Long-Term Tenancy or Short Stays: Which Makes More From a Unit?

Long-Term Tenancy or Short Stays: Which Makes More From a Unit?

The short answer

On the figures I assumed, short stays leave more than a long-term tenancy, but only if every assumption holds in a building that allows it; drop occupancy to about 15 to 16 nights a month and the two routes cross. What decides it is the net figure after the operator, utilities and turnover, and the building's rules. Long-term is the choice for most of my clients.

Buyers who plan to let ask me this before they ask about the unit. The gross figure for short stays is always the more exciting one, and it is the one that gets repeated. What decides it is the net figure after the costs that short stays bring with them — and the building's rules, which can settle the question before any arithmetic does. Here is how I work it through with a client. The numbers in the examples are assumptions I chose to make the arithmetic visible, not market data; substitute the real figures for the building you are looking at.

1. Long-term tenancy: the quiet route

A tenant on a one- or two-year agreement, who pays their own electricity, water and internet, and who you hear from twice a year.

What you get: predictable income, low turnover, less wear on the unit, and a tenancy a bank will count when it looks at your borrowing.

What you give up: the upside. The rent is fixed for the term.

The arithmetic, on assumed figures:

Divide what is left by what you paid and you have the net yield before financing. Vacancy on a long lease is usually the gap between one tenant leaving and the next arriving.

2. Short stays: the hospitality route

Nightly and weekly guests through a booking platform, in a unit that has become a small hotel.

What you get: the ability to price by the night, and a higher gross in a location with real visitor demand — the city centre, near a transit hub, a tourist coast.

What it costs you:

• An operator. Unless you are going to answer messages at midnight yourself, a management company takes a share of the gross. Ask for their rate; it is a large slice.
• Utilities. Guests do not pay them. Air-conditioning in a hot climate is the line that surprises owners.
• Turnover. Cleaning between every stay, and furniture that must be replaced more often than any tenant would require.
• The building's rules. Many management bodies restrict or prohibit short-term letting, and Malaysian courts have upheld such rules. This is the first thing to check, not the last.

The arithmetic, on assumed figures:

On these assumptions the short-stay route leaves more — and it leaves more only if every one of those assumptions holds, in a building that allows it. Drop occupancy to about 15 to 16 nights a month and the two routes cross.

3. The comparison

4. How I would choose

Long-term if you live abroad, do not want a second job, or are borrowing against the rent. This is most of my clients.

Short stays only if the building permits it in writing, the location has visitor demand you can see with your own eyes, and you have an operator whose accounts for a comparable unit you have read.

Either way, rental income is taxable in Malaysia — see the tax guide — and the yield you should plan on is the one after the operator, the utilities and the tax, not the one in the listing.

I am Shyan Yee, REN 46305, IQI Realty. Message me on WhatsApp with the building you are considering and I will tell you what its by-laws say about short stays and what comparable units in it actually let for.