You may not get good tenants all the time, but still proceed

With urbanisation, properties in the Klang Valley is always a good choice where rental is concerned. Many people are moving into the Klang Valley to work and would definitely need to rent. With escalating prices, some may believe renting is an easier and better option. Well, decision is yours.

My friend asked me if he should proceed with a purchase of a walk-up flat for RM150,000. The rental could be RM500 to RM550. He is looking for a few high-rise units to get positive yields as his current landed property is giving him negative return despite being rented out. I told him that if tenant are easy to get, then he should proceed. He said he is worried that the tenant that he got may be a bad one. Those refusing to pay or to move out. Honestly, there’s no guarantee that the tenant we have would always be those ‘pay on time’ type all the time. We could however take the following few steps to mitigate some of the potential risks.

1) Engage good agents to help get tenants. The tenancy agreement is a good precautionary step so that should anything happen, actions could be taken as the signed rental agreement. Get a good sample of tenancy agreement from your agent, else google for one. Read it thoroughly. Do note that when things go wrong, going to court is necessary but at least as a home owner, you have something which you could do legally when you have a binding agreement.

2) TALK to the tenants before renting it out to them. Of course, they may lie or hide certain things but never look down on our own ability to catch some of these little signs. When we are a little uncertain, better to err on the side of caution. To me, I would not welcome those staying with their pets.

3) Deposits should be 3+1. Assuming the rental is RM1,000, then a typical payment upon signing the rental agreement is RM4,000. 1 month for electricity and water deposit, 1 month advance and 2 months security deposit. There should be NO discount. Post-dated cheques for the future months would be desirable.

4) For Selangor, it may be better. According to the Selangor Water Management Group (Air Selangor) corporate communications head Amin Lin Abdullah, the landlord could submit an application to Syabas to terminate the water supply by paying the termination charges. This is as long as the registered account holder with Syabas is the landlord. Make sure YOU are the account holder.

 

Last but not least, I always think it’s best to rent out fully furnished for an extra premium. Most of the time, those willing to pay extra premium tend to be easier to deal with and less of the calculative type. One example, an empty unit for a condo in Kelana Jaya may be RM1,600 but a fully furnished one could be RM2,000. I told my friend that he should proceed as long as renting out is easy. On a longer term, capital appreciation helps tremendously too. Based on a RM150,000 price, it’s already going to be an uphill task for any developer to build such units in future without any assistance from the government. Happy buying and renting.

written on 19 Apr 2016

next suggested article: Property investment? Buying and renting is a good long term strategy

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