All the costs involved with property investment in Malaysia

You heard your friends/relatives got rich by buying a property few years back and sold it for double the original purchase price,

You heard some of the success stories where the people who did compress loan to purchase multiple properties at once got rich in the process.

You read the book Rich Dad Poor Dad and understand that leverage could be the key to build your road to financial freedom.

There is a new launch of a property project in town and the developer is offering a discount, or you decided the market is good and start looking for the second-hand property market.

You want to start investing in a property and hoping that the rental can cover full or partially the monthly installment. But you need to know all the costs associated with property investment, which summarize as below

1. Upfront Cost 
This article from Imoney summarizes well, in general aside from the downpayment, you need to pay
- Stamp Duty for purchase and loan agreement (from 1.5% to 3.5%, depends on your purchase price)
- Legal fee for SPA & loan agreement (around 1.8 - 2.0%)

2. Renovation & maintenance cost 

To make your property tenable, you need to buy some furniture, do some repair painting, replace the electrical appliance etc. 

- Let assume for a new house you need around RM 5k to 10k to make it tenable, then spend another similar amount every 5 years. 

- And every year spend a small amount to fix those pipework/electrical issues/wear and tear. 

3. Fixed Costs per month,

Regardless whether you rent the property out or not, you still have to pay the

- Assessment Rate (around 7% of estimated rental income) and Insurance

- Management fee and sinking fund for condominium/serviced apartment 

- Depreciation charge: this is one of the cost most people often overlook. To understand this, you have to imagine a 10 years/20 years old property cannot ask for the same price as a new launch property. The building and facilities will be aged, people will need to incentivize (receive a discount) to live in an older property compared to a new one. Typically we should expect a depreciation rate of 2% (assuming the property can last 50 years) 

4.  Cost related to renting out

- Quit rent, being the lost income when you are unable to rent your property out

- Agent fee, if you hire a property agent to look for tenant (typical 1 - 1.25 months per year)

- Income Tax: Legally, you have to declare the rental income when filing for income tax, thus depending on your current last tax bracket, you could end up paying 3% - 24% of your rental income as tax.

5. Selling Cost
This article from Imoney summarizes well, in summary
- Real Estate Agent Fees (up to 3%)
- Legal fee for SPA (around 0.8% to 1.0%)
- Real Property Gain Tax (RPGT, 5% for profit when selling the property after the fifth year).