The contents of this article were contributed by Joyce Yeoh, IQI Real Estate Negotiator & Head of Team.
Version: CN
Did you know that it’s illegal to run an Airbnb in Penang?
You probably didn’t – that’s your fun fact of the day to tell your friends and family.
However, there’s more to it than what’s on the surface. It can be legal to run an Airbnb in Penang, if you follow these tips.
Let’s break down this topic right here!
Running an Airbnb in Malaysia
1. How does the Airbnb service in Malaysia work?
The first thing we should address is: How does Airbnb work in Malaysia, actually?
Two things to know:
- The Urban Wellbeing, Housing, and Local Government Ministry defines Airbnb as an online transaction between a host and a traveler.
- Airbnb operates as an agreement between parties who connect via the platform to rent out or let residential properties for several days.
2. So, is it legal to run Airbnb services in Malaysia?
There are no specific federal laws in Malaysia specifically addressing Airbnb.
However, the regulation varies by state within Malaysia.
Let’s explore these regulations together:
1. Sabah
In 2017, the Sabah state government declared that operating Airbnb units in residential buildings is illegal to protect the hotel industry from the from the rapid growth of short-term rentals.
However, owners of properties on lands zoned for commercial or commercial mixed-use can rent out their units as short-term rentals.
They must apply for a lodging house license and comply with fire safety requirements.
2. Penang
The Penang Local Government introduced guidelines in 2023 to regulate short-term stays in residential high-rises and landed properties.
Similarly, you are allowed to run Airbnb services if your property is under a commercial title under the Housing Development Act (HDA) – but not if it’s under a residential title.
In conclusion: Airbnb is legal in Malaysia, but you should definitely have a look into the state regulations if you plan to rent out your property.
3. Understood! But what’s the difference between residential title and commercial title?
Essentially, it’s quite easy to tell the difference between the two. It’s important to know so you can make the correct property decisions down the line.
Let’s get into it:
1. Residential Title
Comprises both landed and stratified developments.
Landed developments are properties such as bungalows, semi-detached houses (semi-Ds), terrace houses, townhouses, and cluster homes.
Stratified developments are apartments, flats, condominiums, and other similar residential units.
Basically, residential properties are primarily for residential purposes, where people live and stay.
2. Commercial Title
Comprises various commercial components from mixed developments, such as office units, shop lots, retail lots and hotels.
In sum, commercial properties that serve business, trade, and commercial activities.
Office buildings, retail spaces, and hotel properties fall under the commercial title.
The lines have been blurred these days, though…
In recent years, developers have become more creative.
They’ve introduced properties that blend residential and commercial aspects.
For instance: serviced apartments, Small Office, Home Office (SoHo), Small Office, Flexible Office (SoFo), and Small Office, Versatile Office (SoVo).
It can be a bit more confusing these days to tell if your property is considered residential or commercial. So be sure to check first!
Okay, got it! Is there an easier way to run Airbnb services legally, though?
We hereby introduce you to the hidden world of ✨ leaseback agreements ✨
4. What is a leaseback agreement?
In Malaysia, a leaseback agreement is a strategic arrangement that allows a company or property owner to unlock funds, enhance cash flow, and increase profits.
Let’s make this easier to understand:
Imagine you own a valuable piece of property, like a building or land, but you need cash urgently.
Instead of selling the property outright, you find an investor who agrees to buy it from you.
However, instead of moving out, you continue using the property by renting it back from the investor.
This way, you get the cash you need while still being able to use the property for your business or personal use.
Let’s understand the parties involved here:
- Selling Party (seller-now-tenant)
You’re the one selling the property but still need to use it for your operations.
By selling it and leasing it back, you get immediate cash without losing access to the property.
2. Buyer (your now landlord)
The investor who buys your property becomes your landlord.
They earn money by renting out the property to you for a long period.
It’s a win-win situation as they get a stable income, and you get the cash you need.
Joyce Yeoh, seasoned IQI agent goes into this in our Agent Shoutout video:
What’s great about leaseback agreements?
Cash Flow: You get immediate cash from the sale.
Still Use the Property: You can keep using the property for your needs.
Balance Sheet: It’s like a financial juggling act—improving your balance sheet without adding more debt.
So, a leaseback is like a temporary swap: you get cash, and the buyer gets ownership while letting you stay put!
Conclusion
So, if you plan to run Airbnb services, be sure to check your property title and the laws in your state. If you’re considering using a leaseback agreement, let our IQI agents help you!
The contents of this article were contributed by Joyce Yeoh.
Joyce is the Head of Team in IQI Realty’s Elite Team, with 5 years of experience in real estate. She has received numerous awards for her excellent performance, such as the StarProperty All Stars Negotiator Award 2022. She is also a 3-time recipient of the IQI Rolex Achiever Award.
If you’re still reading, here’s your sign to invest in property to rent out as an Airbnb! Let our experts guide you every step of the way in your investment journey. We’ll get back to you as soon as possible!
Continue reading:
1. A Quick Guide To Residential Property Investment
2. Investing in Commercial Real Estate: 3 Advantages and Drawbacks
3. More Profit For Investment with the New Penang LRT! 10 Amazing Properties In Penang LRT Hotspots
