What Returns Can I Expect if I Buy a Villa in Bali?

Giving advice on property
One of the best parts of being in the Seven Stones Team is offering advice and guidance to our customers.

We often get enquiries and questions from clients abroad who are looking to invest in Bali property but are just a bit lost as to where and how to get started. And that means they’ll also have concerns regarding any potential return on their Bali villa investment.

In their minds buying a property in Bali seems overly-complicated or out of reach for them.

We’re here to tell you it doesn’t need to be either.

We recently received an enquiry from a gentleman in Australia, who had the following question:

“I am considering investing in a property in Bali. My prime objective is to receive a high yearly yield with the potential of the property appreciating over ten or so years. Could you send some information regarding the process, expected returns, legal requirements, taxation implications, rules pros and cons?”

We thought this Blog would be a good opportunity to try to help answer these questions to a wider audience with similar thoughts.

There are two different ways to acquire a property that generates good yearly yields.

One is through the holiday rental market and the other is through the yearly rental market.

Bali Villa Investment for Holiday Rentals

The holiday rental market can achieve strong returns, but it does have some aspects that need to be taken into consideration.

holiday rentals in bali

You need something called a Pondok Wisata permit. This entitles you to conduct a legitimate business in the holiday rental space. However, the areas that this is allowed are limited to “Tourism Zones” only.

Holiday rental business will generally cost more because of their prime locations in the “Tourism Zones” and some owners of these properties will be wanting to up-sell future profits and therefore charge higher prices. In that sense it’s just like buying/selling a business.

There are lots of holiday rental villas in Bali, and so for the ones that do achieve strong results they have to either be unique properties, be in locations that are in high demand by tourists and also be very well managed, maintained and promoted.

Management, maintenance and promotion can be handled by dedicated management companies here but be warned they will take a nice chunk of the revenue generated.

If that doesn’t appeal, the other option is to self manage, maintain and promote. But that can almost turn into a full time job with overheads, commitments and pressure.

Bali Villa Investment for Yearly Rentals

The yearly rental market can also achieve strong returns although these will usually be a little less then a holiday rental villa.

long term rentals in bali

There are, however some big advantages of acquiring a yearly rental villa. These are:

  1. It will cost less to invest because it isn’t necessary to have a Pondok Wisata license.
  2. You have a much wider area to choose from because the villa doesn’t need to be in a designated “Tourism Zone”.
  3. The rent is paid upfront on a yearly basis and there are no general monthly costs.
  4. Every year there is a growing population of expats moving to Bali, which leads to a growing demand for good quality yearly rentals.

Ownership Structure for Investing in Bali Property

As far, as ownership structures in Indonesia are concerned you may or may not be aware that foreigners are not allowed to directly own a property on a freehold title.

But there are instruments you can use to buy a freehold property and begin investing in Bali property. The most common forms are:

  1.  Through setting up a fully foreign owned company (PMA) which then acquires the property. This is called an HGB structure and allows you to have the property for 80 years. Though during these 80 years you can resell it on a freehold basis again.
  2. Acquiring a work permit for Indonesia (KITAS) and acquiring a property under a HAK Pakai structure, which also allows you to have the property for 80 years and in that time you can resell it on a freehold basis again.

It’s important to note here that properties with Hak Pakai titles can only be used for yearly rentals.

If buying a property under either an HGB or Hak Pakai title seems too cumbersome then you can always acquire a Bali villa investment property on a leasehold basis under your name.

This is perfectly legal under Indonesian law.

Leasehold properties are usually acquired for 25-30 years and can either be used for holiday rental or yearly rental business, pending on what permits they have and what zones they are in.

When it comes to returns we try and tell our clients that freehold/HGB/Hak Pakai property should try and attain an ROI of around 8%, which includes capital appreciation of the land.

With leasehold properties the ROI should really be around 10-12% as a starting point.

For taxes you should count on paying at least 10% on the profit generated. We recommend hiring the services of a bona-fide tax consultant to walk you through the process as there are options available.

Please feel free to email me at joe@sevenstonesindonesia.com should you have any questions or need more details on what I’ve outlined here.

Seven Stones Indonesia is a property company headquartered in Bali, Indonesia, with a mission to help people who are interested in buying and selling residential and commercial real estate.

If you’re thinking about property, ROI, capital gains or lifestyle investments in Bali, Jakarta, Surabaya, and Indonesian’s Eastern Islands and need some friendly advice and guidance then why not email hello@sevenstonesindonesia.com or check out Seven Stones Website | Seven Stones Linkedin | Seven Stones Facebook

If you’d like to subscribe to our newsletters or need more information about this blog or other property matters please complete this form. We’d love to hear from you!
[contact-form-7 id=”24326″ title=”Blog Contact Form”]

Latest Article
Indonesia to Host International Lion Dance Competition
At least 550 athletes from 10 countries are expected to take part in the first international lion dance...
Minister: Longest Elevated Railway on Track for September
Indonesia’s Transportation Minister, Budi Karya Sumadi, said in a statement on Saturday (13/4/24,) that...
Ministry: Eid al-Fitr to Fall on April 10
According to reports from Tempo and Antara News, Indonesia’s Ministry of Religious Affairs has announced...
Minister: Pope Francis to Visit Indonesia in September
Indonesia’s Minister of Religious Affairs, Yaqut Cholil Qoumas, announced on Sunday (31/3/24,) that Pope...
Indonesia Explores Opportunities to Host 2036 Olympics
According to reporting from Tempo, Raja Sapta Oktohari, Chairperson of The National Olympic Committee...

Andrzej Barski

Director of Seven Stones Indonesia

Andrzej is Co-owner/ Founder and Director of Seven Stones Indonesia. He was born in the UK to Polish parents and has been living in Indonesia for more than 33-years. He is a skilled writer, trainer and marketer with a deep understanding of Indonesia and its many cultures after spending many years travelling across the archipelago from North Sumatra to Irian Jaya.

His experience covers Marketing, Branding, Advertising, Publishing, Real Estate and Training for 5-Star Hotels and Resorts in Bali and Jakarta, which has given him a passion for the customer experience. He’s a published author and a regular contributor to local and regional publications. His interests include conservation, eco-conscious initiatives, spirituality and motorcycles. Andrzej speaks English and Indonesian.

Terje H. Nilsen

Director of Seven Stones Indonesia

Terje is from Norway and has been living in Indonesia for over 20-years. He first came to Indonesia as a child and after earning his degree in Business Administration from the University of Agder in Norway, he moved to Indonesia in 1993, where he has worked in leading positions in education and the fitness/ wellness industries all over Indonesia including Jakarta, Banjarmasin, Medan and Bali.

He was Co-owner and CEO of the Paradise Property Group for 10-years and led the company to great success. He is now Co-owner/ Founder and Director of Seven Stones Indonesia offering market entry services for foreign investors, legal advice, sourcing of investments and in particular real estate investments. He has a soft spot for eco-friendly and socially sustainable projects and investments, while his personal business strengths are in property law, tourism trends, macroeconomics, Indonesian government and regulations. His personal interests are in sport, adventure, history and spiritual experiences.

Terje’s leadership, drive and knowledge are recognised across many industries and his unrivalled network of high level contacts in government and business spans the globe. He believes you do good and do well but always in that order. Terje speaks English, Indonesian and Norwegian.

Contact Our Consultants

[wpforms id=”43785″]

Ridwan Jasin Zachrie

CFO of Seven Stones Indonesia, Jakarta

Ridwan is one of Indonesia’s top executives with a long and illustrious career in the financial world. He holds several professional certifications including being a Certified Business Valuer (CBV) issued by the Australian Academy of Finance and Management; Broker-Dealer Representative (WPPE); and The Directorship Certification for Directors and Commissioners, issued by the Indonesian Institute of Commissioners and Directors.

His experience includes being the Managing Director at one of the top investment banking groups in the region, the Recapital Group, the CFO at State-owned enterprises in fishery industry and the CEO at Tanri Abeng & Son Holding. He’s also been an Independent Commissioner in several Financial Service companies and on the Audit and Risk Committee at Bank BTPN Tbk, Berau Coal Energy Tbk, Aetra Air Jakarta as well as working for Citibank, Bank Mandiri and HSBC. His last position was as CFO at PT Citra Putra Mandiri – OSO Group.

Ridwan has won a number of prestigious awards including the Best CFO Awards 2019 (Institute of Certified Management Accountant Australia-Indonesia); Asia Pacific Young Business Leader awarded by Asia 21 Network New York USA (Tokyo 2008); UK Alumni Business Awards 2008 awarded by the British Council; and The Most Inspiring Human Resources Practitioners’ version of Human Capital Magazine 2010.

He’s a member of the Board of Trustees of the Alumni Association of the Faculty of Law, Trisakti University, Co-Founder of the Paramadina Public Policy Institute and actively writes books, publications and articles in the mass media. He co-authored “Korupsi Mengorupsi Indonesia” in 2009, which helps those with an interest in understanding governance in Indonesia and the critical issue of corruption. Ridwan speaks Indonesian and English.

Per Fredrik Ecker

Managing Director of Seven Stones Indonesia, Jakarta

Per is the Managing Director of the Seven Stones Indonesia (SSI) Jakarta office and has more than 25-years’ experience in Indonesia, China, and Western Europe. He previously worked in senior management positions with Q-Free ASA, Siemens AG, and other companies in the telecom sector. Over the last six years, he has been the Chairman of the Indonesia-Norway Business Council (INBC) and recently become elected to be on the board of EuroCham Indonesia.

His most recent experience is within Intelligent Transport Solutions (ITS), Telecom, and other sectors within the Indonesian market. He is today through his position in SSI and by representing Norway Connect, promoting Nordic and European companies that would like to explore business opportunities in the Indonesian market. He’s also playing an active role to help create the Nordic House concept in Jakarta that will provide an excellent platform for Nordic companies entering Indonesia, where they’ll find a community that can offer support with trusted information and affordable services to enter this market.