Why Every Investor Should Consider Multiple Rental Options (MRO)?

WHAT IS MRO? CAN’T I JUST RENT OUT NORMALLY?

You’ve bought a property, invested tens of thousands, and even renovated it to look perfect. Now it’s time to start generating positive cash flow every month. But have you thought about the best rental strategy for your property?

“Are there really many types of rental strategies? Isn’t it just about buying a house, getting it ready, and finding a tenant?”

In some ways, yes. But if there’s a way to maximize your profits, potentially earning a positive cash flow of RM500 – RM1,500 monthly, why not? Beyond profitability, it’s also crucial to choose a rental strategy that suits the needs of your tenants, as everyone’s requirements differ.

That’s why Multiple Rental Options (MRO) is one of the critical elements in FAR Capital’s 7 CRITERIA. The goal is to ensure that the property you invest in offers varied rental strategies—not just one.

Today, we’ll outline 8 types of MRO you should consider before buying a property.

(Note: You don’t need to tick all 8, but at FAR Capital, we ensure that the properties we recommend can fulfill at least 3 out of these 8 options.)

1. Multiple Tenant Segment

Before purchasing a property, check if it’s suitable for multiple tenant segments, not just one, to increase rental income potential, reduce vacancies, and adapt to market changes for better long-term returns.

Example segments:

• Singles
• Families
• University students

If your property has several bedrooms, you can rent them out separately. This approach works well for workers or students seeking affordable rental options, allowing you to secure multiple tenants for one property.

2. Local vs. Expat

If your property is in an area with a significant expatriate population, consider renting to both locals and expats to diversify your tenant base, increase rental demand, and secure a more stable income stream by appealing to a broader range of potential renters with varying preferences and budgets.

Pros:

• There’s higher income potential, as expatriates often pay premium rental rates due to housing allowances or a willingness to invest in more comfortable living arrangements.

Cons:

• Language barriers may arise, especially if tenants are not fluent in the local language, potentially complicating communication.
  
• Cultural differences might require more thoughtful management, as varying expectations about property maintenance, lifestyle, and community interactions could lead to misunderstandings if not properly addressed.

3. Short, Medium, or Long Term

Choosing the right rental duration is essential for maximizing returns while managing workload effectively.

1. Short-Term Rental:

Best for properties near tourist hotspots, business districts, or event venues. Platforms like Airbnb help attract travelers and business professionals. While income potential is higher due to premium nightly rates, frequent tenant turnover and maintenance can increase management efforts.

2. Medium/Long-Term Rental:

Ideal for families, professionals, and expats seeking stability. Though monthly rates are lower than short-term leases, consistent occupancy and reduced management needs make this option appealing for properties in residential or business-friendly areas.

Select a rental duration that balances income potential with your management capacity and market demands.

4. Single Tenant

If your property is only suitable for one tenant (often due to smaller space), this can still be a viable option. Smaller properties like studio apartments or one-bedroom units can attract individuals such as students, professionals, or retirees seeking convenient and manageable living spaces.

Advantages:

1. Simplified Management: Managing one tenant means fewer administrative tasks and easier communication.
   
2. Stable Income: A long-term tenant ensures consistent rental payments with minimal turnover.
   
3. Lower Maintenance Costs: Less occupancy wear and tear means reduced maintenance expenses.

Disadvantages:

1. Higher Vacancy Risk: If the tenant leaves, the entire property becomes vacant, affecting income.
   
2. Limited Income Potential: Renting to one tenant may cap overall rental earnings.
   
3. Tenant Dependency: Financial stability depends heavily on a single tenant’s reliability.

Focusing on one tenant can work well with proper lease agreements and tenant screening

5. Per Room

If you own a larger property with multiple rooms, renting them out individually can maximize your rental income while offering flexibility in tenant selection. This approach works well for properties near universities, business hubs, or city centers where room rentals are in high demand.

Advantages:

1. Higher Income Potential: Renting rooms separately often yields more income than renting the entire property to one tenant or family.
   
2. Reduced Vacancy Impact: If one room becomes vacant, the rest of the property still generates income, reducing overall vacancy risk.
   
3. Flexible Tenant Selection: You can choose tenants with different lease terms, catering to students, professionals, or short-term renters.

Drawbacks:

1. Higher Maintenance Costs: More tenants mean increased wear and tear, leading to higher cleaning, utility, and repair expenses.
   
2. Potential Tenant Conflicts: Shared spaces like kitchens and living areas may cause disputes that require mediation.
   
3. More Management Effort: Handling multiple tenants involves more administrative work, including separate leases, rent collection, and maintenance requests.

Renting rooms individually can be a lucrative strategy if you are prepared for active property management and tenant relations.

6. Per Head

This strategy involves setting rent based on the number of tenants in the property.

Adjusting rent according to the number of tenants allows property owners to adapt to changing market demands and tenant preferences. This approach works well for larger properties or co-living arrangements where multiple tenants share the same space.

Advantages:

1. Flexibility in Rental Pricing: You can adjust rent based on occupancy levels, maximizing income during high-demand periods.
   
2. Higher Rental Income Potential: More tenants typically mean higher total rental revenue compared to renting the entire property to one tenant or family.
   
3. Reduced Vacancy Impact: If one tenant moves out, others still contribute to the overall rent, ensuring continuous income.

Disadvantages:

1. Complex Rent Management: Handling multiple rent agreements can increase administrative tasks, such as tracking payments and lease renewals.
   
2. Higher Maintenance Costs: More tenants may result in increased wear and tear, leading to more frequent repairs and cleaning.
   
3. Tenant Conflicts: Shared spaces can lead to disputes among tenants, requiring time and effort to mediate and resolve.

This strategy works best for landlords prepared to manage multiple leases while maximizing rental income through flexible pricing.

7. Airbnb

Airbnb is a leading platform for short-term rentals, making it ideal for property owners looking to maximize income from properties located in high-demand areas. It works best for properties situated:

• Near tourist attractions
• In city centers
• Close to event venues or business hubs

By listing your property on Airbnb, you can attract a global audience of travelers, business professionals, and vacationers seeking unique, comfortable accommodations.

Pros:

1. High Rental Income: Short-term stays can generate significant income, especially during holidays, peak seasons, and major events.
   
2. Pricing Flexibility: You have the freedom to adjust rental rates based on market demand, ensuring competitive pricing year-round.
   
3. Global Visibility: Airbnb’s worldwide reach increases the likelihood of bookings, boosting your occupancy rates.

Cons:

1. High Maintenance Costs: Frequent guest turnovers mean regular cleaning, restocking, and maintenance are necessary to keep the property in top condition.
   
2. Management Demands: Maintaining quality service and responding promptly to guest inquiries can be time-consuming, requiring active management or hiring a property manager.
   
3. Seasonal Fluctuations: Bookings may decrease during off-peak seasons, leading to inconsistent income.

Airbnb is a profitable platform for property owners ready to manage short-term rentals actively and maintain high service standards.

8. Co-Living

Co-living is a modern housing concept where tenants share common living spaces while enjoying a sense of community and belonging. It’s designed to create a balance between personal privacy and social interaction, making it popular among young professionals, digital nomads, and students.

One of the brands providing co-living services and rental rooms in Malaysia is Belive Coliving.

Co-living properties typically offer:

• Community Manager (CM): A dedicated individual who handles tenant needs, resolves issues, and ensures smooth day-to-day operations within the property.
  
• Organized Community Activities: Regular events, workshops, and social gatherings to foster connections and create a supportive environment among tenants.
  
• Fully Furnished Spaces: Comfortable living areas equipped with essential amenities such as Wi-Fi, utilities, and shared facilities like kitchens, lounges, and workspaces.

By providing a hassle-free living experience with built-in social opportunities, co-living appeals to individuals seeking convenience, flexibility, and a vibrant community atmosphere.

Conclusion

Now that you understand the 8 types of MRO, it’s essential to ensure that the property you purchase can cater to at least 3 of these options. Investing in property isn’t a simple decision—it requires thorough research to mitigate risks and maximize returns.

No time for research?

That’s why at FAR Capital, we provide comprehensive services to simplify property ownership, ensuring you can focus on making the best decisions.

Interested? Click the picture below to register for our FREE webinar this Sunday and learn more about smart property investment strategies!