The Effect of Size of A Unit to Rental Return

Various sizes of units affect various rental. To take Setapak Ria, a well-known Condominium for students of Tunku Abdul Rahman in Setapak as an example, the condominium offers units ranging from 911 sf to 1,300 sf. Assume that the units are unfurnished, the rental range from RM800 to RM1,200. A 911-sf-unit is rented out with RM800 and a 1,330-sf-unit is rented out RM1,200 per month.

Many investors prefer to buy a smaller unit for investment. Of course the prices for smaller units are affordable for many investors. In renting out the unit, it is wise for owner to check the market value and the rental rate for other condominiums in similar area. You will not want your unit stayed empty because you rent out your unit with high rental price. Vice versa, you will also not want your investment return is negative just because you put a below-market-value rental rate.

In place like Kuala Lumpur City Centre, many working individuals and expatriates prefer to rent a studio or 1-bedroom units. In planning to buy a small unit for investment, you also need to know the total units of similar types of units and other small units. I do not think that you will want to compete with other 100 same-sized units for tenants. It would bring less advantage to you. If you target for expatriate, make sure you know their basic requirements for home rental, for example the design of the unit and furnishings.

I used to think that bigger unit costs higher in per square foot. I was wrong. In an article, I understand that there are cases where smaller units costs higher and bigger units cost lower in per square foot. For example, a larger unit with 1,900+ sq. ft., is priced at RM430psf whereas a smaller unit, 1,600+ sq. ft., is approximately RM450psf. Both units are on the same floor.

Between staying in condominium and landed property, I prefer to stay in landed property (assume that the rental rate is similar). Some people prefer to stay in condominium with facilities provided. Suffice it to say, investors should analyse your potential tenant – their needs and motivation to rent your unit.