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Sunday, May 26, 2013

Penang Property | Property Value | Tenancy: Which One To Use? Lease orRent or Lease Option To Buy?

One of popular passive incomes nowadays is to have your property been leased or rented out to have rental yield return.

As a rule of thumb, [and this is happening in Penang, Malaysia] in order to obtain good rental yield you should purchase condominium/apartment versus landed property. In contrary the landed property is favour on capital gain.

'To Lease' is different from 'To Rent'. In general context these two terminologies been used interchangeably. In real estate context, these two terminologies mean different thing.

To lease your property means to have the tenancy agreement of terms more than 3 years under single contract eg. Leasehold houses, in Bayan Baru town which is 90-years. In this tenancy of lease, the tenant might launch personal caveat on the said property [without knowledge of owner] or to have the title inclusion of tenant's name by virtue of having interest. In normal circumstances the landlord is reluctant to with the insertion. To resolve this issue a long list of rent stipulate in the quantum of 3-year block been stated in Tenancy Agreement.

In essence 'To Rent' will encompass any duration up to 3 years. It could be firm tenancy subject to agreement by both parties.

'Lease Option To Buy' - This is where a tenant will rent a property with the intention to buy from the landlord in the near future which can be a period of 5 to 30 years or any agreed period between the landlord and tenant.

The benefits of this 'Lease With The Option To Buy' are, to tenant who has not built up the required down payment, and need time to do so. The tenant will be able to buy the property from landlord at a pre-determined price.

PS: In Malaysia's legal context standpoint, tenancy agreement has to pay stamp duty in order for it to be legally tender in court when any disputes arise.

Picture below: Example on quantum of 3-year block been stated in Tenancy Agreement.

This article been written by VULCAN INT'L Real Estate Research Institute(Penang iProperty) for VULCAN INTERNATIONAL Real Estate Investors Club.

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