Short Term Rental Returns Malaysia: What to Really Expect in 2025

The numbers are tempting. You've seen the listings claiming RM15,000/month in rental income. You've heard stories of Airbnb hosts killing it with 80% occupancy and premium nightly rates.

But what's the reality of short-term rental returns in Malaysia?

Can you really make 2-3x more than long-term rental? Or is it all hype with hidden headaches and diminishing returns?

At iHousing Melaka, we manage dozens of short-term rental properties across the city. We have real data, not hypothetical projections. Let's break down exactly what you can expect from short-term rental investments in Malaysia in 2025.

The Big Picture: Short-Term vs Long-Term Rental

Let's start with a direct comparison using a typical 2-bedroom condo in a tourist-friendly area like Melaka.

Long-Term Rental (12-Month Lease)

Short-Term Rental (Airbnb/Booking.com)

The verdict: Well-managed short-term rentals in good locations can genuinely earn 1.5x to 2.5x more than long-term rental.

But—and this is important—"well-managed" is the critical variable. Poorly managed properties may earn less than long-term rental after accounting for higher operational costs.

Real Performance Data: Melaka Properties

Here's actual data from properties under iHousing management (identities anonymised):

Property A: Parkland Avenue 2-Bedroom (Beachfront)

6-Month Performance:

• Average nightly rate: RM195

• Occupancy rate: 73%

• Monthly revenue: RM5,280

• Monthly expenses:

- Management: RM250 (iHousing flat fee)

- Cleaning (guest-paid): Included in rates

- Utilities: RM180

- Internet: RM80

- Maintenance: RM150

- Strata/Assessment: RM220

- Total expenses: RM880

• Monthly net income: RM4,400

• Annualised net: RM52,800

• ROI (property value RM450k): 11.7%

Property B: Melaka Raya 2-Bedroom (City Centre)

6-Month Performance:

• Average nightly rate: RM145

• Occupancy rate: 68%

• Monthly revenue: RM3,720

• Monthly expenses:

- Management: Custom pricing

- Utilities: RM140

- Internet: RM60

- Maintenance: RM120

- Strata/Assessment: RM180

- Total expenses: RM700

• Monthly net income: RM3,020

• Annualised net: RM36,240

• ROI (property value RM340k): 10.7%

Property C: Klebang Area 2-Bedroom (Mid-Range)

6-Month Performance:

• Average nightly rate: RM125

• Occupancy rate: 62%

• Monthly revenue: RM2,950

• Monthly expenses:

- Management: Custom pricing

- Utilities: RM120

- Internet: RM50

- Maintenance: RM100

- Strata/Assessment: RM160

- Total expenses: RM580

• Monthly net income: RM2,370

• Annualised net: RM28,440

• ROI (property value RM290k): 9.8%

Key Takeaway: Premium properties (Property A) outperform budget properties not just in absolute returns, but also in ROI percentage.

What Drives Short-Term Rental Returns?

Understanding the variables that impact your returns is essential for realistic expectations.

1. Location (The #1 Factor)

Premium Locations:

• Beachfront (Klebang): 15-25% higher rates

• Walking distance to attractions (Jonker Street area): 10-20% premium

• City centre (Melaka Raya): Consistent demand

Secondary Locations:

• 10-15 minutes from attractions: 10-15% lower rates

• Residential areas: Lower rates, more weekday demand

Impact on returns: A premium location can generate 30-50% higher revenue despite only 10-15% higher property prices.

2. Property Type and Size

Sweet spot: 2-bedroom units offer the best balance of rates and occupancy for family-oriented destinations like Melaka.

3. Furnishing and Presentation

Well-furnished properties earn 20-30% more:

• Professional photography: +15-20% in bookings

• Resort-style furnishings: +10-15% in rates

• Smart home features: +5-10% in guest satisfaction

• Quality linens and amenities: Critical for reviews

Furnishing investment:

• Basic functional: RM15,000-20,000

• Standard Airbnb-ready: RM20,000-30,000

• Premium resort-style: RM30,000-45,000

ROI on furnishing: Premium furnishing pays for itself in 12-18 months through higher rates and occupancy.

4. Management Quality

DIY vs Professional Management: The management paradox: Professional management costs money but typically increases net income by 20-40% through better occupancy, rates, and reviews.

Seasonal Variations: What to Expect Monthly

Melaka doesn't have a true "low season," but demand fluctuates:

Peak Months (Higher Rates + Higher Occupancy)

• School holidays: March, May, August, November

• Public holidays: Chinese New Year, Hari Raya, Deepavali, Christmas

• Weekends: Every weekend is peak

During peak periods:

• Rates: +30-50% above base

• Occupancy: 75-90%

Standard Months

• February, April, June, July, September, October

• Steady tourist flow, balanced demand

During standard periods:

• Rates: Base rates

• Occupancy: 60-70%

Quieter Periods

• Certain weekdays outside holiday periods

• Monsoon months (November-January) for beachfront properties

During quieter periods:

• Rates: -15-20% below base

• Occupancy: 50-60%

• Strategy: Lower weekday rates to maintain occupancy

The Expense Breakdown: What You Actually Keep

Gross revenue looks great on paper. Net revenue is what matters.

Typical Monthly Expenses (2-Bedroom Unit)

Net profit margin: 75-80% of gross revenue (after direct expenses, before mortgage)

ROI Calculations: Realistic Scenarios

Scenario 1: Premium Beachfront Condo (Parkland Avenue)

Investment:

• Property: RM420,000

• Furnishing: RM30,000

• Total: RM450,000

Monthly Performance:

• Gross revenue: RM5,500

• Expenses: RM880

• Net income: RM4,620

• Annual net: RM55,440

Returns:

• Gross rental yield: 12.3%

• Cash-on-cash return: 12.3%

• Payback period: 8.1 years

Scenario 2: City Centre Condo (Silverscape/Melaka Raya)

Investment:

• Property: RM320,000

• Furnishing: RM22,000

• Total: RM342,000

Monthly Performance:

• Gross revenue: RM3,800

• Expenses: RM700

• Net income: RM3,100

• Annual net: RM37,200

Returns:

• Gross rental yield: 10.9%

• Cash-on-cash return: 10.9%

• Payback period: 9.2 years

Scenario 3: Budget Entry-Level Condo

Investment:

• Property: RM260,000

• Furnishing: RM18,000

• Total: RM278,000

Monthly Performance:

• Gross revenue: RM2,800

• Expenses: RM600

• Net income: RM2,200

• Annual net: RM26,400

Returns:

• Gross rental yield: 9.5%

• Cash-on-cash return: 9.5%

• Payback period: 10.5 years

Common Mistakes That Kill Returns

Mistake 1: Underestimating Furnishing Costs

Trying to furnish on the cheap backfires:

• Poor photos = fewer bookings

• Bad reviews = lower ratings

• Lower rates = less revenue

Solution: Budget RM20,000-35,000 for proper furnishing.

Mistake 2: DIY Management to "Save Money"

DIY sounds free but costs you:

• Lower occupancy (no quick response during business hours)

• Lower rates (no dynamic pricing)

• Bad reviews (delayed responses)

• Guest fatigue (you burn out)

Solution: Professional management increases net income despite the fee.

Mistake 3: Ignoring Professional Photography

Listing with phone photos underperforms by 30-40% in bookings.

Solution: Invest RM300-600 in professional photography. Pays for itself in a month.

Mistake 4: Not Optimising Pricing

Fixed pricing leaves money on the table:

• Underpricing on peak dates

• Overpricing on low-demand days

• Missing booking opportunities

Solution: Dynamic pricing adjusts rates daily based on demand.

Mistake 5: Choosing the Wrong Location

Buying in areas with low tourist demand guarantees underperformance.

Solution: Research thoroughly. Focus on proven tourist areas.

Financing Impact: Leveraging for Higher Returns

If you're financing your purchase, here's how it affects returns:

70% Loan Scenario (RM300,000 loan at 4.5% interest)

Monthly mortgage: RM1,520 Net income after mortgage: RM3,100 (from Scenario 2) Positive cash flow: RM1,580/month Cash-on-cash return: 55% on RM90,000 down payment The power of leverage: Financing can dramatically increase your percentage return on actual cash invested.

Tax Considerations

Malaysia's tax treatment for short-term rental income:

Taxable Income

• Rental profit is taxable income

• Expenses are deductible

• Maintenance and furnishing can be claimed

RPGT (Real Property Gains Tax)

• Held <3 years: 30% tax on gains

• Held 3-5 years: 20% tax on gains

• Held >5 years: 5% tax on gains

• Held >10 years: 0% tax on gains

Strategy: Hold for 5+ years to minimise RPGT on sale.

The iHousing Advantage: Maximising Your Returns

At iHousing Melaka, we don't just "manage" your property. We optimise it for maximum returns.

Our Return-Maximising Strategies:

1. Dynamic Pricing

• Rates adjusted daily based on:

- Local events and holidays

- Competitor pricing

- Demand patterns

- Booking lead times

2. Multi-Platform Presence

• Airbnb, Booking.com, Agoda

• Maximum visibility = more bookings

3. responsive guest communication

• Instant responses = more bookings

• Professional handling = better reviews

• Problem resolution = fewer cancellations

4. Professional Standards

• Hotel-quality linens and amenities

• Consistent cleaning protocols

• Regular maintenance and upgrades

Our Pricing Model:

For Parkland Avenue by the Sea:

• Flat RM200-300/month depending on unit size

• No percentage of your revenue

• Your success doesn't cost us more

For Other Melaka Condos:

• Custom transparent pricing

• WhatsApp us for a quote tailored to your property

Result: Our managed properties typically achieve 20-40% higher net income than self-managed units.

Is Short-Term Rental Right for You?

Short-term rental investing in Malaysia can deliver excellent returns, but it's not for everyone.

It's right for you if:

• You want higher returns than long-term rental

• You're comfortable with variable income

• You can handle occasional vacancies

• You're willing to invest in proper furnishing

• You value professional management

It might NOT be right if:

• You need guaranteed monthly income

• You're risk-averse

• You want zero involvement

• You're not willing to spend on setup

• You're buying in a non-tourist area

Get a Realistic Return Projection

Want to know what YOUR property can realistically earn as a short-term rental?

WhatsApp Us for Free ROI Projection

We'll calculate realistic returns based on your specific property and location

Final Thoughts

Short-term rental returns in Malaysia are genuinely attractive—if you approach it right.

The data doesn't lie:

• Well-located, well-furnished, well-managed properties earn 1.5x to 2.5x more than long-term rental

• ROI of 9-13% is achievable in tourist areas like Melaka

• Professional management typically increases net income despite the fee

The keys to success:

Choose the right location

Invest in quality furnishing

Hire professional management

Optimise continuously

At iHousing Melaka, we're here to help you achieve maximum returns from your short-term rental investment.

Related Reading:

• [Condo for Investment Melaka](/blog/condo-for-investment-melaka)

• [Airbnb Investment Calculator](/blog/airbnb-investment-calculator)

• [Self-Manage Airbnb vs Hire Company Malaysia](/blog/self-manage-airbnb-vs-hire-company-malaysia)