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Know Your Stuff: Buy-to-let

Know Your Stuff: Buy-to-let

26 Feb 2026
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For many, buy-to-let property is seen as a reliable source of passive income and a store of value. What is often overlooked, however, is that buy-to-let success hinges less on price appreciation and more on the ability of the asset to generate stable, repeatable income over time.
 
For more insight, City & Country speaks to Nawawi Tie Leung Property Consultants Sdn Bhd executive director and regional head of research and consulting Saleha Yusoff, who cautions against viewing buy-to-let as a low-effort strategy.
 
Broadly, Saleha describes Malaysia’s buy-to-let market as dominated by two asset classes: high-rise residential units — including apartments, condominiums and serviced residences — and commercial shopoffices.
 
She notes that in actual practice, buy-to-let in high-rise residential is less passive than assumed, due to rising strata and maintenance costs and constant repricing pressure resulting in relatively thin net yields that require hands-on oversight to stay viable.
 
Commercial shopoffices, while typically offering higher headline yields, are not necessarily more passive — with income stability dependent on business cycles and obsolescence risk.
 
Saleha adds that many investors overestimate the role of price appreciation and underestimate the cumulative impact of costs. 
 
“[Rental] income is sustained not by inertia and truly set-and-forget exposure tends to exist only in pooled or institutional vehicles.” 
 
Not set and forget
 
Landlords often face structural limits on rental growth. For high-rise residential in the Klang Valley, Saleha cautions investors against trying to optimise both rental yield and capital appreciation at the same time, noting that market structure makes either objective dominant depending on where, when and why the property was bought.
 
“Rental yield tends to outweigh capital appreciation in mature, well-occupied areas such as established neighbourhoods, where entry prices already reflect full development risk and tenant demand is utilitarian rather than aspirational,” says Saleha.

 

Rental repricing is not always upward — in areas with abundant new supply, owners may find that rents cannot be increased even when occupancy remains stable. Income is sustained by continuous leasing cost control and asset upkeep.
 
“Returns increasingly reward owners who treat property as a managed income-producing asset,” Saleha says, “rather than a set-and-forget investment.”
 
Familiarity over speculation
 
A landlord who only wished to be known as Tiana says her first rental was a condominium near a hospital in Kuala Lumpur, aimed at a defined tenant pool.
 
“I bought in an area I was familiar with, knowing who I wanted to target,” she says, citing steady demand from nurses and hospital staff.
 
Budget discipline shaped her strategy. 
 
“As I had bought a more affordable unit, I knew I couldn’t target doctors [as there are newer, more upscale condominiums nearby],” she adds, noting that rent growth is now limited by newer nearby condominiums. She bought her condominium in 2012.
 
Even so, occupancy is stable. “My turnaround time is usually a maximum of two months,” she says, with rent covering the loan.
 
Her advice to first-time landlords? 
 
“If you can’t get a tenant for six months, can you still cover the loan? You need a contingency fund.”
 
She cautions against out-of-state purchases without management. “I encourage people to hire an agent — you then have someone to advise you and can handle documentation and negotiations better.”
 
What reasonable returns actually look like
 
In the Klang Valley, Saleha says high-rise residential properties typically generate gross rental yields of about 3% and 5% per annum. After accounting for costs, net yields often compress to between 1.5% and 3%, with variations due to location, maturity, accessibility and strata fees.
 
“In reality, new launches in prime areas often deliver lower yields due to high entry prices; secondary stock may offer slightly better net yield if occupancy is stable,” says Saleha.
 
Commercial shopoffices are estimated to generate gross yields of between 5% and 7% and net yields of 3% and 5% after expenses. The variation is due to factors such as footfall, tenant type, lease terms and active management. “Higher headline yield comes with higher volatility; neglecting tenant mix or location strategy can quickly erode net returns.”
 
In essence, residential yields tend to be lower than those of commercial properties but relatively stable while commercial yields are higher but require strategic oversight.

 

Residential versus commercial
 
From a risk perspective, high-rise residential properties face frequent tenant turnover, limited pricing power and gradual cost escalation from strata and sinking fund contributions. Commercial properties carry higher default risk and are more exposed to tenant business viability and economic cycles, with potentially significant capital expenditure requirements.
 
“Residential returns are relatively predictable once occupancy is stabilised. Commerical returns fluctuate and can see stronger upside if early cycle positioning is well executed,” Saleha says. 
 
Management intensity further differentiates the two. Residential assets require routine oversight, while commercial properties demand more strategic involvement in tenant selection and lease structuring. “Neglecting management is costly in both segments,” she says, while noting that commercial assets are generally less forgiving.
 
In Malaysia, rental income from high-rise residential properties typically covers only about 70% and 80% of mortgage repayments, requiring investors to supplement cash flow. Commercial properties may cover a higher proportion of debt service but income volatility remains a concern.
Decide what you are optimising for
 
Before selecting a buy-to-let asset, investors must be clear about what they are optimising for: cash flow or capital growth.
 
“The two rarely peak in the same asset,” Saleha says.
 
For cash flow-oriented investors, income durability should take precedence over purchase price viewed in isolation.
 
“Investors should prioritise income durability over advertised or transacted purchase price such as proven rental demand, realistic net yields, longer-tenure tenants and assets where active management can lift occupancy and rent.”
 
These properties are more commonly found in mature locations, secondary stock or well-positioned commercial units where demand is already established.
 
Capital growth-oriented investors must accept lower or neutral cash flow in exchange for future upside. “Here, holding power matters more than yield. The key risk is timing — not just vacancy but timing and patience.”
 
Financing structure, holding period and expectations need to align with either objective — and attempting to force a single asset to deliver both outcomes often leads to compromised results.

 

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