Is buying to let still feasible?

With so many schemes available such as PR1MA, RUMAWIP and so on, buying a house in no longer difficult. Most people nowadays are working more than just one job to earn some extra passive income. Furthermore, property market is still considered as a popular investment. Before you jump onto the bandwagon of buying a property, it is essential to understand the Real Property Gains Tax (RPGT) on how it works, what it is and how it is computed. This article will elaborate on the feasibility of buying a buy to let property in Malaysia.

 

  1. Right target market

Think about your target tenants. Finding the right target market is essential for people who are in the property market. Determine the potential target market depending on the location of your property. Young couples are more likely to rent a place instead of buying as they are not fully settled down yet.

 

  1. Potential rental yield

A rental yield is the percentage you get in return based on the rental you get from your property after deducting costs incurred in maintaining your property versus total property price. As for capital gain, it is the gain or loss after you sell your property.

 

In order to know if your property is generating money flow from the rental that you collect is much more than comparing the rental you collect with the monthly installment that you pay, as you will also need to take other costs involved into consideration as well.

  1. Miscellaneous costs

Buying a property involves other miscellaneous costs as well as you are not only paying for the property price only.

 

  1. Property tax

Property tax is payable for all properties that include shops, lands and factories. Property tax comes in assessment tax where it is based on the annual rental value of the property; and quit rent where it is calculated on a yearly rate.

 

  1. Rental income tax

Rental income tax is only applied to those who have a total rental income of more than RM5,000. However, the cost related with your buy to let proeprty is able to get offset against the rental income.

 

  1. Real property gains tax (RPGT)

Real property gains tax applies to property that is sold lesser than 5 years after purchasing. RPGT charges only the profits that you get after minusing the original property price, renovation and incidental costs, such as stamp duty, legal fees, advertisement fees and etcetera.

 

The imposement of RPGT has its own pros and cons, with lesser impact on genuine buyers as compared to property investors. It is entirely up to you to decide whether it has more pros than cons or vice versa.

 

In conclusion, you will need to plan ahead and do your research before buying a property in Malaysia. Set realistic goals, build a budget and stay within your means to prevent yourself from getting into a financial debt. Know that there will be its advantages and disadvantages when it comes to investment in the property market.

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