Renting Out Property in Malaysia: How to Find Reliable Tenants

Finding a reliable tenant is rule number one when owning a rental property. For property owners, your sanity usually lies in the hands of those you rent to. Great tenants can make your life easier, while problematic ones can make your investment a nightmare. Don’t underestimate the impact real estate agents have during the process of securing a tenant.

This article covers pointers from how to navigate the process to communicating with agents and providing practical tips on attracting and retaining tenants. It will be a long read, but do not overlook the important sections.

Selecting the right agents

When relying on real estate agents to find a good tenant for your property, choosing the right agents is important. Instead of sending your property details to everyone, be selective. Start looking for agents a few months before your tenant leaves. Opt for experienced agents who are actively working in the area where your property is located or in your development. Ask other property owners for references.

Talk to the agent first to get a sense of their personality. Are they friendly, knowledgeable and trustworthy? Can you rely on this person for after-service if you encounter issues with the tenant? You don’t want someone uncooperative and unprotective of your interests when you need them to resolve issues during and after the tenant securing process.

I know professional agents who provide support throughout the tenancy and handle the check-in and check-out process well. Additionally, they assist in coordinating and providing a list of service providers to carry out the necessary work that the tenant is responsible for per the tenancy agreement. They also communicate any required work by the landlord to ensure the property is in good condition before the viewing process begins. They treat the property as their own, setting a gold standard. Avoid those who don’t protect your interests. Unfortunately, I have also encountered some who put self-interest first.

Once you’ve made your selection, be clear about the terms of engagement, such as the commission amount and when it will be paid. Normally, the one-month earnest deposit (first month’s rental) held in escrow by the licensed real estate agency firm becomes their commission when the tenancy agreement is signed, and the security and utility deposits are deposited into the landlord’s account. We will cover more on this later.

Criteria for selecting good tenants

When searching for tenants, it’s important to determine the tenant profile you prefer. Established companies are typically the most reliable, as they pay the rental and deposits for their employees. These companies are usually international firms, multinational corporations or stable local businesses. They usually have good budgets, but that doesn’t mean you can ask for a high rent. They tend to prefer higher-end properties, but they don’t disregard well-maintained lower-end ones.

If the company isn’t well-established, like a startup or a small unknown firm, it’s better to go for a personal lease, where the occupant signs the tenancy agreement.

Some companies have their own tenancy agreements and procedures. If you want to proceed with them, you must follow their process. These are reputable companies, so they are likely to honour their end of the deal. However, don’t hesitate to speak up if you are uncomfortable with their requirements.

If you cannot secure a company letting, then aim for tenants who can provide an employment letter from an established firm. You can call the firm to verify the employment.

Please be aware of the following categories of tenants, who may be perceived as less secure than those mentioned earlier. Nevertheless, they could also prove to be excellent options.

1. Self-employed individuals, either local or from overseas.

2. Start-up businesses, either from local individuals or overseas.

3. Employees, either local or from overseas, working for less established firms.

4. Foreigners under guardian visas who accompany their children studying here.

5. Working individuals under nomad visas. Under this type of visa, individuals must earn an income remotely as an employee, business owner or freelancer.

I suggest researching or seeking advice from a knowledgeable professional about starting a business as a foreigner and obtaining work permits, student permits, and guardian passes. This will help you understand the process and may provide insights into the credibility of your prospects. I have included several links on this topic at the end of the article.

If you are feeling uneasy about the situation, please gather more information. Where applicable, you can request the following information: a business card or letter of employment, company registration, work permit, student visa, guardian pass and a letter from the educational institution. A recommendation letter from the current or previous landlord would be very useful.

Normally, the tenancy agreement would attach a copy of their passport (information page) and the work permit (for foreigners). Discuss with your agent the specific information you need from the beginning.

Do schedule an informal meeting with potential prospects. If an individual is reluctant to share information, proceed cautiously and consider the situation carefully before finalizing any agreements.

You should obtain the essential information before you sign the offer letter.

Securing the tenancy

Before the viewing process starts, prim up your property. Repaint the walls (if need be), fix any cracks, get rid of stains and improve any unpleasant-looking areas. Ensure the property is tidy and creates a ‘wow’ effect upon first impression.

Consult a professional or do your own research on the rental market so that you don’t ask for a rent that’s too high.

Letter of offer / Agreement to rent

You have received a rental offer for your property. If you are working with a licensed agency, you can ask for written confirmation that the earnest deposit has cleared in their client’s account before signing the offer letter. You can also request a bank slip. If the landlord rejects the offer, the deposit will be refunded free of interest to the tenant.

Under the Malaysian Estate Agency Standards, there is an Agreement to Rent form. You can obtain this from the Board of Valuers, Appraisers, Estate Agents, and Property Managers (BOVAEAP). Ensure that your agency’s letter of offer conforms to the standard format. If you need to amend it, please consult a legal counsel.

The reservation period is usually about two weeks after both parties sign the offer letter. If the tenant does not sign the tenancy agreement and pay the security and utility deposits within this period, the tenant agrees to forfeit the earnest deposit as pre-agreed damages. Be aware that agency firms can claim 50% of the earnest deposit. This would be stated in the agency appointment letter.

If the tenant has fulfilled their part but the landlord refuses to sign the tenancy agreement within the stipulated time frame, the earnest deposit will be refunded to the tenant plus an equal amount as compensation from the landlord.

Tenancy agreement

Before you sign the tenancy agreement, please ask for written confirmation that the security and utility deposits have been cleared and will be released to your account immediately after you sign. You can have this stated in the agency appointment letter. The tenant should sign first and pay the required deposits, and then you can sign.

In March 2024, BOVAEAP issued a notification regarding the preparation of tenancy agreements. These documents are legally binding and should only be prepared by qualified lawyers. Anyone who prepares tenancy agreements without the authority to practice law violates Section 37 of the Legal Profession Act 1976 (Act 166).

The terms and conditions in the tenancy agreement constitute the entire agreement and supersede ( take over) all prior agreements, whether written or verbal. If some of the terms and conditions stated in the offer letter are not captured in the tenancy agreement, you might have a problem. Please seek legal counsel for more guidance.

Remember the inventory list attached to the tenancy agreement. This list contains the items provided by the landlord, which must be returned in good working condition. I recommend actively participating in this process when your agent handles it.

Ask your agent if they intend to include a section of photos that displays any defects or imperfections in your property. It’s crucial they go over these details with you prior to the tenant’s move-in. Should you find any discrepancies in the descriptions or photos, promptly notify your agent.

It’s worth noting that some rental practices involve signing the tenancy agreements and paying the deposits on the move-in day. I would not recommend this. In urgent cases or when there are only 2 weeks or less between the letter of offer stage and the move-in date, the agreement should be signed and deposits made before allowing entry.

It is standard practice not to allow entry until the required deposits are made, even if the tenancy agreement has been signed and the tenant is ready to move in.

Agency appointment letter/ Authorization to let

Addressing this during the agent selection process will ensure that you and your agent are clear about the terms and conditions of the appointment. Do not wait till you receive the offer letter.

There is also an Authorization To Let form under the Malaysia Estate Agency Standards.

If your agency gives you its own appointment letter, you can compare it with the standard format. Ensure that it’s in writing that the earnest deposit becomes their commission upon signing the tenancy agreement and releasing the security and utility deposits from the agency’s account to your account.

Agent selection process

Addressing this during the agent selection process will ensure that you and your agent are clear about the terms and conditions of the appointment. Do not wait till you receive the offer letter.

There is also an Authorization To Let form under the Malaysia Estate Agency Standards.

If your agency gives you its own appointment letter, you can compare it with the standard format. Ensure that it’s in writing that the earnest deposit becomes their commission upon signing the tenancy agreement and releasing the security and utility deposits from the agency’s account to your account.

Enhancing tenant service and retention

Communicate with your tenants. Show interest in their well-being and respond promptly to any repairs needed. Maintaining the property will lead to greater tenant satisfaction and a better probability of them staying put. Offer small incentives for tenants who renew their lease, such as a gift card or a free house cleaning. If it makes sense to increase the rent upon renewal, discuss it with the tenant. That should be a two-way decision.

One way to get your tenant to stay longer is to create a positive and enjoyable living experience. You have to be firm too but do continue to foster a good relationship with them. Great tenants bring wealth and peace of mind. Finding reliable tenants in Malaysia is possible with smart screening and clear communication.

References:

(1) Tenancy Agreement In Malaysia: 6 Things You Should Know! (propertyguru.com.my)

(2) 6 Types of Nightmare Tenants and How to Avoid Them | Avail

(3) Renting Out Your House in Malaysia: How Do You Find The Perfect Tenant? (propertyguru.com.my)

(4) Malaysia Digital Nomad Visa: How to Apply in 3 Steps  (nomadsembassy.com)

(5) Visa & i-Kad – Education Malaysia Global Services

(6) Student Pass – Malaysian Immigration Department (imi.gov.my)

(7) Dependant Pass – Education Malaysia Global Services

(8) Work in Malaysia – Types of Malaysia Work Visas and Permits (visaguide.world)

(9) Complete Guide to Starting a Business in Malaysia | InCorpConsult a professional or conduct your own research on the rental market to ensure that you are not asking for a rent that is too high.