Maybe you have a business idea, but that business is too capital-intensive to get off the ground as a solo entrepreneur.
An “asset-light” business model refers to entering into partnerships and outsourcing agreements to reduce a business’s need to own physical assets.
Examples include Airbnb, which doesn’t own its properties, as well as Uber, which doesn’t own its cars.
Now, three millennials are adapting the asset-light model to a small business, with plans to profit from “authentic” Malaysia properties they don’t own. But is this a smart business move or a risky hustle?
Adopting the ‘asset-light’ model
George Town in Penang, Malaysia — a UNESCO World Heritage site since 2008 — is renowned for its architecture, which blends Malay, Chinese, Indian and colonial influences.
If you’re a tourist in Penang, you can now stay in one of George Town’s distinctive shophouses.
In 2023, Shane Low and his wife Chong Xin Pei, an architectural designer, started a property development company called Aayu Homes, according to Business Insider (1). A year later, they were joined by Low’s childhood friend Andy Ooi, who oversees daily operations and business development. All three are 33 years old.
“We felt that whenever you travel, staying in something very local is more authentic than staying in high-end hotels,” Low told the publication in an article published Oct. 13. “We don’t own any properties; our model is asset-light.”
Rather, they work with shophouse owners and investors to fix up the properties, at their own cost, and then either rent them out or help run them, taking about 30% of the revenue, reports Business Insider. The shophouse owners tend to be locals or foreigners who buy them as future retirement properties, stay there when they’re in town and rent them out when they’re not.
So far, they manage over a dozen properties, which are marketed through Airbnb and Booking.com, but they plan to expand by adding more properties while curating experiences such as the ability to book cooking classes and walking tours.
“It becomes a whole ecosystem,” Low said. “Not only do you have houses — you have everything that is local around, from experiences, to products and shops.”
The risks of ‘asset-light’ models
As with all business models, this one does bring some risk. The heritage nature of the homes means they might come with some pitfalls, such as no windows in bedrooms and poor noise-proofing. If guest expectations aren’t handled properly, Aayu Homes risks reputational damage, which could depress future bookings.
If you’re considering a similar venture, it’s important to assess the risks first and account for them in your financial projections. For instance, these properties are in a UNESCO heritage area, and they may be subject to a host of regulations, particularly regarding alterations.
Since Aayu Homes renovates the units before renting them, there’s a chance the business could face cost overruns and delays. It’s good practice to stress test renovations, such as applying an additional 10% to projected costs and analyzing whether or not the renovations still make sense. This could be done with all costs, such as maintenance, taxes and utilities.
The company could also stress test the effects on revenue of various vacancy rates, since they might not always be fully booked. Since they depend on tourism, they should understand and model the effects of declining or increasing tourism and monitor potential changes in the market such as consumers’ travel tastes and geopolitical events.
Since they don’t own the properties, they’ll also need to accommodate owners when they want to use the properties (which means they won’t be bringing in any revenue) — and they’ll need an exit strategy for when the owners decide to permanently take back the properties.
A company may want to stress test all of these various factors together. Gaining an understanding of how worst-case scenarios could affect your company — and whether you’d be able to keep the business afloat in those scenarios — can help you decide if an asset-light business model makes sense.
It’s also important to have the right insurance. In this case, guests could accidentally damage the property during a stay. Standard homeowner’s insurance doesn’t cover commercial activities; a property management company needs a local policy that covers potential risks such as property damage and injury to guests, among other risks.
If you want to invest in real estate but don’t want to take on the risk of starting your own company, many options are available. These include private real estate funds, platforms that offer fractional investment in single-family rentals or commercial real estate, as well as home equity funds and home equity agreements.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Business Insider (1)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.