When on vacation, why stay in a usual hotel for RM300 a night, when you could stay in a cozy Airbnb for half the price? Plus get first-hand tips on the best hidden spots from a local!
If your parents’ old home isn’t being put to good use, why not rent it out for an extra RM1,000 or so per month?
Combined, those two sentiments above see short-term rentals booming in Malaysia, pioneered by a certain accommodation-sharing site which has become a household name – Airbnb.
But don’t go gobbling up the very next “buy-to-let as Airbnb property" you see. Read on as we clarify and compare more on short-term rentals and Airbnb in Malaysia.
What are short-term rentals?
Though there exists no clear-cut lines between what constitutes a short-term rental and a long-term one, it’s generally understood that they’re differentiated by their rental duration and purpose of renting.
Short-term rentals (STR) are typically rented out for a few nights or weeks at most. Domestic and foreign tourists, as well as business travellers make up the lion’s share of guests.
Short-term rentals
Rental duration: Typically few nights or weeks.
Purpose of renting: Vacation, business, events.
These days, they’re an alternative to hotels, hence why they’re sometimes referred to as vacation rentals.
Do note though, that hotels are NOT considered short-term rentals. Hotels are commercial properties, whereas STR are residential properties like serviced apartments and bungalows.
Long-term rentals on the other hand, typically have a rental length of at least 12 months and longer.
Long-term rentals
Rental duration: Minimum of 12 months
Purpose of renting: Own stay
In Malaysia, STR is a flourishing industry, with the best example being Airbnb. This year, Malaysia is once more the fastest growing country for Airbnb in the whole of Southeast Asia, with over 53,000 listings up for rent!
While this paints a pretty picture, it’s still important to unveil all aspects of short-term rentals before diving in headfirst.
Should I rent out the entire unit, or by room?
You’ve done up your property all nicely for rental, and now you’re faced with a pressing question:
“Should I rent out per room… or just rent out the entire unit?”
In order to answer this question, you’ll have to first ask yourself even more questions – how much time and money are you willing to fork out, and is your property even suited for short-term rental in the first place?
Fret not, we’ll make it easy for you (as we always do) by comparing the two in terms of profitability, suitability, effort, and risk.
1) Profitability
Renting out by the room
- Minimizes the effect of downtime when the property is vacant. Unless you manage to rent out your unit for all 365 days a year, there will be periods when the unit is vacant. When renting out by the room, it’s more likely that at any given time, at least one room will be occupied.
Renting out by the unit
- May be more worthwhile, despite possibility for lower rental income. Though price per rooms are usually charged higher, the effort involved can far outweigh the revenue.
2) Suitability
Renting out by the room
- Not recommended for strata properties. Dealing with complaints is difficult enough when it comes to STR. If your unit has 3 rooms that are all occupied at any given time, that’s three times the amount of noise, trouble and complaints too!
Renting out by the unit
- Ideal for unique vacation-centric units such as traditional kampung houses. Where tourism breeds, so does STR. Studies by Airbnb have found that guests are increasingly looking towards STR not just for a temporary accommodation, but for a more immersive experience in local culture during their stay.
Take island paradise Semporna for example, whose Airbnb Malaysia bookings have tripled since last year!
3) Effort
Renting out by the room
- Highly time-consuming. More rooms means more work. On top of ensuring no rooms go vacant for too long, you’ll also be kept full with:
- General maintenance and repairs
- Cleaning up after each tenant
- Handling all the payments individually
- Responding to never-ending enquiries
- Making sure your listings are always up-to-date and attractive
Renting out by the unit
- Lower turnover means you won’t have to consistently seek out new tenants, as tenants who seek out entire units tend to stay longer. Plus, you’ll only be dealing with one group at a time.
4) Risk
Renting out by the room
- You might have to mediate between tenant conflicts. Having to handle tenant dynamics is something you may find yourself involved in, especially when there’s several of them under one roof, and they’re sharing bathrooms and kitchens.
- Liability issues are more complicated. It’s a mess when damages are involved. Especially when everyone is pointing fingers at each other and you can’t verify who is at fault.
Renting out by the unit
- Cancelled bookings give stronger blows. When renting out the entire unit, it’s all or nothing. Last-minute cancellations will leave you scouting for prospective tenants to fill in the gap whereas with rent per rooms, you’d at least have the income from the other rooms.
Short-term rentals don’t just stop at Airbnb
Homeseekers looking to get a gist of the area they’re considering to call home… couples looking for a few week’s stay while awaiting renovation to complete…
While standard listing sites typically attract such a demographic, Airbnb is generally seen through more touristy lens.
More and more people are looking towards short-term rentals in place of hotels. This means your listed property is essentially going up against budget hotels and resorts.
Hence, there is a base expectation for the essentials like toiletries and whatnot, which is why going the extra mile by offering things such as airport pickup and a DIY area guide can take your guests’ experience one step further (and your reviews too!)
So far, we’ve mentioned Airbnb whenever short-term rentals come into the picture. But we didn’t forget about all the other platforms in the short-term rental market!
Here’s a brief breakdown of how the top few fare against each other.
General demographic
Travelers looking for affordable, localised accommodation
Wide variety for both short-term and long-term rentals
International short-term and long-term rentals
Fees
Hosts pay 3%, guests pay 6-12%
Hosts pay 10% processing fee and 6% SST
Hosts pay an average of 15%
A percentage of the first month’s deposit is taken, exact percentage based on length of tenure
Still no clear and consistent regulations for STR
Just last year, Airbnb in Malaysia contributed an estimated RM3 billion in direct economic impact. But it certainly comes as no surprise that STR is such a huge boon to the economy.
It provides locals with a means of putting extra money in the bank, making use of property overhang, and expanding the local tourism industry.
One would think that considering the state of Airbnb in Malaysia, there are bound to be regulations in place, right?
Unfortunately, not so much! There are still no clear guidelines nor enforced regulations despite call for change alongside concerns of:
- Neighbours’ rights to quiet enjoyment of their property
- Reduced availability for locals looking for long-term rentals
- Property prices are thus pushed up within the area due to shortage
- Residential neighbourhoods becoming “Airbnb-ified” with tourists
- No taxes imposed on most short-term rentals
If you’re wondering what Malaysians have to say about this, recent findings by our PropertyGuru Consumer Sentiment Survey H2 2018 show that we have some interesting opinions regarding STR.
Despite 57% of respondents personally interested in exploring STR themselves, 54% want for regulations to be set in place.
Efforts so far include DBKL calling for STR hosts in KL to register with the council, and even straight up deeming it illegal as per what DBKK (Kota Kinabalu) and MBPP (Penang Island City Council) previously announced.
Obviously, a simple search for Airbnbs in Kota Kinabalu is telling of just how much of an impact this announcement has had since its conception in 2017 (which is next to nothing).
So if you’ve got a place prepped up and ready to go, don’t dive straight into renting it out without first identifying what suits your needs, and what the property is best suited for.
But if you have yet to decide on whether to rent out your place on a long-term or short-term basis, our handy guide here already breaks down the pros and cons for you!
And if you’ve decided the short-term route is the way to go, this guide will teach you how to effectively manage your short-term rental property!
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Disclaimer: The information is provided for general information only. PropertyGuru International (Malaysia) Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.