"This unit yields 6%." You hear it at every property showcase, every agent WhatsApp blast, every investment seminar. And technically, it is not wrong — gross yield might be 6%. But gross yield is a marketing number. It tells you almost nothing about whether the property will put money into your account each month or drain it.
After analyzing thousands of Malaysian rental listings and running them through actual financing scenarios, the pattern is consistent: most condos that look profitable at the gross level turn negative once you account for the real, recurring costs of ownership.
Here is exactly how that happens, and what number you should be using instead.
The Yield Calculation Agents Show You
The formula they use is simple, and that simplicity is the problem:
Gross Rental Yield = (Monthly Rent × 12) ÷ Purchase Price × 100
Take a RM 500,000 condo renting at RM 2,500/month:
(RM 2,500 × 12) ÷ RM 500,000 × 100 = 6.0%
Looks solid. At 6%, this appears comfortably above the typical mortgage rate of 4.0–4.5%. You might conclude there is a healthy spread of 1.5–2.0% — money in your pocket.
But this calculation assumes you pay zero maintenance, never have a vacant month, owe no tax on rental income, and the furniture you bought tenants lasts forever. None of that is true.
The 7 Deductions Between Gross and Net
Here is what actually sits between your gross rental income and the cash you keep. These are annualized percentages of property value, based on ranges we observe across the Malaysian market:
| # | Cost Item | Annual % of Property Value | Notes |
|---|---|---|---|
| 1 | Maintenance & sinking fund fees | 0.8–1.2% | Higher for newer condos with resort-style facilities |
| 2 | Vacancy allowance | ~0.4% | Assumes ~0.5–1 month vacancy per year |
| 3 | Agent letting fee | ~0.4% | Typically 1 month rent per new tenancy, amortized |
| 4 | Rental income tax | 0.5–1.5% | Marginal rate dependent; non-residents pay flat 30% |
| 5 | Fire insurance (houseowner) | ~0.05% | Often bundled but still a real cost |
| 6 | Sinking fund top-ups | ~0.1% | Increasingly common for aging developments |
| 7 | Furnishing depreciation | ~0.3% | Aircon servicing, furniture replacement over 5–7 years |
Total deductions: 2.55–3.95% of property value per year.
That 6% gross yield? After these costs, you are looking at a net yield of roughly 2.0–3.5%. And we have not even touched financing yet.
A 6% gross yield condo in KL, after all real costs, typically delivers 2.5–3.0% net yield — barely above a fixed deposit rate. The "spread" that looked like 1.5% is actually negative once you include the full cost stack.
What Yield Threshold Means Cashflow Positive?
This is where the math gets uncomfortable for most Malaysian condos.
At the current OPR of 2.75% (as of February 2026), typical financing costs are:
- Conventional mortgage: ~4.35% effective rate (OPR + 1.60%)
- Islamic financing (Musharakah Mutanaqisah): ~4.0% effective profit rate
If you finance 90% of a property — the standard margin for residential purchases — your annual financing cost is roughly 3.6–3.9% of property value (90% of the rate).
Now add the 2.55–3.95% in operating deductions from the table above. Your total annual cost sits at 6.15–7.85% of property value.
This means:
- At 6% gross yield, you are almost certainly cashflow-negative.
- At 7% gross yield, you break even or go slightly positive under Islamic financing.
- At 7.5%+ gross yield, you start generating meaningful monthly surplus.
The breakeven threshold shifts depending on your financing type. Islamic financing at ~4.0% gives you roughly a 0.35% annual edge over conventional at ~4.35% — on a RM 400,000 property, that translates to about RM 115/month. It is often the difference between red and black. We covered this financing edge in more detail in our post on the true cost of owning a Malaysian rental property.
To just break even on financing costs alone (ignoring operating costs), you need a gross yield of approximately 5.3% at 90% margin with Islamic financing. But breaking even on financing is not the same as being cashflow-positive — you still need to cover everything in that deduction table.
Data Reality -- Yield Distribution
Across the major Malaysian markets — Kuala Lumpur, Selangor, Penang, Johor — the bulk of condo listings cluster in the 4.0–6.0% gross yield range. This is precisely the zone where most properties look promising at the headline level but fail at the net level.
Properties exceeding 7% gross yield exist, but they are a minority. They tend to fall into specific categories:
- Older apartments (15–25 years) in established areas with low purchase prices and stable rental demand
- Studio and small units near universities or transit hubs with high rent-per-sqft
- Properties in secondary cities where purchase prices are lower but tenant pools are thinner
The uncomfortable truth: if you are shopping in the mainstream KL condo market at RM 400,000–600,000, the median gross yield sits around 4.5–5.5%. That is below the breakeven line for cashflow-positive ownership under either financing type.
This is not a knock against property investing — it is an argument for being selective and using the right metric.
The Number You Should Use -- Rent Coverage Ratio
Instead of gross yield, we recommend investors focus on one number: Rent Coverage Ratio (RCR).
Rent Coverage Ratio = Monthly Rental Income ÷ Monthly Loan Installment
This is intuitive, hard to manipulate, and directly answers the question: does the rent cover the mortgage?
- RCR below 1.0: The rent does not even cover your loan payment. You are subsidizing the tenant.
- RCR of 1.0–1.2: Rent covers financing but not operating costs. Still cashflow-negative.
- RCR of 1.2–1.4: Covers financing and most operating costs. Borderline positive.
- RCR above 1.4: Genuinely cashflow-positive with a buffer for unexpected costs.
The beauty of RCR is that it automatically adjusts for your financing terms, tenure, margin of financing, and interest rate. Two properties with identical 6% gross yield can have very different RCRs depending on how they are financed.
We discussed how RCR connects to other cashflow signals in our guide on 5 signs a property will be cashflow-positive.
For Singapore Buyers
If you are a Singaporean purchasing Malaysian property as a non-resident, pay particular attention to deduction #4 in the table above. Non-resident rental income is taxed at a flat 30% in Malaysia — no progressive rates, no personal relief. This single factor can slash 1.5–2.0% off your net yield compared to a Malaysian resident buyer. A condo yielding 6% gross may net under 2% for a non-resident after the full cost stack. Factor this into your RCR calculation before committing, and model the numbers at the 30% rate — not the graduated scale your agent may have quoted.
How PropCashflow.my Calculates Real Yield
Every property in our directory goes through a full-stack yield calculation that accounts for all seven deduction categories listed above. We do not show gross yield as a headline number — we show:
- Net yield after operating costs — what you keep before financing
- Rent Coverage Ratio — under both conventional and Islamic financing scenarios at current market rates
- Monthly cashflow estimate — the actual ringgit amount you gain or lose each month, at 90% margin of financing over a 35-year tenure
We run each property through two financing models:
- Conventional: Based on prevailing BLR/BR rates (currently OPR + 1.60%)
- Islamic (Musharakah Mutanaqisah): Based on prevailing Islamic profit rates (currently ~4.0%)
The inputs are real asking rents from active listings, actual maintenance fee schedules filed with the Commissioner of Buildings, and current tax brackets. Where data is insufficient — fewer than three rental comparables in the same development — we exclude the property entirely rather than guess.
The goal is simple: when you see a number on PropCashflow.my, it should reflect what ownership actually costs and what the rental income actually covers. No inflated projections, no missing line items. Just the math that determines whether a property puts money in your pocket or takes it out.