7 Best Passive Income in Malaysia+How to Do Them

There are many ways to earn passive income in Malaysia. This guide will help you to navigate most, if not all available options and help you decide which ones to consider doing, based on your interest and/or skillset.

At the end of this article, I’ll also share the passive incomes that I personally have.

How to earn Passive Income in Malaysia – 7 types to explore

To the best of my ability, I have researched all the possible ways to earn passive income in Malaysia. I categorised them into 7 types:

1. Property
2. Rental
3. Intellectual Property
4. Lower risk investments
5. Higher risk investments
6. Keep valuable items
7. Referral

Each of them will be expanded in their respective sections below. But first,

Passive income vs active income: how is it different?

Firstly let’s make the distinction between passive and active income:

• Active income is income derived from constant effort, on an ongoing basis. Your day job is an example of this. My writing business is an example of this.
• Passive income, on the other hand, requires one-time massive work and/or capital, then will generate income ‘as you sleep’. It requires inactive participation – perfect for lazy smart people.

Note: No passive income in Malaysia is totally passive. There is upfront effort/cost to start it, and there might be some ongoing work to maintain it, but after that, for the most part you can leave them to do their thing. Which is cool, because then you get to do the funner things in life.

It is important to have a few steady sources of passive income. When you can’t work – by choice or by force – this will be the money to keep you going. For example, RM2.4 million will generate you RM10k monthly income for life (Related: How to Get RM10000 per Month in Passive Income.)

They say that true financial freedom comes when you can quit your active income and rely on your passive income. I think that’s true!

With that clarified, let’s get into the first type of passive income,

Passive Income Malaysia #1 – Property

What this entails: Buy and rent out property spaces to tenants.

To make this profitable, the amount of rent must exceed the amount of monthly/yearly payments you make (not just mortgage, but also insurance, taxes, etc).

The (oversimplified) steps if you want to do this type of passive income:

• Research locations and demand
• Buy/lease the property
• Renovate it (optional, but common in order to attract tenants and get good price)
• Hire property agent to handle rental inquiries and draw contracts
• Hire property manager to look after the property (optional, but not uncommon. Who wants to deal with leaked toilets?)
• Receive rental checks monthly or according to agreed schedule

Pro: If you get tenants for the whole duration of the mortgage, you are essentially getting the property for free by the end of the term.

Con: Tenant woes; high start-up cost

Alternative: REITs (Real Estate Investment Trust). Similar to above, but the property management team will do the work for you. However, you don’t own the property.

Passive Income Malaysia #2 – Rental

What this entails: Similar to Property, but expanded to other types of assets. For example, car, vending machine, gaming systems, rarely-use products like power washer etc

The (oversimplified) steps if you want to do this type of passive income:

• Research what’s in demand (commonly overlooked)
• Acquire items to rent out
• Figure out rental mechanism so you can receive money while not losing the item
• Rent out, receive payment, repeat with more customers

Pro: Can get pretty good income

Con: If item is damaged, that’s your loss (unless you can somehow get insurance); may require a lof of work (unless if you hire staff)

Passive Income Malaysia #3 – Intellectual Property

What this entails: Create/make software, apps, websites, books, songs, graphics, photographs and sell them on online platforms (either directly or via advertising revenue).

To make this profitable, networking/marketing/advertising efforts must be ongoing so you can expose the product to new audiences. To make it ‘passive’, you can outsource and/or automate this.

The (oversimplified) steps if you want to do this type of passive income:

• Research what’s in demand (commonly overlooked)
• Make said intellectual property and trademark it/proof ownership (stealing happens)
• Package it to the right target audience
• Choose selling platforms
• Market/advertise the heck out to the target audiences
• Receive royalties when people buy/use it

Pro: Lower start-up cost; infinite income potential

Con: Most IP don’t make much money due to too much competition; piracy; lack of marketing/advertising

Passive Income Malaysia #4 – Lower Risk Investments

I’m grouping a few types of investments here because they’re similar: Mutual funds (ASB, ASW, etc), fixed deposit, unit trust, stocks/shares from blue-chip companies that give dividends (big, stable companies that everyone has heard of), ETFs (Exchange-Traded Funds) and REITs.

The (oversimplified) steps if you want to do this type of passive income:

• Choose the right vehicles for you – probably the hardest part. Bumi people have it good with ASB, but the rest of y’all have to research a bit more on brokerage fees that’ll eat into your income
• Contribute monthly/yearly (you can automate this)
• Receive dividends*, usually yearly (*sometimes you don’t get this if the company is not profitable that year, or if they made a loss)

Pro: Easiest type of passive income to get into; great for long-term investors as you can just forget about it

Con: Not much control; have to learn withdrawal strategies so you don’t withdraw too much

Passive Income Malaysia #5 – Higher-risk Investments

Tricky category because higher-risk investments that are NOT scams are pretty diverse. For example, you can invest via P2P (peer-to-peer) lending platforms, ECF (equity crowdfunding) platforms, cryptocurrencies, do investment in durian plantation etc. (Note: Are there more? Add in comments!)

The (oversimplified) steps if you want to do this type of passive income:

• Pick a legit platform. There are many illegal platforms for these types of investment. This is the list of unauthorised investment platforms in Malaysia, as per Securities Commission. If the one you picked is in here, take your money out ASAP and report their ass.
• Research market condition. Everyone wants your money to make money, but will they, realistically speaking? Access to industry-specific insight is a must.
• Give money to them. There may be maximum limit that you can invest, so check with the platform.
• Wait for them to start making profit so you can cash out.

Pro: If you’re lucky, the profit will be really good. It’s possible to get back 100% return on investment, or more.

Con: You must be OK with the possibility of not getting most or all of your money back. Your higher-risk investments could generate high returns…or it could reduce -80%. It’s not uncommon to lose all initial investments too (ie losing crypto due to scams, mistakes).

For this reason, higher-risk investments may not be suitable passive income strategy for retirees and people not comfortable with high risk

Passive Income Malaysia #6 – Keep valuable items

What this entails: Some items make great passive income as their value grows. However, there are no guarantee that the worth will remain the same after some time. For example, tulip bulbs and Beanie Babies used to be sold/traded for high profits, but not any more.

That said, a few things stood the test of time, but they’re still not guaranteed. For example gold, antiques and rare collectibles. I’d even put properties and currencies in this list. Basically, things that have value, according to society at large. Some may overlap with #4.

The (oversimplified) steps if you want to do this type of passive income:

• Make research on supply and demand, know everything about it and the market price (be expert-level, preferably)
• Purchase said items
• Keep said items safely and in good condition
• Sell when the timing is right to the right buyer (to be fair, it’s incredibly, incredibly hard to get the timing and buyer right)

Pro: Suitable for already-hobbyists and experts in the field

Con: Kind of risky, you won’t know if you’ll make a profit until you sell it

Passive Income Malaysia #7 – Referral

I don’t like these at all, but most of you would have been exposed to some of these by now. Some are legit, but others are in the category of investment scams (read how to avoid them here). They usually make money for the top few people in the pyramid, but the rest will lose money.

The (oversimplified) steps if you want to do this type of passive income:

• Choose a platform to be part of their network, pay their fees
• Promote to friends, families, colleagues and acquaintances (I’d argue that this makes it borderline active income, but anyway)
• As your network below you grows, and your referrals get their own referrals, you get income from their fees
• Collect income

Pro: Technically unlimited income potential

Con: You’ll become ‘that’ person; if you promote HYIPs (high yield investment programmes) / Ponzi schemes, there’s a chance you’ll get harassed by people wanting their investment back.

My passive income streams

I love the word ‘streams’, it’s pretty refreshing to have nature references in investment. I have the image of pretty small river trails that leads to the ocean (aka my bank account) 🙂

Here are my passive income streams:

Rental:

• As of 2020 I’m doing vending machine business that give rental income

Lower-risk investment:

• ASB (I do ASB financing, too)
• EPF
• PRS (my Private Retirement Scheme guide – get 0% sales charge)

Higher-risk investment:

• P2P lending
• Investment in a few cryptocurrencies, especially bitcoin (very risky – read my bitcoin guide before you even consider this)
• Gold
• ETFs in Wahed Invest and MIDF Invest (I condiser risky as my portfolio is Aggressive)

Note: There are many investments in Malaysia that you can start with RM1000 capital or even lower.

Intellectual property:

• Income generated from advertising and affiliate revenue from this blog (borderline active income actually)
• My books: Money Stories from Malaysians, Bergaji & Pokai (You can get it from ImanShoppe.com or Shopee, or at major bookstores nationwide)

Any other passive income ideas?

There you go – the 7 types of passive income ideas plus the simplified steps to do them. As someone who loves the idea of constant income generation even when not working (who doesn’t!), I always look around for more opportunities, so leave a comment if you know of more options!

Perhaps a final note before I end this article – do be careful of passive income claims. A lot of passive income opportunities – especially those promising high returns – is most likely investment scams. ESPECIALLY if they depend on referrals.

I’m not saying don’t do them, since fortune favours the bold and all. All I’m saying is – perhaps limit your exposure and only use 1-5% of your EXCESS savings if you want to try them out.

What do you think of this guide? Are you doing passive income, and if yes which ones? If no, which ones are you considering?

As always, if this guide helped you, share it around 🙂