New launch showrooms are designed to sell you a dream. Sub-sale properties force you to deal with reality — the actual unit, the actual building condition, the actual tenant, the actual neighborhood at 11pm on a Tuesday. For cashflow investors, that is an advantage, not a drawback.
Sub-sale (secondary market) properties account for roughly 60-70% of all property transactions in Malaysia. Yet most investor education focuses on buying from developers. The sub-sale process is different in timeline, cost structure, risk profile, and legal complexity. If you do not understand these differences before signing your Letter of Offer, you are navigating a six-figure transaction blind.
Why Cashflow Investors Prefer Sub-Sale
Four structural advantages make sub-sale properties the default choice for rental income-focused investors:
1. You can inspect the actual unit. No show unit, no artist impressions. Every defect is visible before you commit.
2. Existing tenants mean immediate cashflow. Some sub-sale properties come with a sitting tenant. You inherit the tenancy and start collecting rent from day one.
3. Established rental demand. You can check actual rental comparables in the same building and verify occupancy rates with the management office — data, not developer projections.
4. No construction risk. Developer delays, abandoned projects, and quality shortfalls are non-issues. The building exists.
The tradeoff: sub-sale properties lack developer rebates and deferred payment schemes. You also inherit any existing issues — aging infrastructure, management disputes, or structural defects. Due diligence is your responsibility.
The 9-Step Sub-Sale Process
Step 1: Property Search and Viewing
Identify properties through online portals (PropertyGuru, iProperty, EdgeProp), agent networks, or direct owner listings. Filter by gross yield first — anything below 5.5% is unlikely to be cashflow-positive under current financing rates.
View the property in person. Check unit condition (walls, floors, wet areas), air conditioning, water pressure, electrical systems, building common areas, lift condition, and the neighborhood at different times of day.
Step 2: Letter of Offer and Earnest Deposit
Once you agree on a price, sign a Letter of Offer (or Offer to Purchase) and pay the earnest deposit. The standard breakdown:
| Component | Typical Amount | Notes |
|---|---|---|
| Earnest deposit | 2% of purchase price | Held by agent or seller's lawyer as stakeholder |
| Agent booking fee | 1% of purchase price | Professional fee for the selling agent |
| Admin / processing fee | 0.18% of purchase price | Covers administrative costs |
| Total initial outlay | 3.18% of purchase price | Payable upon signing Letter of Offer |
On an RM 500,000 property, you pay RM 15,900 at this stage.
The earnest deposit is typically non-refundable if you withdraw from the transaction after signing the Letter of Offer. If the seller withdraws, they must refund the deposit (often doubled as compensation, depending on the terms). Read the Letter of Offer carefully — the forfeiture terms should be explicitly stated.
Step 3: Loan Application (2-4 Weeks)
Apply to 2-3 banks simultaneously. Most Letters of Offer give 14-21 days to secure approval. Key parameters: 90% margin (first two residential properties), up to 35 years tenure, and Islamic financing at 3.95-4.15% for better cashflow than conventional at 4.35-4.50%.
The bank will order an independent valuation. If the valuation comes in below the purchase price, you negotiate down, make up the shortfall in cash, or walk away (subject to Letter of Offer terms).
Bank valuations for sub-sale properties can differ by 5-15% from the agreed purchase price. This is especially common in softening markets or for leasehold properties with shorter remaining tenure. Always apply for financing early and treat the bank valuation as a critical checkpoint — not a formality.
Step 4: SPA Signing (Within 14 Days of Loan Approval)
Once financing is approved, the Sale and Purchase Agreement (SPA) is prepared by the seller's lawyer (or a mutually agreed lawyer). The buyer typically has 14 days from loan approval to execute the SPA.
The SPA is the binding legal document that governs the entire transaction. It specifies:
- Purchase price and payment schedule
- Completion timeline
- Conditions precedent (state consent for leasehold, discharge of seller's existing loan)
- Representations and warranties
- Default provisions for both parties
Legal fees for SPA follow a regulated scale under the Solicitors' Remuneration Order 2023:
| Property Value | Legal Fee Rate |
|---|---|
| First RM 500,000 | 1.25% (minimum RM 500) |
| RM 500,001 to RM 7,500,000 | 1.00% |
| Exceeding RM 7,500,000 | Negotiable (max 1%) |
On an RM 500,000 property, SPA legal fees are RM 6,250 plus disbursements (typically RM 500-1,500 for search fees, photocopying, courier, etc.).
Step 5: Balance 7% Payment
After the earnest deposit (3.18%) and before full loan disbursement, you pay the remaining balance to make up 10% of the purchase price. This is typically due within the SPA-specified timeline (usually 14-30 days of SPA execution).
On an RM 500,000 property:
- Already paid: RM 15,900 (3.18%)
- Balance due: RM 34,100 (6.82%)
- Total before loan disbursement: RM 50,000 (10%)
Step 6: Loan Documentation and Stamp Duty
Your bank's panel lawyer prepares the loan agreement. You sign, and stamp duty is payable on both the SPA (Memorandum of Transfer) and the loan agreement.
Stamp duty breakdown for RM 500,000 property:
| Document | Calculation | Amount (RM) |
|---|---|---|
| MOT stamp duty | 1% on first RM 100K + 2% on next RM 400K | 9,000 |
| Loan stamp duty | 0.5% of RM 450,000 (90% LTV) | 2,250 |
| Total stamp duty | 11,250 |
Loan legal fees follow the same scale as SPA legal fees but calculated on the loan amount. On a RM 450,000 loan: RM 5,625 plus disbursements.
For a detailed breakdown of stamp duty rates at various price points and available exemptions, see our stamp duty guide.
Step 7: State Consent (If Applicable)
Required for leasehold transfers, foreign buyer purchases, and Malay Reserve Land. Adds 1-6 months and RM 500-2,000 in fees. Freehold properties purchased by Malaysian citizens skip this step entirely — one reason freehold transactions close faster.
Step 8: Transfer and Registration
The seller's loan is discharged, the buyer's bank releases the loan amount, and the Memorandum of Transfer is stamped and registered at the land office. The new charge (buyer's loan) is registered on the title simultaneously. This takes 2-4 weeks for properties with individual title. For master title properties, transfer is via Deed of Assignment with a private caveat filed to protect your interest.
Step 9: Key Handover
The seller delivers vacant possession (or assigns the existing tenancy agreement to the buyer). The buyer receives keys, access cards, and all relevant property documents.
Total timeline estimates:
| Property Type | Typical Timeline |
|---|---|
| Freehold with individual title | 3-4 months |
| Freehold with master title (Deed of Assignment) | 3-5 months |
| Leasehold with individual title | 4-6 months (state consent adds time) |
| Leasehold with master title | 6-12 months |
| Foreign buyer purchase | 6-12 months (EPU/state consent) |
Full Cost Breakdown
Every ringgit you spend on a sub-sale purchase, beyond the property price:
| Cost Item | Amount / Calculation | Typical Range (RM 500K property) |
|---|---|---|
| SPA legal fees | Scale rates + disbursements | RM 5,500 - 6,500 |
| Loan legal fees | Scale rates + disbursements | RM 5,000 - 6,000 |
| MOT stamp duty | Tiered: 1%/2%/3%/4% | RM 9,000 |
| Loan stamp duty | 0.5% of loan amount | RM 2,250 |
| Valuation fee | 0.15-0.30% of property value | RM 750 - 1,500 |
| Agent fee | 2-3% (usually paid by seller) | RM 0 (buyer typically pays nothing) |
| Land search fee | Per title search | RM 50 - 150 |
| Bankruptcy search | Per individual | RM 8 - 12 |
| State consent fee (if applicable) | Varies by state | RM 500 - 2,000 |
| Total buyer costs | RM 23,058 - 27,412 |
As a percentage of purchase price, buyer transaction costs for a sub-sale property are approximately 4.6-5.5% of the purchase price. Add this to your 10% down payment, and you need roughly 15% of the purchase price in cash to complete the transaction.
On an RM 500,000 property, budget RM 73,000-77,000 in total upfront cash (10% down payment + 4.6-5.5% transaction costs).
Sub-Sale vs New Launch: Key Differences
| Factor | Sub-Sale | New Launch (Developer) |
|---|---|---|
| Pricing | Market price; negotiable | Developer-set; rebates and packages available |
| Inspection | Physical unit available | Show unit only (actual unit may differ) |
| Defect risk | Visible defects; no developer warranty | Developer warranty (24 months Defect Liability Period) |
| Rental readiness | Immediate (can have existing tenant) | 3-5 years to completion, then furnishing needed |
| Financing timeline | Loan disbursement at completion (3-6 months) | Progressive disbursement during construction |
| Stamp duty | On purchase price or market value (whichever higher) | On SPA price; developer may absorb as promotion |
| SPA terms | Negotiable between parties | Standard developer SPA (Schedule G/H) |
| Price discovery | Market-driven; comparable data available | Developer pricing; limited transparency |
| Construction risk | None (building exists) | Delays, abandonment, quality issues possible |
| Agent fee | Paid by seller (2-3%) | Paid by developer (1-3%) |
For cashflow investors, the sub-sale advantage is clear: skip the 3-5 year construction wait, verify rental demand with actual data, and avoid construction risk entirely.
Individual Title vs Master Title
Individual title (Geran/Pajakan): The property has its own title document. Transfer is registered directly at the land office. Banks strongly prefer these.
Master title only: All units sit on a single title in the developer's name — common for developments less than 5-10 years old. Transfer uses a Deed of Assignment instead. Your lawyer files a private caveat to protect your interest. When strata titles are eventually issued (could be years), the title transfers to your name.
Master title transactions are slower (developer consent may be needed), cost more (additional legal fees), and carry risk if the developer is wound up before issuing strata titles. Prefer individual title where possible.
Due Diligence Checklist
Before committing to any sub-sale purchase, verify:
Property-Level Checks
- [ ] Land search / title search: Confirms ownership, encumbrances, caveats, and title type. Conducted at the land office (RM 50-150 per search).
- [ ] Bankruptcy search on seller: Ensures the seller is not an undischarged bankrupt. If bankrupt, the sale may be void. Search via Insolvency Department (RM 8-12 per individual).
- [ ] Maintenance arrears check: Contact the management corporation or JMB. Outstanding maintenance fees can become the buyer's liability in some circumstances. Request a statement of account.
- [ ] Utility bills check: Request the seller to show recent utility bills (TNB, water, Indah Water) to confirm no outstanding amounts. Arrange for meter readings at handover.
- [ ] Condition inspection: Physically inspect the unit. Check for water damage (ceilings, bathroom walls), cracks (structural vs cosmetic), pest infestation, air conditioning condition, and electrical systems. Hire a professional inspector (RM 300-800) for properties above RM 500,000.
Legal and Financial Checks
- [ ] Existing caveats: A private caveat on the title may indicate a dispute, a prior sale agreement, or a creditor's claim. Your lawyer should check for and demand removal of any caveats before completion.
- [ ] Seller's outstanding loan: Verify the seller's loan balance. If the outstanding loan exceeds the purchase price (negative equity), the seller needs to bring cash to close — which introduces completion risk.
- [ ] Strata by-laws: For condos, review the house rules and by-laws. Some developments restrict short-term rentals, pet ownership, or commercial use — all of which affect your tenant pool and rental strategy.
- [ ] Management corporation financials: Request the MC's annual financial statements. A large deficit, special levy history, or escalating maintenance fees are red flags.
- [ ] Developer status (for master title properties): If the property is still on master title, check if the developer is solvent and actively processing strata titles. A wound-up developer creates title transfer complications.
The total cost of pre-purchase due diligence — land search, bankruptcy search, and professional inspection — is RM 500-1,200. That is 0.1-0.2% of the purchase price. Skipping due diligence to save RM 1,000 on a RM 500,000 transaction is the kind of false economy that creates real losses.
Key Risks
Five risks specific to sub-sale transactions: maintenance arrears (include SPA clause requiring seller to clear all arrears; MC can block transfer), caveats on title (your lawyer must ensure removal before completion), seller bankruptcy (bankruptcy search is essential but a risk window exists between search and completion), structural defects (no developer warranty — inspect thoroughly before committing), and negative equity (seller's loan may exceed purchase price, requiring them to bring cash).
Your lawyer's role is to identify and mitigate these risks through the SPA terms. Do not rely on the seller's representations.
Timeline Summary
For a straightforward sub-sale transaction (freehold, individual title, Malaysian buyer):
| Stage | Duration | Running Total |
|---|---|---|
| Property search and viewing | 2-8 weeks | 2-8 weeks |
| Letter of Offer + earnest deposit | 1-3 days | 2-9 weeks |
| Loan application and approval | 2-4 weeks | 4-13 weeks |
| SPA preparation and signing | 1-2 weeks | 5-15 weeks |
| Balance payment (7%) | 2-4 weeks | 7-19 weeks |
| Loan documentation and stamping | 2-3 weeks | 9-22 weeks |
| Transfer and registration | 2-4 weeks | 11-26 weeks |
| Total: search to keys | 3-6 months |
Add 2-6 months for leasehold (state consent) or foreign buyer (EPU consent) transactions. Properties without individual title (Deed of Assignment) add another 1-3 months to the documentation stage.
For a broader understanding of the stamp duty component of sub-sale costs, including worked examples at multiple price points, see our stamp duty guide. For legal fee calculations, see our legal fees guide.