Property for rental – Kepong

My colleague bought a new property recently and told me that he has a good deal. I asked him why. He said he bought it for just RM240,000 but rental can be as high as RM1,300 per month. It got me interested and I asked for the name and I did some checks online. It seems that what he said is true and for those who wants to buy to rent out, this may be a property which you may want to consider. Further checks reveal that the there is a cemetery just beside which explains why the price has not spiked like many other condos which rental are also within the rental range of RM1,300. One example, Pangsapuri Menara Manjalara. However, all other points are favourable. For example: near to KTM station, near to schools, near to hypermarkets. Then, again these days, majority of all apartments / condos are near to hypermarkets. 🙂
kepong sentral highkepong sentral lowkepong central rental
From the above, we can see that the price of the condo is low enough so that the rental yield should still be positive. For those who are questioning if the price would increase further, let me tell you objectively that the price will continue to increase if the rental continue to be strong or increase. In fact, the choices are not that many for properties below RM300,000 and still giving RM1,300 rental. Also, secondly, considering the price goes up by just the same inflation rate per year of 3%, if the price is RM240,000, then the yearly increment is RM7,200. Three years later, the increment would have almost equalled your 10% downpayment. This gives you a simple ROI of 30% per annum if you sell three years later. It is indeed a good buy. I agree with my colleague.
I am very sure there are other opportunities in the market. We just need to be slightly more hardworking and conduct checks online for rental and then use the information to find apartments / condos to buy. Happy buying and renting.
written on 11 Jan 2014
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  1. From my understanding, Many Kepong units fetch good rental return because foreign tenants (mostly with student visa) are willing to pay higher rental. Many local believe that more number of foreigner occupancy will spoil the market value and demand of the project therefore some JMBs have urged their landlords not to rent to this category of tenants.

    1. Perhaps this is one of the main reasons. Thk u stephen!

  2. So, still consider a good deal for this?
    I think it will be good to go for those near future MRT or existing LRT/Putra line. Don’t forget that once MRT start operation….what will be the impact to those fetching rental but lesser public transport Properties? Till today i can’t accept that KTM is one of the public transport.

    1. Any deal which can give good yield is a good deal because both the price and rental can only do up in future. I have never heard of rental dropping….

  3. The rental of RM1,300/month implies roughly RM13,000/year (i take ten months rental because u need to pay one month commission to agent and one month rental income to be used to pay maintenance fees). So RM13k net rental income over purchase price of RM240k represents 5.4% net rental yield, as compared to your interest cost of approx. 4.6% (assuming BLR of 6.6% minus 2%) which still give you a small positive spread of 0.8%. Not to bad i guess.
    However, I am really not sure whether you will call this 5.4% yield property a GOOD deal unless you believe rental and price growth will be quite strong (more than 10% p.a.??). I guess single digit growth p.a. is more likely.
    Anyway, I must also say that this may be a low risk investment as the entry cost of RM240k implies RM260psf entry price which is relatively low for that area. This mean the downside is fairly limited (i.e. price and rental won’t really drop as it is at a low level already).
    So this investment project is a FAIR deal but not GOOD deal. It may be viewed as GOOD to many as there are too many BAD deals in the market that make this looks BEAUTIFUL!

    1. WK, you should start writing more articles. I love the way you write. Clear and concise. Yes, I agree. Fair Deal. Instead of good deal. but as you said, fair deals are no longer common these days.

  4. asali avatar

    Has anyone do a stress test towards their property portfolio? The purpose this stress test is to see at what level of BLR increase can your portfolio absorb before it goes to negative cash flow. The serious question is your portfolio can withstand a 1% or 2% increase?

    1. Assuming you are talking about rental. Calculated. 2% is still ok. Moving forward, it may not be so easy anymore. Have to really find a good one and negotiate before buying. Perhaps buy fully renovated so that the rental is for fully furnished.

  5. Wai yan avatar
    Wai yan

    I have one property bought at 162k (below market) and rent at 1150 per month, good buy? The current rent now is 1.2k basic unit. Area is shah alam.

    1. This is awesome. Actually good deals still available. Just need some homework.

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