"Condo" and "apartment" are used interchangeably in Malaysia by agents, portals, and even some developers. They are not the same thing. The legal classification of a property determines its title type, utility rates, permissible use, management structure, and — critically for investors — the cost structure that drives your net cashflow. Buying a service residence thinking it is a condominium can add RM 200-400/month in utility and assessment overheads that never show up in the agent's yield calculation.
This guide covers the legal distinctions under Malaysian law, the practical differences that affect your wallet, and which property type works best for different investment strategies.
The Four Property Types
Malaysian strata properties broadly fall into four categories. The distinctions are legal, not marketing.
Condominium
A condominium is a residential property built on residential-titled land and regulated under the Strata Titles Act 1985 and the Strata Management Act 2013.
Key characteristics:
- Strata residential title — issued under the Strata Titles Act
- Mandatory recreational facilities — under previous guidelines, condominiums were required to have a minimum of 1,000 sqft per unit and provide recreational amenities (pool, gym, landscaped garden). The minimum size requirement has been relaxed in recent years, but the facilities requirement persists as market expectation.
- Managed by MC/JMB — a Joint Management Body (JMB) or Management Corporation (MC) governs the development under the Strata Management Act 2013. Owners vote on budgets, maintenance fees, and sinking fund contributions.
- Residential utility rates — electricity (TNB domestic tariff), water (domestic rate), and assessment (residential rate from local council).
- Gas pipeline — connected to the gas distribution network. Piped gas is available.
Apartment
An apartment is also a residential strata property, but with fewer regulatory requirements.
Key characteristics:
- Strata residential title — same as condominium
- No mandatory facilities — apartments are not required to provide pools, gyms, or other recreational amenities. Many do, but it is a developer choice, not a legal obligation.
- No minimum unit size — apartments can be built smaller than condominiums. Studio apartments of 400-600 sqft are common.
- Residential utility rates — same domestic tariffs as condominiums
- Lower maintenance fees — fewer facilities mean lower ongoing management costs. Typical apartment maintenance is RM 0.15-0.30/sqft vs RM 0.25-0.45/sqft for condominiums.
The practical difference between a condominium and an apartment has narrowed significantly. Many newer apartments offer comparable facilities. The distinction matters most in older developments where "apartment" genuinely means a simpler building without resort-style amenities.
Service Residence (Serviced Apartment)
This is where the classification gets consequential for investors. A service residence is built on commercial-titled land — not residential.
Key characteristics:
- Strata commercial title — issued under the Strata Titles Act, but classified as commercial property
- Commercial utility rates — electricity, water, and assessment are charged at commercial tariffs. This is the single biggest cost difference.
- No gas pipeline — commercial-titled buildings typically do not have piped gas. Tenants use electric stoves or portable gas cylinders.
- Short-term rental permitted — because the property sits on commercial land, there are fewer restrictions on Airbnb and other short-term rental arrangements. This is a significant advantage for certain investment strategies.
- Commercial assessment rates — local council assessment tax is calculated at commercial rates, which are typically 1.5-2x higher than residential rates.
- Higher maintenance fees — service residences often come with hotel-like amenities (lobby, concierge, function rooms) that increase the maintenance burden.
Flat
A flat is typically a low-cost or medium-cost residential property, often government-subsidized.
Key characteristics:
- Strata residential title or master title — varies. Some older flats remain on master title, which can complicate resale and financing.
- Basic facilities — minimal or no recreational amenities. Parking may be limited.
- Smaller units — typically 600-850 sqft for low-cost, 850-1,000 sqft for medium-cost.
- Very low maintenance fees — RM 0.05-0.15/sqft. Some flats have maintenance as low as RM 50/month.
- Bumiputera quotas and restrictions — many low-cost flats have resale restrictions, Bumiputera ownership quotas, or price ceilings that limit the buyer pool.
- Lowest purchase price — entry prices below RM 200,000 are common, making flats attractive for yield calculations (if the rental market supports it).
Side-by-Side Comparison
| Feature | Condominium | Apartment | Service Residence | Flat |
|---|---|---|---|---|
| Title type | Strata residential | Strata residential | Strata commercial | Strata residential / master |
| Land use | Residential | Residential | Commercial | Residential |
| Typical unit size | 800 – 2,500 sqft | 400 – 1,500 sqft | 400 – 1,200 sqft | 600 – 1,000 sqft |
| Mandatory facilities | Yes (pool, gym, etc.) | No | No (but usually provided) | No |
| Utility rates | Domestic | Domestic | Commercial (+20-30%) | Domestic |
| Gas pipeline | Yes | Yes | No | Yes |
| Assessment rate | Residential | Residential | Commercial (1.5-2x) | Residential |
| Airbnb legal? | Restricted | Restricted | Generally permitted | Restricted |
| Typical maintenance | RM 0.25-0.45/sqft | RM 0.15-0.30/sqft | RM 0.30-0.55/sqft | RM 0.05-0.15/sqft |
| Typical gross yield | 4.0-6.0% | 4.5-7.0% | 4.5-6.5% | 5.0-8.0% |
Service residences on commercial title pay 20-30% more for electricity and water than identical units on residential title. On a 1,000 sqft unit, this translates to RM 80-150/month extra — a permanent drag on cashflow that most yield calculations omit.
The Cashflow Implications
Property type directly affects your cost stack, and therefore your net cashflow. Here is how the same RM 2,500/month rent plays out across different property types, assuming an RM 400,000 purchase with 90% LTV Islamic financing at 4.0%.
| Cost Item (Monthly) | Condo | Apartment | Service Residence | Flat |
|---|---|---|---|---|
| Rent received | +2,500 | +2,500 | +2,500 | +2,500 |
| Financing (RM 360K, 4.0%, 35yr) | -1,460 | -1,460 | -1,460 | -1,460 |
| Maintenance + sinking | -330 | -220 | -440 | -100 |
| Assessment tax (monthly equiv.) | -65 | -65 | -110 | -45 |
| Quit rent | -5 | -5 | -5 | -5 |
| Utility differential | 0 | 0 | -120 | 0 |
| Insurance | -35 | -30 | -35 | -25 |
| Vacancy (1 month/yr) | -208 | -208 | -208 | -208 |
| Net monthly cashflow | +397 | +512 | +122 | +657 |
Same rent. Same purchase price. Same financing. The net cashflow varies by RM 535/month — over RM 6,400/year — purely based on property type.
The flat produces the strongest cashflow because its cost structure is the leanest. The service residence produces the weakest because commercial rates, higher maintenance, and the utility differential compound against you.
Condos vs Service Residences: The Airbnb Factor
The comparison above assumes long-term rental at RM 2,500/month across all property types. But service residences have one advantage that can change the equation entirely: short-term rental is legal.
Residential-titled condominiums and apartments are subject to restrictions on short-term rental. Many Management Corporations have passed by-laws explicitly prohibiting Airbnb and similar platforms. Even where no by-law exists, the Housing Development Act was amended to give MCs the power to restrict short-term rentals in residential developments.
Service residences on commercial title face no such restriction. You can legally list a service residence on Airbnb, Booking.com, or any other short-term platform without MC approval.
The revenue difference:
| Metric | Long-term Rental | Airbnb (Service Residence) |
|---|---|---|
| Monthly revenue | RM 2,500 | RM 3,500-5,000 |
| Occupancy rate | ~92% (1 month vacancy) | 60-75% |
| Annual gross income | RM 27,500 | RM 25,200-45,000 |
| Management effort | Low | High |
| Furnishing standard | Basic | Hotel-grade |
| Additional costs | Minimal | Cleaning, supplies, platform fees (15-20%) |
At 70% occupancy with an average nightly rate of RM 180 for a well-located 1-bedroom service residence, annual gross income is approximately RM 46,000 — versus RM 30,000 from long-term rental. After deducting Airbnb's service fee (3%), cleaning costs, and higher utility consumption, net income is RM 32,000-36,000.
That RM 2,000-6,000/year premium can offset the higher cost structure of a service residence — and then some. But it comes with significantly more management effort, furnishing cost, and occupancy risk.
The Airbnb premium only justifies the commercial title cost structure if you achieve 65%+ occupancy at rates 40%+ above long-term rental equivalents. Below that, you are paying commercial costs for residential returns — the worst of both worlds.
Which Property Type for Which Strategy?
Long-term rental, cashflow priority: Apartment or flat. The lower cost structure maximizes net yield. Apartments in established areas near MRT stations with maintenance below RM 0.25/sqft are the sweet spot. Flats can produce exceptional yields but come with tenant profile and resale liquidity considerations.
Long-term rental, balanced growth + yield: Condominium. The facilities and residential classification support both rental demand and capital appreciation. Target developments with maintenance under RM 0.35/sqft and avoid new launches with inflated fees.
Short-term rental (Airbnb): Service residence. This is the only property type where short-term rental is straightforward from a legal perspective. Target high-tourism or business-travel areas: KL city center (KLCC, Bukit Bintang), Penang Georgetown, JB near CIQ. Ensure the numbers work at 60% occupancy, not 80%.
Value play / high yield: Flat. Flats under RM 200,000 with stable rental demand can yield 7-10% gross. The risks are real — resale restrictions, limited buyer pool, building condition — but the yields compensate. Not suitable for foreign buyers due to price thresholds.
For a deeper analysis of how to evaluate any property's cashflow potential regardless of type, see our guide on 5 signs a property will be cashflow-positive. And for the long-term vs short-term rental decision, see our Airbnb vs long-term rental comparison.
Common Pitfalls
1. Assuming "serviced apartment" means residential. The word "apartment" in "serviced apartment" is misleading. Check the title type on the SPA. If it says commercial or "petak aksesori" (accessory parcel), you are on commercial land with commercial rates.
2. Buying a condo for Airbnb. Even if the MC has not yet passed anti-Airbnb by-laws, the legal risk is real and growing. Several MCs have successfully obtained court orders to stop short-term rentals in residential developments. Do not build an investment thesis on a use case that can be shut down by a simple AGM vote.
3. Ignoring the sinking fund. Low maintenance fees look great until the MC announces a special levy of RM 5,000-15,000 per unit for lift replacement or facade repairs. Developments with healthy sinking fund balances (check the audited accounts, which the MC must make available) are less likely to surprise you.
4. Comparing gross yields across types without adjusting for costs. A service residence yielding 5.5% gross and a flat yielding 5.5% gross are not equivalent investments. After the cost differential, the flat likely nets 1.5-2.0% more. Always compare on a net basis.
5. Foreign buyers targeting flats. Most flats fall below the minimum foreign purchase price threshold (RM 500K-1M depending on state). Foreigners are effectively restricted to condominiums, apartments above the threshold, and service residences.
The label on the listing — condo, apartment, serviced residence, flat — is not marketing. It is a legal classification that determines your cost structure for the entire holding period. Get the classification right, model the real costs by type, and your cashflow projection will be significantly more accurate than the agent's gross yield pitch.