Bali Villa Sales

Villas of Bali ™ is the trusted real estate company that offers the most beautiful villas for sale on Bali. Visit our experienced and helpful staff in our office in Seminyak, or search the extensive villa listing online at www.balivillasales.com, providing the most exclusive properties for sale. Villas of Bali ™ stands for quality, integrity and trust. We help you save time and money, while providing you peace of mind of your property related needs. Send us an email to info@villasofbali.com, or call us at +62 878 6249 3526.

  1. Welcome Guest to the new look Balipod. If you are an existing member, just sign up with your usual username/password. Any problems you can post them here
    Dismiss Notice

Benchmark Returns for Investment Villas

Discussion in 'Owning Property in Bali' started by TBuskens, Feb 8, 2018.

  1. TBuskens

    TBuskens New Member

    Joined:
    Aug 24, 2017
    Messages:
    4
    Likes Received:
    0
    I am seeking advice on what levels of returns one should reasonable expect from investment in a short stay holiday villa in Bali. There is a lot out there to choose from with different occupancy levels, nightly rates and expenses. once put all together what is a reasonable return?

    thanks in advance.
     
  2. Harry08

    Harry08 Member

    Joined:
    Dec 5, 2017
    Messages:
    49
    Likes Received:
    4
    In how many years do you expect to earn back your investment? 3? 5? Anything more and I ask: why bother.

    Remember, every number you are told is probably fiction detached from reality. They ask 100, you can probably get it for 30.
    If they cant/wont produce PL statements filed with gov, you know it's all BS. Every time I asked for balance sheet an PL.... crickets

    Who is going to supervise your property and staff, accountant etc?

    Build your own Balinese style villa, away form over crowded south Bali (Kuta, Canggu, Ubud etc).
     
  3. TBuskens

    TBuskens New Member

    Joined:
    Aug 24, 2017
    Messages:
    4
    Likes Received:
    0
    thanks Harry, yes I am learning that on the P&L statements. I can't believe how many do have this basic information!

    I am looking into established villas with leaseholds of around 30 year.

    My working assumption is money back in less than 7 years with benchmark returns of +10% pa. However I am asking myself weather that is realistic in this market?

    My plan is to rent out on short term holiday accomodation basis.
     
  4. tel522

    tel522 Active Member

    Joined:
    Oct 30, 2015
    Messages:
    315
    Likes Received:
    28
    Room rates and villa rentals , have very low rates currently on this island , and if the volcano goes bang , what do you think ?
     
  5. davita

    davita Well-Known Member

    Joined:
    Mar 13, 2012
    Messages:
    4,251
    Likes Received:
    107
    I agree...I know lots of villas empty and looking for tenants. The downtown Kuta/Legian/Sanur doesn't seem too empty but out of town....very slow.
     
  6. kabouter

    kabouter Member

    Joined:
    Feb 16, 2011
    Messages:
    44
    Likes Received:
    0
    Highly unlikely. First of all it will be hard to find established villas with still 30 years left on the leasehold. Secondly everyone here seems so bad at math (or just set on getting a holiday home) that most villas are horrible investments and 10% pa is just far fetched (unless you don't pay taxes and you don't take into consideration the fact that the value depreciates yearly, something a lot of real estate agents seem to be unaware of)
     
  7. TBuskens

    TBuskens New Member

    Joined:
    Aug 24, 2017
    Messages:
    4
    Likes Received:
    0
    Thanks kabouter I am quickly learning that.

    It raises another question what depreciation rate do people use for for investment villas?

    Also I understand the taxes should be 10% on revenues and 1.5% on net profit, correct?
     
  8. davita

    davita Well-Known Member

    Joined:
    Mar 13, 2012
    Messages:
    4,251
    Likes Received:
    107
    Hi TBuskens and a belated welcome.
    I can understand your questions but I suggest you have to know that Bali is unlike other countries where there are methods to determine value, ROI. lease titles, taxation...etc.
    I suggest you advise the forum of your knowledge/visits of/to Bali so far... so the answers you request are more reflective of a realistic experience....otherwise, basically, we are 'whistlin' dixie.'
     
  9. TBuskens

    TBuskens New Member

    Joined:
    Aug 24, 2017
    Messages:
    4
    Likes Received:
    0
    Thanks davita for the belated welcome. Yes I have been a long time viewer short time contributor.

    by way of context I am a relative late arrival to Bali, only started visiting a few years ago in my early 40s, Bali was the kind of place I never wanted to visit but when I eventually did its was, WOW. Since then I have travelled back a couple of times a year and been thinking and passively looking for investment.

    Started looking in Ubud then quickly moved to looking in Seminyak which evolved to looking in Canggu. After considering 30+ villas over the last year we think we may possibly of found one. There is a Villa in Umalas with a +30 year lease, designed in a Traditional Balinese style, with 3 bedrooms, open living, large pool and garden, peaceful rural feel but close enough to Seminyak and Canggu (with traffic) not to be isolating.

    In terms of the numbers (all in USD) asking price is around $180K, nightly rental around $150 (booking history shows around 60% occupancy) and annual expense circa $10,000 (excluding tax, depreciation) also the owner currently does their own booking and advertising (i.e. no management company expenses) but pays staff onsite to deal with villa management issues. Using traditional sources of return on investment I am calculating around 7% before tax. It has all the required licenses to be compliant. The primary aim of this villa is for short term holiday rental and to provide investment return.

    So my question is what benchmarks make sense to use for this investment? I am also open to any other insights or advice from experienced investors.
     
  10. davita

    davita Well-Known Member

    Joined:
    Mar 13, 2012
    Messages:
    4,251
    Likes Received:
    107
    I'm not sure if 60% occupancy can be sustained and that's the critical factor. I read that most hotels are less full than that.
    I do know of many rental villas that are empty 90-100%. There are a lot of budget-style villas co-rented by surfers but not sure of ROI.... nor condition.

    I also read that Sinermas bank offer 7% annual return on IDR fixed deposits but the Gov't will take 20% tax on interest.
     
  11. kabouter

    kabouter Member

    Joined:
    Feb 16, 2011
    Messages:
    44
    Likes Received:
    0
    60% is definitely possible, but from my experience the average nightly rate of $150 (assuming USD) seems high for a villa with an asking price of $180k.

    7% before tax seems like a normal rate, but keep in mind that you'll have to deal with check ins/outs/repairs/etc... It definitely won't be hands off, if it will be you'll have to pay a management company 15%+ (and you'll end up in negative ROI most likely).

    One more thing to keep in mind is that even if you do the rentals yourself, you'll still have to pay booking, expedia, airbnb 15%.

    Some more things:
    - Does the villa have a pondok wisata? It will be hard to get one for a villa in Umalas if it doesn't already have one.
    - Annual expenses of $10k seem high since he is doing everything himself?
    - I'm not sure but I reckon occupancy rates in Canggu, Seminyak and even Pererenan are going to be higher because they are closer to the beach than Umalas.

    Regarding your question for depreciation. For leasehold I would put down yearly maintenance expenses and on top of that just spread out the complete investment over the leasehold term. In your case 180k/30 years = $6000 year. Yes even the value of a leasehold property can go up, but I just like to be on the conservative side.
     
  12. Teddybear

    Teddybear Member

    Joined:
    Mar 5, 2017
    Messages:
    64
    Likes Received:
    1
    Hey all, no one has mentioned what happens if it burns down, i know noone thinks about some form of landlord insurance but can one get it to cover themselves, scary thought. People visit Bali to party and some party very hard , anything is possible, lease to a group of schoolies or a sports club, yes only 4 will be living in it, yeh right , next another 40 show up after the club closes, just a thought. T.
     
  13. davita

    davita Well-Known Member

    Joined:
    Mar 13, 2012
    Messages:
    4,251
    Likes Received:
    107
    Insurance in Bali is available for any situation.
     
  14. mugwump

    mugwump Member

    Joined:
    Mar 15, 2011
    Messages:
    676
    Likes Received:
    18
    Sorry, insurance for a house with an alang alang roof was rejected for home insurance by Allianz. My experience.
    My thoughts are also that as an owner you must establish some pretty strict rules of prospective tenants. Those rules wouldn't be permitted in Western countries having laws against what would be construed as discriminatory, but would be no problem here and with a pembantu observing each day that that the rules were adhered to.
     
  15. spicyayam

    spicyayam Well-Known Member

    Joined:
    Jan 12, 2009
    Messages:
    2,876
    Likes Received:
    44
    It is a good point. Buildings frequently burn down here. Those 'alang alang' roofs are especially vulnerable.

    I would say the leasee needs to take out insurance. The owner may not have insurance for the property.
     
  16. davita

    davita Well-Known Member

    Joined:
    Mar 13, 2012
    Messages:
    4,251
    Likes Received:
    107
    Here is a Bali company that insures Alang Alang roofs....https://www.asialife.net/general-insurance/home-and-contents.html

    "For example, Traditional Balinese ‘Alang-Alang’ (Thatch) and ‘Sirap’ (Ironwood) roof structures can be covered with the premium rated accordingly."
     
Loading...

Share This Page