First time Purchase property in Bali - leasehold - pheweeee!

AuroraB

Some of your questions are answered in the link below: 2. See links below. 3. Many short term rental inside residential zones. But as a foreigner you may eventually be reported and your business model falls apart. 4. Indonesian only. See links below. 5. Any documents that is not in order (incl IMB) may be used as leverage to extort you. https://www.villabalisale.com/blog/guide-to-renting-out-a-villa-as-a-foreign-investor-in-bali https://emerhub.com/bali/renting-out-villa-in-bali/

spicyayam

I would ask why are you doing it? I can't think of any reason why this makes sense. It is extremely difficult to be profitable, going to be mostly a headache, legal gray area. I would say go for it, if you have plenty of money and are happy to walk away if things go completely south.

Kevinp

Hi, thanks for reading my post. i am new to the group as recently discovered the forum whilst trying to seek information regarding purchasing a villa in Bali. Im hoping someone can help me with the mind numbing complexities of purchasing in Bali. Every day I learn something new! To cut a long story short I would like to purchase a villa in Bali for my own use approx 2 months a year and then let it for holiday rentals for the rest. I have found a potential property yet now it becomes complex To unravel what u can and can’t do. Below are any points I understand or lack information and please help where needed: 1. Property is leasehold for 24 years with possibility to extend - I would like to negotiate already another 6 years to make 30. 2. Advised to create a Limited company PMA in order to purchase and be registered in order to pay taxes on any rental income. 3. The property is in yellow zone (residential) - [B]can you rent daily vacation in yellow zone as I have read only long term yet was advised it is possible to do short term? Is it possible to change? I studied a zoning map and appears red zoning (commercial) is only mostly next to beach?[/B] 4. Do you need a Pondok Wisata as this seems very complex? [B]Can you obtain with yellow zone and a foreigner?[/B] Again advised not needed but maybe that is in reference to long term rentals? 5. i asked regarding is the IMB license in place and advised it would be ready in 1-3 months. The real estate agent advised it has been issued and has proof of the ticket?[B] I don’t really understand. Is it possible to register and then certificate is later[/B]? the process is completely new to me so naturally being very cautious as I do not want to buy a villa that is useless to me. So much property seems to be being built with a fast process I want to make sure my information is correct And do not get stuck in a transaction that is not finalised with all certification etc. Appears to be many contradictions or different information regarding zoning rental, Pondok Wisata and license. any help will be extremely appreciated. best `Kevin

gtrken

Kevinp wrote Hi, thanks for reading my post. i am new to the group as recently discovered the forum whilst trying to seek information regarding purchasing a villa in Bali. Im hoping someone can help me with the mind numbing complexities of purchasing in Bali. Every day I learn something new! To cut a long story short I would like to purchase a villa in Bali for my own use approx 2 months a year and then let it for holiday rentals for the rest. I have found a potential property yet now it becomes complex To unravel what u can and can’t do. Below are any points I understand or lack information and please help where needed: 1. Property is leasehold for 24 years with possibility to extend - I would like to negotiate already another 6 years to make 30. 2. Advised to create a Limited company PMA in order to purchase and be registered in order to pay taxes on any rental income. 3. The property is in yellow zone (residential) - [B]can you rent daily vacation in yellow zone as I have read only long term yet was advised it is possible to do short term? Is it possible to change? I studied a zoning map and appears red zoning (commercial) is only mostly next to beach?[/B] 4. Do you need a Pondok Wisata as this seems very complex? [B]Can you obtain with yellow zone and a foreigner?[/B] Again advised not needed but maybe that is in reference to long term rentals? 5. i asked regarding is the IMB license in place and advised it would be ready in 1-3 months. The real estate agent advised it has been issued and has proof of the ticket?[B] I don’t really understand. Is it possible to register and then certificate is later[/B]? the process is completely new to me so naturally being very cautious as I do not want to buy a villa that is useless to me. So much property seems to be being built with a fast process I want to make sure my information is correct And do not get stuck in a transaction that is not finalised with all certification etc. Appears to be many contradictions or different information regarding zoning rental, Pondok Wisata and license. any help will be extremely appreciated. best `Kevin

There will be a lot of info on this forum if you put leasehold villa in the search bar and I am sure as some members wake up from their slumbers you will get a lot of answers, some helpful, some not. My opinion is leasehold is fraught with danger and be very sure YOUR lawyer, not theirs , looks carefully over the documents. Leasehold on a villa that will be rented while you are not there is beyond fraught with danger. Some things to consider Who will manage the lease? Do you Know them? Do you trust them to lease your villa, look after and maintain it while paying you the rental? There are MANY villas for lease both long term and short term in Bali that are sitting there rotting away because nobody wants to stay in them, that area, that configuration etc. Tread VERY carefully... Cheers Cynical but not as bad as Markit Ken

Markit

Kevinp wrote Hi, thanks for reading my post. i am new to the group as recently discovered the forum whilst trying to seek information regarding purchasing a villa in Bali. Im hoping someone can help me with the mind numbing complexities of purchasing in Bali. Every day I learn something new! To cut a long story short I would like to purchase a villa in Bali for my own use approx 2 months a year and then let it for holiday rentals for the rest. I have found a potential property yet now it becomes complex To unravel what u can and can’t do. Below are any points I understand or lack information and please help where needed: 1. Property is leasehold for 24 years with possibility to extend - I would like to negotiate already another 6 years to make 30. 2. Advised to create a Limited company PMA in order to purchase and be registered in order to pay taxes on any rental income. 3. The property is in yellow zone (residential) - [B]can you rent daily vacation in yellow zone as I have read only long term yet was advised it is possible to do short term? Is it possible to change? I studied a zoning map and appears red zoning (commercial) is only mostly next to beach?[/B] 4. Do you need a Pondok Wisata as this seems very complex? [B]Can you obtain with yellow zone and a foreigner?[/B] Again advised not needed but maybe that is in reference to long term rentals? 5. i asked regarding is the IMB license in place and advised it would be ready in 1-3 months. The real estate agent advised it has been issued and has proof of the ticket?[B] I don’t really understand. Is it possible to register and then certificate is later[/B]? the process is completely new to me so naturally being very cautious as I do not want to buy a villa that is useless to me. So much property seems to be being built with a fast process I want to make sure my information is correct And do not get stuck in a transaction that is not finalised with all certification etc. Appears to be many contradictions or different information regarding zoning rental, Pondok Wisata and license. any help will be extremely appreciated. best `Kevin

See some of my "cynical" comments above to your post. I did exactly what you are doing but 14 years ago. Use the search function and dig deep here and be aware that many people (local and expat) think they can profit from helping you dig your way out of a shit situation hence their "advice". You're not the first. If I had it to do again I'd buy/rent a piece of jungle (not paddy) and put up a non-permanent villa build from bamboo or wood because it wouldn't need an IMB and if you have a short lease you can walk away if it gets too difficult and if your "owner" decides not to renew your lease you can take it all apart and move it somewhere better leaving him some cleared jungle. Keep it simple and you'll have fun. My motto for living in Indonesia "It is better to ask for forgiveness than permission" You're not in Kansas Dorthy so do what you want. Nah Ken that wasn't too cynical was it?

Kevinp

Haha a good start to my first post :eek: reasons I would like to invest is based on being able to spend more time in Bali myself (2 months a year) and the opportunity to make a return on investment. I have been up and down with the process. Naturally swayed by the Bali dream and lifestyle but also trying to be practical at the same time. Bigs concerns are relating to whether it is actually a good investment or just a dream? Appears to be so many grey areas and uncertainties which I unravel and then realise a lot of it is based on this is just how it is in Bali and some things are slightly unusual or not 100% legit. im trying to navigate the inevitable fears of investment such as property depreciation based on reducing leasehold. I consider if I extend already to 30 years then I sell in 5 it still has 24 left? But Do villas depreciate regardless as they become worn and aesthetically out of date? Are there just too many villas being built to sustain itself? I read and hear pros and cons. Some say best investment made whilst others say market is saturated. Everytime I visit Bali yes it’s busy but In comparison to other well established tourism areas there still feels much more to develop. I can already hear the replies when I mention Canggu, Pererenan but again are they over developed or is it just getting established for more? i hear the stories of empty villas but I also ask the question where is everyone staying? Maybe sharing in the forum will make me more confused thx anyone who wants to chat over their experiences or stories

harryopal

If you are here for 2 months and the rest of the year are an absentee landlord then so much would depend on the management arrangements you are able to make. Managing this anywhere in the world carries risk. You may have seen stories with AirBnB in other countries where tenants have used the rented place to throw wild parties and others where the facility has been ideal for scammers who have set up leases to others or even sold the property. Bali is littered with skeletons of uncompleted buildings or completed but falling into disrepair. A nice dream and perhaps achievable so good luck with that but maybe better left as a dream unless you have some ironclad arrangement with someone you completely trust to look after the property.

mugwump

Believe me I am reluctant to comment as I don't want to rain on your parade, but there are so many things you are attempting to do that it is difficult to see a positive solution. The basic attempt to come here for only 2 months a year conflicts with everything else. For instance my situation in living here for about 10 months of a year invariably is met with numerous mending projects upon my return, and feel that I have an exceptional staff, and don't lease out. My home in the US costs far less to maintain even with plumbers that charge exhorbently from time left from their shop till reaching my home. Whereas Bali charges minimally, but so damned frequently it exceeds my US costs! Why you ask? It is due to the fact that there is far more corrosion, and half assed capability resulting in frequent repair. Nothing seemingly lasts long in a tropical climate to that of a temperate one. Come here and rent or live in an update homestay for a while and give yourself an opportunity to check things out.

Kevinp

Thx for all messages. Glad found this forum instead of googling for answers and just finding real estate agents. Think for now time to reflect and consider options as maybe feels a little too much of a risk option. Would be interesting to know what happens to all these super expensive luxury villas that are being built? Is there going to be a pile up of villas especially in areas such as Canggu?

AuroraB

Kevinp wrote Would be interesting to know what happens to all these super expensive luxury villas that are being built?

Answer: They go to the dogs!

AuroraB

Quote "... reasons I would like to invest is ..... and the opportunity to make a return on investment". One important feature of investment is liquidity, i.e. how quickly can you rotate out of one investment and into the next? As mentioned elsewhere, an "investment" here in a villa can quickly turn into sunk cost as you may not be able to sell at all or anywhere close to asking price. I have probably been inspecting >50 villas over the last two years as I prefer to rent. I have seen quite good villas been on the market like "forever" with much needed upkeep deferred into the future... Personally I would just rent when visiting and then put the cash into real and super liquid investment, like buying shares in Rio Tinto at 11% current yield that will cover dividend taxes, annual Bali trip and much more with a good margin.... [this is not an investment advice]

gtrken

Kevinp wrote Thx for all messages. Glad found this forum instead of googling for answers and just finding real estate agents. Think for now time to reflect and consider options as maybe feels a little too much of a risk option. Would be interesting to know what happens to all these super expensive luxury villas that are being built? Is there going to be a pile up of villas especially in areas such as Canggu?

Glad to see you have decided this. My take is unless you are there or have a trusted family member to oversee the property you will pretty much get ripped off. Very rarely does the ROI match the pie in the sky figures the agents are quoting and imagine if you owned an expensive villa when Covid hit? No ROI then but maintenance, loan repayments, lease fees, banjar fees , security fees etc would still all have to paid. If you are only going to Bali for 2 months of the year, better to just rent a villa through somewhere like booking.com or airbnb as there are a LOT advertised. No stress about what is happening to yours then and just enjoy the holiday. Cheers Ken

tel522

AuroraB wrote Answer: They go to the dogs!

Ashes to ashes ,dust to dust ,bloody rubbish construction !

britoo

AuroraB wrote Answer: They go to the dogs!

Damn, I so wish that was true, fido has brought me back quite a few strangled chickens - look .. look .. just see how clever I am :), at 50k a pop for the disgruntled farmer but he's keeping his real estate portfolio to himself. So it seems to be a choice though, our first property (rented) just disintegrated around us from day 1 - brand new - even a big chunk of the wall fell down after maybe 1 year. Frankly it was the owner's business plan, cut corners and let the (stupid bule) renter ugrade. Our current (purchased) property is a bloody castle, in need od much love, clinging onto the side of a river gorge. It's probably 15 years old and countless earthquakes and after years of neglect it has negligible cracking even of the plaster let alone masonary or wear even compared to our previous place at 1 year old. So it can be done! Difference is, this was originally built by a Javanese architect for himself and his family. I think this wisdom has been touted on here before, never touch off-plan unless you can monitor its development quality or better still self-build if have the skill and saintly patience to do so.

Kevinp

Agree would be great to take on a build project and be in control of own destiny, rather than buying an off plan or ready brek built without knowing if there are any foundations in the building! Yet alas finding a good builder in my own area is hard enough so I’m guessing this would be like walking into the Wild West and giving myself a nervous breakdown :eek: interesting that most replies on my post have been mostly words of caution and possible bad experiences. Respect the honesty for sure as that’s what I needed. But I would love to hear some other sides just to balance my Bali bubble of utopia ;) for now my small pipe dreams have faded yet i still would like to find a way to enjoy and fully partake in the beauty of the country. Maybe bigger picture has to be long term rather than investment and short term ( the reality behind my initial short term living and investment was to plant a foot for possible longer term future). I did speak to one villa owner in Berewa recently who told me his villa was best property investment he had ever made with great occupancy and was now buying more land. So appears there are some good stories to be heard. have enjoyed and welcomed everyones comments so far. A great community forum

Mark

Interesting perspective [USER=21076]@britoo[/USER]. Based on your experience and my own build it's clear that construction on behalf of owner occupiers is far more likely to be properly done than that for entrepreneurs intending to flip or rent out the villa. Something for purchasers to consider.

Markit

Mark wrote Interesting perspective [USER=21076]@britoo[/USER]. Based on your experience and my own build it's clear that construction on behalf of owner occupiers is far more likely to be properly done than that for entrepreneurs intending to flip or rent out the villa. Something for purchasers to consider.

When I built they laughed at how much and how thick the rebar in my foundations was. 2018 big earthquakes on Lombok with about 300 significant shakes here too. All my contemporary building companions (who contracted out) had cracks running up and down and lots of tiles of the roof. Me? nuttin! " He who laughs last..." Maybe $1000 added cost to the build. Also had to search high and low for concrete vibrator (again to raucous laughter) for the foundations. Back then wasn't ever used here. Guess whose houses fell down? The only building that did suffer from the shaking was the Balibegong (gazebo) because it's terminally top-heavy with roofing tiles.