The In’s and Out’ of Renting: As It Is
Your one-stop-landlord guide to the in’s and out’s of renting. If you feel like taking a step into the waters of property or real estate, check this out.
Introduction
The property industry has long been an industry in which many has sought to get into. Like with any other industry or business, there have been stunning successes and failures of varying degrees.
According to Grand View Research, the global real estate or property market is set to generate a revenue of USD 4.263 billion which amounts to MYR 17.33 billion by 2025. It is a large billion-dollar industry, and it is ripe for those who have at least one extra property to rent out or wish to take a step into the property market.
Malaysia’s strong economic growth after rebounding in 2017 continues to persist. In the final quarter of 2017, the Malaysian economy expanded by 5.9% according to the International Monetary Fund (IMF). Additionally, in January 2018, inflation was 2.7% down compared to 3.5% in December 2017 which was attributed to the rise of fuel prices.
The stabilising and increasingly stronger economy, coupled with increasing expats from Europe and Eastern Asia mean more supply of properties is needed. Perfect for entrepreneurs or individuals owning more than one property to break into the industry.
Why should I rent out my house?
So you’re wondering, “Why should I rent out my house?” Or, “Why should I invest in a property?” There are several reasons why many choose to break into or be a part of the real estate industry.
One of the major ones is passive income, which means to increase their profit and revenue as they turn the rented out property from a liability into an asset. The increased income benefits the landlord in terms of spending and expenses, whereas the tenant has a place to stay and live in.
Another is that they are migrating, but still wish to retain their local property as they either do not want to see it turn to waste or due to uncertainty of their future at their destination of migration.
Building equity or value is also a reason why many choose to be landlords and rent out their property.
How much rent should I ask as a landlord?
Got the place, got the furniture and amenities ready, but what to do with the rent?
You’re in a dilemma. Set too little an amount and you’ll lose money, set too high and tenants won’t be attracted to your property. How does one decide the rent?
Fortunately, there’s a few ways for you to determine the right amount.
- Find out the average rent asked for in your neighbourhood.
- Check out the average price of similar properties for rent in your surrounding area.
- Choose how long you want to get your return on investment.
- For instance, you have paid RM 600,000 for a property and want to earn it back in 10 years. Just divide 600,000 by 120. This means you want to ask RM 5000/month.
AGENCY: To be a landlord, or not?
So you’re convinced, you have a property, and you’re ready to go. But what’s the process?
What landlords usually do is get an agent to represent them. Others set up by themselves. Below, the pros and cons are discussed for both.
Having an Agent
An agent certainly helps you in reducing the workload as they take care of the entire operation process. They save you the headaches of finding and meeting potential tenants, sorting out of property photos and details and set up shop for you online.
So what’s the risk? Besides taking a cut of the rent, not all agents are honest and some may even quote a higher price to potential tenants to get a higher cut. This leads you to being misrepresented and getting a bad image in the process, reducing your reputation and/or credibility as a good landlord.
Self-representation
So you’ve chosen to represent yourself. Maybe it’s because you want to have a hand at being a landlord speaking for him or herself, don’t want to risk misrepresentation or simply want the full cut of the rent. Either way, this path is a challenging, albeit risky one. You’d have to get to know and understand the landlord tenancy laws in Malaysia, for one. Finding and meeting clients is another, as well as setting up listings and the details of the property online. Simply put, the entire operations process.
The SPEEDHOME Way
A platform that connects landlords and tenants directly, SPEEDHOME’s goal is to make the entire experience of renting as easy as checking in and out of a 6-star hotel. What the platform does is that it helps landlords in finding tenants, tracking the rental payments and more.
Before you rent out…
You might want to consider renovating. It doesn’t have to be extensive or elaborate. Simple renovations such as a change of interior décor or repainting can go a long way in appealing and attracting interested tenants.
TENANCY AGREEMENT
A tenancy agreement is a contract between the landlord and tenant which details the terms and conditions of renting. Such details include the renting duration, rules that the tenant need to follow and payment details. This is usually signed after negotiations.
It is possible to write your own tenancy agreements, but it is not recommended. Instead, it is better to have a lawyer to do so. Or, if you have a tenancy agreement template, have it reviewed by a professional and if needed, revised to ensure that you and the tenant are sufficiently protected during the period of tenancy.
Usually, the tenancy agreement lasts for 1 year. After the contracted period, it is up to the landlord as to allow the tenant to renew the agreement or not. It is important to remember that the agreement is for the benefit of both parties involved.
Don’t Forget to Stamp
The agreement has to be stamped by the tenant and signed by both landlord and tenant. If the agreement is not stamped, it will be inadmissible in court in the event of disputes.
Rough Estimated Legal Fees for Agreement
|
For the first RM 10,000 |
25% of the monthly rental |
|
For the first RM 90,000 |
10% of the monthly rental |
|
Exceeds RM 100,000 |
Negotiable on the excess (usually not more than 10%) |
NOTE: For an overview of the process, click here.
COMMON PROBLEMS
All businesses have their own risks and problems. This also goes for the business of being a landlord. Here we will discuss the 3 most common problems that all landlords face.
Damages
So your tenant isn’t particularly a calm person or is prone to accidents. Either way, it happens more often than you think. Coming in all forms from ruined curtains to broken furniture, it all accumulates and you’d have to pay the leftover bills before renting it out again. While deposits can help, more is needed when dealing with extensive damage or property damage requiring you to call a contractor to fix or replace things.
Late Rental Payments
Experienced landlords will tell you that a tenant who does not pay their rent in a timely manner will be a risk. This is because there is the risk of the tenant running off and not clearing the debt, leaving you (the landlord) with the bills and expenses to pay.
Complaints
Tenants may disrupt the neighbourhood of the place they are renting. It may be that they speed or are prone to littering. Younger tenants might also be prone to late-night partying or hosting such parties leading to illegal parking of vehicles and make excessive noise.
This brings us to the importance of finding good tenants. It is common for some landlords to not vet their potential tenants, simply wanting to rent out their property immediately. But the lack of screening introduces another risk: bad tenants.
Subletting without Notifying
Sublet is the action of a tenant renting out the property to another individual. Finding a new person in your property isn’t particularly a nice thing when you aren’t notified. If you as the landlord was aware, it wouldn’t be a problem.
But, what to do if the tenant sublets without notifying you?
What to do?
First, make sure that the new individual is not there to visit or house sitting. If the guest has been there for at least a month and you find new furniture, keep calm. It is likely that the guest does not know of the agreement between you and the first tenant.
So, you are sure that the property is being sublet. Approach your first tenant and talk as the arrangements between him or her and the new individual may be violating the original agreement. It is also likely that the rent had only been charged for one person and not two.
Try to come to a compromise and discuss to get the best option that will benefit everyone. Assumptions and hasty conclusions, along with confrontations can be avoided if there is a new tenancy agreement with conditions that placate or satisfy everyone.
If, however, the tenant is not keen, reiterate that it is not allowed and the new tenant will need to leave.
Checklist
- Bring a copy of the tenancy agreement before approaching the original tenant for a talk and explaining about subleasing.
- Give them a duration of 30 days to sort out the issue. If the new tenant wants to stay on, revise the rental price and tenancy agreement.
- If the subletting tenant is adamant and refuse to leave, the last option would be taking legal action. But before you proceed, ensure that you are within your legal rights to do so.
- If the lease agreement does not specifically prohibits subletting, it’s harder to resolve the issue. Get advice from a lawyer instead as the tenancy agreement might simply require updating and having the original tenant to re-sign it. Though it does take about 30 days for it to come into effect.
EVICTION
You’re at the end of your rope. Your tenant refuses to see you or pay the bills and has changed the locks. You start to seriously consider evicting your tenant.
This scenario is one of the possible few that can happen depending on how your tenant is. No one wants to be a part of this scenario, most of all, you. Unfortunately, life doesn’t work that way and evicting tenants does happen sometimes. Like most matters, it is not as easy and you cannot simply wave a hand and magically vanish your nightmarish tenant and conjure money to pay the bills.
The Run-down:
The Tenancy Agreement
- The equivalent of the scripture for you (landlord) and the tenant. As it covers both parties and protects their rights, this document is important and is the go-to reference if anything goes wrong.
- Ensure that this document exists and is legal. This is because there is a lack of laws protecting the rights of landlord and tenant. While there was the proposal of the Residential Rent Act, time would still be required for it to take effect.
A Valid Reason
- It may be a misunderstanding or a small matter blown out of proportion. Regardless, make sure that the reason for evicting the tenant is reasonable and give them a fair amount of time to pack or settle things.
- Examples of valid reasons
- Failing to pay the rent
- Significant damage to the property
- Violating the tenancy agreement
Attempt to Parley
- Try to talk and reason with them first. You might be angry, but there may be a chance of sorting out the issue without turning it into a bigger mess. Sit down and talk with your tenant. Discuss alternatives and options. Have it in a public area to reduce the chance of making a scene.
The Eviction Notice
- You have done all you can to defuse or solve the situation but your tenant still refuses to cooperate. Time for you to act and get that eviction notice out. However, the eviction notice is not an easy matter as it has to adhere to legal procedures.
- The eviction notice should consist of three main components: reason for eviction, proposed ways to prevent the eviction and a deadline or grace period to settle their dues or pack and move.
File the Eviction Order
- If the tenant still refuses to make a move and stays past the deadline, you, the landlord, can now file for an eviction order in court to claim all the outstanding payments including payment for the property damages.
- However, an eviction order can take 3 to 6 months to be processed in the Sessions Court. An eviction order is expensive, costing between RM7,000 to RM25,000. It can increase if the tenant decides to contest it.
- If the tenant still refuses to make a move and stays past the deadline, you, the landlord, can now file for an eviction order in court to claim all the outstanding payments including payment for the property damages.
- However, an eviction order can take 3 to 6 months to be processed in the Sessions Court. An eviction order is expensive, costing between RM7,000 to RM25,000. It can increase if the tenant decides to contest it.
It is always better to cover all your bases. Getting Landlord insurance is part of the protection. While it is the norm for landlords to collect the deposit as insurance, it is better to get the actual landlord insurance for the wider coverage.
A landlord insurance slightly differs from the standard housing insurance, as it also covers:
- Theft
- Tenant’s failure to pay the rent
- Property damage caused by the tenant and/or other factors
Reasons why you should get insurance
Homeowners’ insurance claims are usually denied if the property is rented out and more liability coverage is needed as there is the risk of damage by the tenant. Also, unlike the standard house insurance, a landlord’s insurance would aid you more in court. Landlord insurance ensures protection from loss of income in case the tenant suddenly decides to move out due to damages.
SPEEDHOME + ALLIANZ Protection
At SPEEDHOME, our landlords are covered by RM42k Rental Protection. We cover inconvenience benefits, loss of up to 2 months rental and more! Click here for more info.
RESPONSIBILITIES
The fundamental responsibilities of the landlord are as below:
- Ensure a safe and secure environment.
- Comply with the local and state health, safety and building regulations.
- Provide standard amenities: electricity, hot and cold water, heat
- Prompt repairs
- Pest-free environment
- Following the legal process if evicting a tenant
- Notice before entering a rental unit
- Screen your tenants*
- Inspect the property
Click here for more information
How to Screen Tenants
You might be wondering how to screen tenants. What do I check? What do I look for? This can be daunting for you if you’re a first-time landlord.
Simply put, there’re two options for you to consider:
a) hire a rental property management company, or
b) find tenants by yourself
But take note that if you hire a rental property management company, they will take a cut of the money.
Resolving tenant conflicts
Sometimes, tenancies go by quietly and peacefully. And other times, badly with a spoonful or heap of drama.
So what can you do to minimise it?
- Terms for a safe and peaceful environment
- You can include specifics of what makes a safe and peaceful environment for everyone such as no excessive noise-making or enforcing civility. And if your tenants don’t comply, they’re violating the agreement and you can seek out their eviction.
- Create a resolution policy
- If you have multiple tenants and they’re having a conflict, be proactive and act. When your tenants arrive or you have a new tenant, give them a packet detailing the terms and conditions (e.g: house rules). This tells them that you take conduct seriously.
Having to step in and resolve conflicts will happen at some point, so it’s better to be prepared.
HOUSE-CARE AND MAINTENANCE
Plan regular maintenance sessions for your rented out property. Routine maintenance helps in spotting problems in early stages before they become worse and turn into an expensive problem, thereby draining your cash flow. A house or property that is maintained regularly in mint condition holds better value and minimises the risks of having to fork out more money later for extensive damage.
General House care
Check for/the:
- Pests (in-depth explanation below)
- Leaks and water damage
- Pay close attention to the roofs, ceilings and walls and see if there is any water leak. Identify the signs of water around the windows, the shower, under the sink and the toilets. Early detection helps prevent damaged walls and possessions and toxic mould.
- Caulk and grout
- Grout is the mortar or paste filling the tiles while caulk is a sealant or material which makes an object air or watertight. They can crack or loosen over time. If unchecked, and they are damaged, water will seep through and damage the walls and the floor inside. Replace them at the earliest opportunity after detection.
- Air Conditioning unit filters
- Prevent contamination of the air ducts. Consult the manufacturer first for advice in choosing the right filter for your air conditioning unit. This should be done at least twice a year.
- Water heater/filter
- Drain them to remove the accumulated sediments. Sediments can contaminate the water supply which would then lead to health problems.
- Gutters
- Gutters are prone to clogging after time. Clogged gutters can be problematic as the trapped water are liable to entering the property and damaging it.
Click here for more information
Pest Infestations
Pest infestation is one of the major concerns in the property rental industry. They can lead to:
- Property damage. Rodents and termites can damage the wiring and chew through the walls.
- Complaints from tenants and high turnovers: No one wants to live in a place infested with rodents or insects.
- Health problems galore. Pests often carry diseases and are able to transfer them. For instance, mosquito bites, if infected, will cause malaria in the individual. Malaria is a disease which are transmitted to humans from the Anopheles Currently, no vaccine has been licensed for global use.
Which means expensive bills, bad reputation and potential court cases which would drain your money. Hence, you should take pest infestations seriously to save future time and money.
Schedule regular exterminations
If you ever see signs of rats and insects, it is very likely that the infestation is a serious one. It is better to stop or minimise the problem before it gets worse and bugs you more in the future. Here are 7 things that you can do to keep your property pest free:
Seal up those cracks and services.
This prevents rodents and bugs from infesting your property. Check the unit’s exterior regularly. Focus on the foundation, gaps between corners, pipes, vents, units and doors. While time-consuming, it saves you the hassle later on and lessens the chances of the problem becoming bigger.
Set up rules about cleanliness
Inform and remind your tenant that maintaining the cleanliness of the property is a shared responsibility. Ensure that the common areas are clean.
Proper waste bins
If your unit doesn’t have waste bins that are sturdy or proper lids, get one of them. Or several. They should not be cracked or damaged in any way as you don’t want to give the pests opportunity to infiltrate your waste or space in any form.
Remove the clutter
Pests or rodents may nest in piles of dirty laundry or garbage, so throw those into the washing machine or take them to the cleaners. Dispose of the garbage accordingly.
No Stagnant Water
If you have containers or cans containing water around your unit, it will attract the pests as they would use it as a nesting site. The Aedes mosquito would be one such pest attracted to the stagnant water.
Team up with the tenant
Work together to ensure that no rodents or pests infest the property. One of you might miss things that the other notices. Like the saying from John C. Maxwell goes, “Teamwork makes the dream work.”
FUN FACTS
5 Popular Towns in KL for Expats
The most common criteria when looking for a place in any housing area would be accessibility, safety and security. But there are also additional factors which can make or break the expats’ decisions.
High-end supermarkets
These supermarkets carry international brands which may be familiar.
Concentration of other expats
To ease the transition into a new country, sometimes you need a little bit of familiarity.
International cuisine
Good for food-lovers, fabulous way to connect back with the homeland.
International schools
For households with children.
So here are the top 5 Areas Best for Expats in Kuala Lumpur that fulfil the criteria:
Mont Kiara
- International schools, gated housing areas and condos, this affluent township is a popular choice for expats who have relocated to Malaysia and the majority of Malaysian upper income groups.
- Public transport is fairly inconvenient and traffic during peak hours is the norm.
Bangsar
- This suburb in the city is a peaceful neighbourhood with an extensive choice of excellent eateries and bars. It can be a short walk depending on the area and extremely accessible due to the availability of the MRT and LRT
- However, prices are on the higher end of the market and there is a lack of international schools.
Taman Tun Dr Ismail (TTDI)
- In the Golden Triangle of Petaling Jaya, Taman Tun Dr Ismail, more commonly referred to as TTDI, is a delightful mix of expat-friendly amenities, good food and the local experience. With a variety of commercial and residential properties and connected to the highways of Penchala Link, NKVE and LDP, it is easy to get around.
Damansara Heights
- The name itself is a symbol of status as the local upper income group and various foreign dignitaries settle here.
- Connected to the SPRINT highway and 2 MRT stations, Bukit Damansara and Semantan, this neighbourhood is also close to Bangsar, Mid Valley, KL Sentral and the city centre surrounded by good food.
Kuala Lumpur City Centre
- Perfect for the working class and surrounded by several major malls like Suria KLCC and Pavillion which are within the walking distance, KLCC is also interconnected with three public transport systems: the bus, LRT and MRT. Properties here are usually condominiums and apartments.
- Expensive, but a well-connected neighbourhood.
Top 5 Most Popular Condos in Kuala Lumpur 2018
Kuala Lumpur is a vibrant city made up of a wide variety of condominiums. Here is a list of the Top 5 Most Popular Condos in Malaysia in 2018.
Empire City
Consisting of a 26-stories tower, this sleek leasehold SOHO development that is the Block M of Empire City is located in Damansara Perdana. It has a myriad of amenities and facilities. Empire City is filled to the brim with studio units, loft offices, serviced office suites and more. With easy access to major highways like Penchala Link, North-Klang Valley Expressway (NKVE) and North-South Highway (PLUS), Empire City is definitely a hot spot.
Maisson
Nestled in the embrace of Mother Nature, Maisson is an elegant residential building situated in the exclusive area of Ara Damansara. Maisson blends indoor and outdoor living seamlessly with their concept of barefoot luxury, allowing residents to enjoy stunning natural beauty with a modern twist. Nearby amenities consist of IKEA, 1-Utama, Jaya Grocer, AEON Big, Giant and more.
Pacific Place
In Ara Damansara, Pacific Place stands out from its competitors with limitless connectivity. It has easy access to the new LRT station, health institutions (Subang Jaya Medical Centre and Sunway Medical Centre) and reputable academic institutions. Surrounded by an affluent and established community, lifestyle malls such as Sunway Pyramid and Subang Parade, there are activities that cater to everyone.
Garden Plaza
With 1149 residential units and 58 commercial units, Garden Plaza is an exclusive, one-of-a-kind freehold development built to cater to diverse lifestyles from international students to workplace professionals and businessmen. Klang Valley is within easy distance via LDP, ELITE and SKVE highways. So is KLCC via the MEX Highway.
Sky Park Cyberjaya
Experience an unbelievable eco-friendly lifestyle with Sky Park in Bandar Saujana Putra. A sophisticated, urban styled service apartment block, Sky Park consists of five block buildings and is simply 1.0km from Lim Kok Wing University of Technology. Hotels, SOFO studios and near KTM and LRT stations, Sky Park’s accessibility is undoubtable.
If Only Tenants Knew…
- That you have your own obligations, responsibilities and expenses like any other regular person.
- That you get nervous when they (the tenants) don’t respond or communicate.
- That you have a heart and isn’t a complete demon so it’s okay to be honest.
- That they just have to inform and have a discussion with you to work out an option if someone else wants to stay over permanently.
- That you used a lot of money (and savings) to get that property and maintain it.
- That you just want them to feel at home.
