The truth about GRR: Why you should run away from buying that “promised income” property

When buying a property in Malaysia, especially one marketed as an investment, you’ve probably come across the magic term guaranteed rental return (GRR).

At first glance, GRR looks like an investor’s dream: predictable income, hassle-free management, and peace of mind, but in reality, this “guarantee” often hides deeper financial risks that can cost you more than you think.

Here’s how to spot a genuine property investment opportunity, and avoid falling into a trap.

What exactly is GRR?

Let’s break down what GRR really means, and why you should be careful when considering property investments in Kuala Lumpur, Johor Bahru (JB), or anywhere else in Malaysia.

A GRR scheme is when a property developer or agent promises a fixed rental income for a certain period (usually two to five years) after you purchase the property. For example: “We’ll guarantee you 6% rental returns annually for three years, because the rental per night is RMXXX”.

It sounds like easy money. But in most cases, that “guarantee” comes from your own money.

Developers often inflate the property’s selling price to include the cost of paying those returns later. For example, they’ll mark up the selling price for the property by at least 18% to pay you back 6% annually for three years.

In other words, you’re pre-paying your own rental income without realising it. It’s like lending someone RM100,000, then having them pay you back half of it slowly with your own cash, and calling it “profit”.

The problem with GRR: when it’s the only selling point

If the main thing a developer promotes is the GRR, that’s a warning sign.

Why? Because good properties don’t need GRR to sell. Developments in strong, in-demand areas, like near universities, offices, tourist attractions, or transport hubs, can attract tenants naturally, and earn stable rental income without any guarantees.

If the developer spends more time promoting the GRR instead of the property’s location, amenities, or surrounding rental demand, it usually means the project is in a weak or oversupplied market, or simply overpriced.

Location and price determines whether GRR works or fails

A GRR scheme only works if the property is in a location with real rental demand, i.e. with the following factors:

A) Near universities or colleges with vibrant commercials: easier to rent room by room to students

B) Near business districts or commercial hubs: attracts working professionals

C) Near tourist or entertainment areas: ideal for short-term rentals like Airbnb

D) The most important consideration is the property purchase price: should be priced fairly to median prices in the area.

If your property doesn’t tick a minimum three of these boxes, ask yourself what will happen after the GRR period ends.

In many cases, investors discover too late that the promised returns were only sustainable during the GRR period. Once it expires, the property’s true rental value becomes clear, often much lower than expected, and in some cases, drops by over 50%.

For example, buyers of Genting Highlands properties should be aware that the area depends heavily on tourism, which tends to be seasonal. When tourist numbers drop, properties intended for short-term rental struggle. Many units sit vacant for months outside peak seasons.

Properties marketed in emerging areas with future potentials, such as an education hub, a wholesale hub, or any other yet-to-be-proven pull factors, should also be carefully analysed before any commitment is made. In some cases, the marketing may work too well, attracting a host of developments that subsequently outstrips the demand, eventually leaving owners competing in a soft market with falling rental yields.

What you should really look for

In general, you should just simply avoid any properties that are sold based solely on GRR, or marketed as short stays.

The best properties will have multiple rental options to get breakeven rentals vs instalments. So, before buying any GRR property in Malaysia, ask yourself:

1 Can it be rented out, be it fully or room by room? Flexibility matters. The more rental strategies you can use, the safer your investment.

2 Is it Airbnb-friendly? Short-term rentals can boost cash flow, especially in city centres, or tourist areas.

3 Does the area have genuine, sustainable demand for long term rental? Check whether there are universities, offices, shopping centres, or public transport nearby.

If the answer to these is “no”, then even the best GRR offer won’t protect you once the guarantee ends. Best is to study multiple rental options, which are outlined in Far Capital’s 8Filters method.

GRR should be a bonus, not the main reason to buy a property

If your property can perform well through normal rentals, whether fully, room by room, or as an Airbnb, then GRR can be an extra perk, but if the investment only makes sense because of the GRR promise, it’s likely a bad deal in the long run.

Always analyse the location, real rental demand, and exit strategy before committing.

At the end of the day, smart investors don’t buy marketing promises. They buy performance.

Pro-tip: If the locals aren't willing to buy property in that area, and don't make up the majority of the purchasers, you should definitely stay away e.g. property in JB but sold in Hong Kong, China or Korea, or property in Terengganu but sold in KL or Selangor. 

Assess whether your next property investment is truly profitable with pro help

Find real-performing properties in KL, JB, and across Malaysia that deliver sustainable, long-term rental returns without relying on guarantees.

Far Capital offers professional advisory based on clear past performance, without needing to have GRR. The company presents multiple rental options, and its 8Filter method equips you with investment savviness.

Click here to find out more.