Investing in bali real estate in 2024

Getting you up to speed before starting

With its gorgeous beaches, vibrant cultural heritage, and thriving tourism industry, Bali is a unique combination of natural beauty and financial opportunity. 

The Bali provincial government has been working tirelessly all year to improve the tourist experience in Bali by investing in infrastructure.

As we are entering 2024, the local government of Bali has upgraded the road infrastructure by building sidewalks, expanding roads, making changes to traffic flow, opening new roads to relieve the pressure from the roads and most notably is in the process of developing an underground metro.

2023 has closed with approximately 4.5 million tourists visiting the island (12.000 per day!) and the projection for 2024 is 7 million tourists. 

If the 2024 will be met means that Bali tourism has recovered and resumed growth.

Feel free to look into our Bali market data page for more information or if you want to dip your toes right now make sure you check out this app that allows you to invest in bali real estate and earn 10-15% per year starting from $ 1.00

Now, without further ado let’s get into some of the best practices for you looking forward to making your villa investment in Bali.

Location Matters

Bali is a relatively small island, but it offers a diverse range of neighbourhoods, each with its own unique personality and vibe. 

From the upscale shops and restaurants of Seminyak to the digital nomad vibe of Canggu, you'll find something to suit your style and preferences. 

That's why it's essential to research different areas of the island and choose the one that best aligns with your needs and expectations.

In 2023, the Uluwatu peninsula had a surge in demand by holidaymakers and now it looks like it is really poised for growth. 

I suggest you take a look at our current villa listings in Uluwatu as there are very good deals still going on at the moment.

My suggestion when choosing an investment location in Bali is to really understand what your priority is (living, business or hybrid) and then find a solution that delivers a great balance and can align with your target.

Do Your Due Diligence and buying a property

Due diligence

Before making any real estate investment or startup your AirBnb business in Bali it's important to do your homework and make sure you know what you're getting into. 

This means checking the property permits such as PBG and SLF, ensuring that it's free of debts or claims, and verifying that all necessary permits and licenses are in order (pariwisata license). 

Engaging a certified and reputable local agency is a smart move for your investment in Bali, [wink wink], as they'll be able to guide you through the process and help you avoid any pitfalls.

Acquisition process

Purchasing a villa or an off-plan project in Bali is a straightforward and easy process if you have the right assistance. To buy under your personal name all you need to buy a villa in Bali is your passport.

Here is the process:

1. Provide your documentation after you choose the villa or project you love.
2. Review and sign the deposit agreement.
3. Pay the deposit to start the due diligence process.
4. Review, sign and settle the purchase agreement.
5. Done!

If for any reason during the due diligence process a fault from the seller side is found you will get your deposit money back, but if you back off the deal for no reason (i.e: change of mind) say ciao ciao to your deposit money.

Setting up a rental business in Bali

Many investors not only buy a villa in Bali for themselves and their family, most will not occupy the property indefinitely but use it as a holiday home, which kind of makes sense doesn't it?

Other investors on the contrary invest in Bali with the sole purpose of profiting and that’s great also.

Each investor has its own targets, strategies and necessities, make sure to define your target before starting your investment journey in bali.

If you plan on getting started generating income with your villa in Bali you will need to open a PT PMA (Indonesian LLC), declare revenue and pay taxes.

Understand the costs associated with a Bali AirBnb business

Within our estimates, we always consider approximately 40-50% of the revenue generated to be allocated to operational costs. 

This encompasses various elements, including:

• 10% for taxes
• 5% for maintenance and utilities
• 15% platform fees (AIrBnb, Booking, Etc.)
• 10-25% management costs

Recognising the composition of these costs is crucial for tailoring your investment strategy.

It’s worth noting that the condition in which you as an investor will end up having 40-50% operational cost is one in which: 

You acquire a property and delegate every operation related to managing your property to a management agency. 

In this scenario you will passively earn your income without moving a finger. In my opinion this is a fair tradeoff.

Capital Appreciation Potential

One of the biggest drivers of real estate investment is the potential for capital appreciation. 

This is essentially the idea that your property will increase in value over time, either through rental income or the appreciation of the property itself.

Here are some pros and cons of leasehold properties.

Pros of leasehold properties in Bali

• Flexibility: Leasehold contracts offer dynamic terms tailored to investors' needs.
• Affordability: Lower initial capital requirements than freehold properties.
• High Yields: The thriving Bali tourism sector can offer significant returns.
• Liquidity: Leasehold properties in Bali are often easier to transfer or sell.
• Development Opportunities: Attractive to real estate developers seeking financing.

Cons of Leasehold Properties in Bali

• Opportunity Cost: A leasehold property's value decreases over time due to the time-bound nature of the contract (total paid : contract years).
• Uncertainties: Without a guaranteed renewal, the value becomes nil at the end of the lease term.

If you want you can deepdive into how leasehold properties work in Bali. There’s a good amount of info in that blog post plus a few charts and technical jargoon you can flex at the pub.

I want to buy a freehold villa and own it forever

No.. In Indonesia there is no possibility for foreign individuals to obtain the right to own property.

No..Even through a company you can't.

Many companies and sellers may offer freehold properties to foreign nationals but keep in mind that there will be a contract limit exactly like in the leasehold contract.

The limit is 99 years, which is a LOT of time, but when the 99 years expire your grandkids will lose ownership of the property and it ends up being an asset of the Indonesian republic.

Still, freehold is a smart play to speculate on long term growth or plan to move your family here. There are many freehold listings at decent prices here in Bali and often if you can pay a small premium now overtime you will absorb the cost much quickly as opposed to a classic leasehold.

Conclusion

Investing in real estate in Bali is an exciting opportunity, but it's important to approach it with caution and carefully evaluate all the factors involved. 

Buying a villa in Bali and managing an AirBnb business can be a very fun and rewarding experience when done correctly otherwise if it’s a mess you will not sleep at night.

Make sure to talk to the right people and think critically WINK WINK.