Smart Investor Malaysia


Property Investment: Make Money via Capital Gain & Rental Yield


Property investment can be classified as a high risk investment category. High risk, high return. Indeed, that statement is true but do not forget the other side of it which the possibility of higher losses also increases.

Knowledge and strategy are matter the most in investment. It is applicable to all types of investment including property. They are important so that investor can manage their investment properly; control their losses.

It’s not whether you’re right or wrong but how much money you make when you’re right and how much you lose when you’re wrong.

George Soros

Property Investment

Property investment involved a huge amount of capital as compared to the others. Remember, it is not easy to liquidate your property especially when you are in the lost.

It involved quite a long process before the deal is done. You will need an agent to market your property, then will have to wait for a buyer. Then, if your property is leasehold, you will have to wait for consent from the land office. Normally it will take 3-6 months for a deal to be completed after you have a buyer.

Anyway, that is not our discussion in this article. There are whole lot of things can be done to get the best property investment as your investment portfolio.

How can investors make money via property investment?

Capital Gain of a Property

Capital gain also known as capital appreciation can be defined as the increase of the property value from time to time. It can be measured by the difference from original value with current market value.

You can easily calculate it using this simple calculation,

Capital gain = ((Current market value – Original value) / Original value) x 100

For example, you bought an investment property in Setia Alam for RM600,000 in July 2015. As of July 2022, the current market value is RM800,000.

Your property value has increased as much as RM200,000 in just 7 years. The capital gain from formula given is 33% over the 7 years of ownership. Easily calculated, your property value increased around 4% to 5% a year.

Your property value appreciation can not be reflected literally by 4% to 5% per year as the appreciation value is pretty volatile over the years. It could have appreciated by 15% in the first year and stagnated until the fifth year and appreciated again.

So, what can be considered as good capital gain for our investment?

Average capital gain of residential properties in Malaysia reached 13.9% in 2012 when the economy was great according to National Property Information Center (NAPIC).

Capital gain of 5% to 7% can be considered ideal during typical market situations. It is good to remember that mostly, the capital gain is impacted by the economy.

After all, the capital gain can be seen as decent when it is above the inflation rate. Most investors who aim for capital gain will flip or sell their property unit after they reach their goals at certain times.

Property Rental Yield


Rental yield can be described as the amount of rental income for a property as compared to the total investment value. This can help property investor to evaluate potential income of the said property.

Rental Yield = ((total rental income – total maintenance cost)/(property purchase price))x 100

For example, you purchased a property at RM600,000 while the maintenance cost per year amounting RM5,000 and the rental income per month is RM3,000.

Then, your rental yield is around 5.2%. What does it mean?

Rental yield also impacted from the economy. When the demand for rental market is good, the rental yield would likely be good too.

During the pandemic outbreak, many people lost their job. The demand for the properties especially surrounding business area depleted.

Normally, the average rental yield for residential properties is about 3.7%. A good rental rate should be at least 7%. As an investor, there are things that need to consider; property furnishing, property repairs, maintenance fees and any other cost involved.

You have to consider taxes that actually may reduce your rental income.

Location and type of the property play big role in determining the rental yields. For instance, a high rise property with limited units that located near to the access of public transport and offices are usually get a higher rental yields.

This rental yield strategy is suitable for those who have a property in a high demand rental area where you can rent it out easily with higher price.

So, which one is best suits you?

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