financial Webinar with KCLau.com. Co-Founded DividendVault.com, an online membership site that empowers retail investors to build a stock portfolio that pays rising dividends year after year in Malaysia and Singapore.

    2 replies to "Smart Rental Strategies to Consider for Your Investment Property "

    • Insomnia person

      Hi Ian, appreciate your insights on property investment.

      Wanted to ask your opinion on the unit type for rental, which one is better?
      1R1B or 2R2B? I’m looking at property at Bandar Sri Damansara area. There will be a retail mall below this project, and linked bridge to MRT.

      I’m not sure about the exit plan for 1R1B, will it be hard to get buyers? I think sub-sale buyers are mostly parents with kid hence 2R2B might be easier to sell after I hold for 10 years. What do you think?

      • KCLau

        When it comes to rental properties, demographic factors play a crucial role in determining the best unit type.
        Here’s my opinion:

        1R1B vs. 2R2B:

        1R1B:

        Pros: Lower purchase price, potentially higher rental yield per square foot, and possibly easier to rent to singles or couples.
        Cons: Limited target market for resale. Singles or couples might prefer renting, and families generally require more space.

        2R2B:

        Pros: More versatile and appealing to a broader demographic, including small families, couples, and even singles who want extra space for a guest room or home office. This versatility can make it easier to rent out and potentially more attractive for resale.
        Cons: Higher purchase price, but this could be offset by higher rental income and better resale value.
        Given the proximity to a retail mall and a linked bridge to the MRT, the 2R2B unit seems more attractive. It can cater to a wide range of tenants, from singles and couples to small families, and offers flexibility for various living arrangements. This versatility also means it might be easier to sell in the sub-sale market, as it appeals to a broader buyer base.

        In conclusion, the 2R2B unit is likely a better choice for both rental income and resale potential due to its broader appeal and flexibility.

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