After buying your home, you may now be thinking about investing in multiple properties in Malaysia. The idea of collecting rental income each month, and potentially not having to work for an income, is something many may aspire to have.
While investing in multiple properties may sound lucrative, it requires careful financial planning over decades, in-depth knowledge of the property market, and awareness of legal and tax regulations.
This guide will walk you through some of the key considerations if you want to invest in multiple properties in Malaysia.
Understanding Your Finances: Loan-to-Value (LTV) Ratio & Debt Servicing Ratio (DSR)
Before jumping into property investment, it’s crucial to check if your finances are in good health. In Malaysia, banks generally offer up to 90% financing for your first two residential properties, making it easier to get started.
If you’re eyeing a third residential property, things get trickier. To keep real estate speculation in check, Bank Negara Malaysia (BNM) introduced a policy that caps the loan-to-value (LTV) ratio at 70% for your third mortgage.
In simple terms, if you already have two unpaid home loans under your name, you’ll need to fork out a much bigger down payment, at least 30% of the property price, for your next purchase.
Therefore, before expanding your property portfolio, make sure you’ve built a good credit record such as CCRIS and CTOS, to prove your financial capacity.
Additionally, lenders will consider your Debt Service Ratio (DSR), which compares your total monthly debt obligations to your income. Keeping your DSR at a manageable level ensures higher chances of loan approval. If your income sources are not diversified, it’s best to build financial stability first before acquiring multiple properties.
Read Also: How To Check Your CCRIS Report, And Understanding What It Means
Managing Multiple Property Loans: Choosing Fixed Or Flexible Home Loans & Refinancing Options
Taking multiple loans for different properties can be challenging, especially with higher interest rates today. It’s important to compare mortgage options from different banks to secure the best terms.
Some investors choose flexible loan structures, such as a combination of fixed and floating interest rates, to manage risks. Refinancing existing loans is also an option to free up cash flow for further investments.
Alternatively, if you already more than one home loan, you can refinance by choosing to pay off one of your mortgages entirely and maximise the home loan on the property to qualify for 90% financing on your third property investment.
However, before applying for additional financing, it’s crucial to evaluate whether your rental income or salary can sustain the monthly repayments. Over-leveraging can lead to financial strain, so always plan for worst-case scenarios, such as vacancies or unexpected repairs.
Read Also: Understanding The Overnight Policy Rate (OPR) And How It Impacts Your Home Loan
Rental Property Management: The Admin Of Owning and Renting Out Multiple Properties
Managing multiple properties requires time and effort, especially if you’re handling tenants, maintenance, and legal matters. Some investors prefer self-management, but hiring a property management company can ease the burden.
Property managers handle tenant screening, rental collection, repairs, and even legal disputes. Platforms like CozyHomes offer comprehensive property management services, including tenant management and maintenance, to provide a hassle-free experience for property owners.
For those focused on short-term rentals, GuestReady specialises in managing Airbnb and other vacation rental properties by handling guest communication, cleaning, and maintenance to maximise rental income. Meanwhile, PropertyGuru provides tools and insights for property investors, helping them connect with property agents and manage their investments efficiently.
While these services come at a cost, they allow investors to focus on acquiring more properties without being overwhelmed by operational issues. A well-maintained property also increases its rental and resale value, making professional management a worthwhile investment.
Choosing the Right Property Investment Strategy
Not all property investments yield the same returns. Some investors prefer rental income, while others focus on capital appreciation. If you are buying properties for rental yield, consider locations with strong demand, such as Kuala Lumpur, Penang, and Johor Bahru. Properties near public transportation, universities, and business districts tend to attract tenants more easily.
On the other hand, if your strategy is capital appreciation, look for areas with ongoing infrastructure developments and increasing population growth. Conducting thorough research and understanding market trends will help you make informed decisions. This may be a much riskier strategy with higher payoff if you select the right property market to invest in.
Diversifying Your Property Portfolio
When investing in multiple properties, diversification is key to minimising risks and maximising returns. Rather than putting all your money into one type of property, consider spreading your investments across different property types and locations. For example, a mix of residential, commercial, and short-term rental properties can help balance income streams.
Residential properties in high-demand areas like Kuala Lumpur and Selangor offer steady rental income, while commercial properties such as shop lots or office spaces may provide higher yields, though they come with different risks.
Meanwhile, short-term rentals like Airbnb properties in tourist-heavy areas such as Penang and Langkawi can generate lucrative returns, especially during peak seasons. However, be mindful of local regulations regarding short-term rentals, as some buildings or areas may have restrictions.
By diversifying, you not only increase your earning potential but also protect yourself against downturns in specific market segments.
Exit Strategies: Knowing When to Sell
Knowing when to exit and sell a property is just as important as knowing when to buy, especially in property investment, which is often seen as a long-term game. One of the key indicators that it might be time to sell is when market conditions are favourable—if property prices in your area have surged and you can secure a strong profit, selling could be a smart move.
Another factor to consider is low rental yield; if your property isn’t generating strong rental income and maintaining it has become costly, it may be better to offload it and reinvest elsewhere. Cash flow issues are another red flag—if managing multiple properties is stretching your finances too thin, selling one or two can free up capital and improve financial stability.
Lastly, if better investment opportunities arise, such as a high-growth area showing strong appreciation potential, selling an underperforming property and reallocating funds could lead to better returns in the long run. Having a well-planned exit strategy ensures you can maximise profits while minimising risks, keeping your property portfolio financially healthy and sustainable.
Read Also: 5 Popular Neighbourhoods In Johor To Buy A Residential Property
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