RENT-TO-OWN

rent

With most Malaysians unable to buy a house, an alternative exists to fit their budgetary needs and help solve myriad of affordability problems

Affordability has increasingly been a major issue in Malaysia’s property industry. The recent Khazanah’s State of Households report further reinforces the view that low to middle income earners in Malaysia are falling behind in their ability to purchase affordable homes. The federal and state governments have announced several measures to tackle the problem. Prime Minister Dato’ Seri Najib Tun Razak in his Budget 2015 speech outlined several measures to assist low income and first time home buyers which included, among many, a rent-toown (RTO) scheme.

Last December, the State of Selangor followed suit with an announcement on its own rent-to-own programme through the launch of DanaSel, even though at a smaller experimental level, targeting only a handful of low income folks.

REI Group of Companies CEO and co-founder Dr Daniele Gambero has been a consistent voice in Malaysia’s housing affordability issue. “I’ve written previously about how the government can stop putting the burden of low-cost housing on the shoulder of developers. Low cost [housing] should be handled by the government on a rent basis, or rent-to-buy basis,” he told Property Insight.

Government should reconsider selling low-cost flat and apartment units, and simply rent them out, Gambero suggested an alternative. The renters will enjoy a more livable environment while paying more affordable prices compared to the loan repayment and the rental will allow a more flexible monthly family budget, according to him. However, not much is understood – by buyers and owners/developers alike – about the mechanism of a rentto- buy structure and how both parties can benefit.

Wealth Mastery Academy speaker BK Khoo, author of the upcoming book ‘The 9 to 5 property Millionaire’ and one of the first property investors to implement Lease Option strategies in Malaysia, said that rent-to-own is quite simply a two-part agreement between a landlord and a tenant. “The first part is related to the ‘Rent’, where the tenant rents the property from the landlord via a regular lease or tenancy agreement. The second part is an additional condition, which is the option to buy the property in the future or, in other words, allows the tenant ‘to Own’ the property in the future,” he explained to Property Insight.

Therefore, in a RTO arrangement, the landlord is now not only a landlord, but a ‘Landlord-seller’. Similarly, the tenant is not just a tenant, but now a ‘Tenant-buyer’, he said.

HOW DOES IT BENEFIT THE LANDLORD-SELLER?

RTO, Khoo believed, can solve one of the biggest challenges faced by investors in Malaysia at the moment, which is low rental yield. Property prices have been.

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