How profitable really is a villa rental business?

T

TheRudeTourist

New Member
It seems like every man and his dog is trying to do it these days. And I know some people say it’s a flooded market, but from what I see most people with short term rental villas in seminyak area for example, it’s rarely empty at the moment. From what ive seen, people with long term 25 year leases are doing very well out of it, yet i see a lot of people now also buying 2-3 year leases or even 1 year and expecting to make returns, is it even worth it?
I know a lot of set ups are technically illegal with foreigners that a just winging it on AirBnB, but lets say someone has done it through a PMA or they’ve got their indonesian spouse in charge, can someone who’s experienced in this break down the rough costs and profit? And I get it that maintenance can be a headache
 
TheRudeTourist said:
It seems like every man and his dog is trying to do it these days. And I know some people say it’s a flooded market, but from what I see most people with short term rental villas in seminyak area for example, it’s rarely empty at the moment. From what ive seen, people with long term 25 year leases are doing very well out of it, yet i see a lot of people now also buying 2-3 year leases or even 1 year and expecting to make returns, is it even worth it?
I know a lot of set ups are technically illegal with foreigners that a just winging it on AirBnB, but lets say someone has done it through a PMA or they’ve got their indonesian spouse in charge, can someone who’s experienced in this break down the rough costs and profit? And I get it that maintenance can be a headache
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I think the bubble will burst eventually. In a few years time, we will see "ghost hotels and villas" in places like Canggu because the supply is way more than the demand.

At the moment, places in high demand areas like Ubud, Canggu, Uluwatu are experiencing 80% occupancy rate year round according to my sources. So you can imagine if you are able to provide a nice villa while keeping costs low, then you can make a decent profit. That's why we see so many villas with what I call the "Canggu cheap" interior style.

Basically, it's designed to photograph nicely and fool some people for short term stays but maintenance will be required every couple of years.

But yeah, I don't think people would be getting into the rental business if it wasn't working out well. The numbers don't lie. It's just how long will the gold rush last is what concerns me.
 
Depends on your reasons for doing it. Some people seem to think they are going to make 15 to 20%/year ROI and that might happen for the first year or 2 but in the long run, with renovation and personal costs that just aint sustainable. If you have high residency then you also have high wear n tear on the premises and one bad review can ruin you, yes really, one bad review. So it aint "build it and sit on the pool with your Pina Colada and watch the dosh roll in".

If you think you can use it as a way to meet really nice people and supplement your income/savings to make a nice life on Bali possible, then that's closer to the reality.

Make sure you charge for (and offer) top level accommodation and you will get a nice clientele. You do not want to cater to the lower end of the market, really!
 
Markit said:
Depends on your reasons for doing it. Some people seem to think they are going to make 15 to 20%/year ROI and that might happen for the first year or 2 but in the long run, with renovation and personal costs that just aint sustainable. If you have high residency then you also have high wear n tear on the premises and one bad review can ruin you, yes really, one bad review. So it aint "build it and sit on the pool with your Pina Colada and watch the dosh roll in".

If you think you can use it as a way to meet really nice people and supplement your income/savings to make a nice life on Bali possible, then that's closer to the reality.

Make sure you charge for (and offer) top level accommodation and you will get a nice clientele. You do not want to cater to the lower end of the market, really!
Click to expand...
You are right about useing this as a supplemental income, but not for huge profits. From what I've seen here, the construction is pure crap, and things start falling apart fast. I would think, the landlord should have a solid rental contract, with a large deposit, to cover any damages the renters do to the property. But the building and plumbing, wiring, and all going to be needing repairs, which are the owners responsibility.
It sounds like a good idea, but too much of a financial risk for me.
 
Shadrach said:
You are right about useing this as a supplemental income, but not for huge profits. From what I've seen here, the construction is pure crap, and things start falling apart fast. I would think, the landlord should have a solid rental contract, with a large deposit, to cover any damages the renters do to the property. But the building and plumbing, wiring, and all going to be needing repairs, which are the owners responsibility.
It sounds like a good idea, but too much of a financial risk for me.
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There is crap construction here. But there are also some beautifully designed and well made buildings as well. I think the top-tier luxury villas do make more than a passive-income on their properties but for the most part, it's as Markit said: a relatively easy way to make some money and live a simple life in Bali.
 
YachtRock said:
I think the bubble will burst eventually. In a few years time, we will see "ghost hotels and villas" in places like Canggu because the supply is way more than the demand.

At the moment, places in high demand areas like Ubud, Canggu, Uluwatu are experiencing 80% occupancy rate year round according to my sources. So you can imagine if you are able to provide a nice villa while keeping costs low, then you can make a decent profit. That's why we see so many villas with what I call the "Canggu cheap" interior style.

Basically, it's designed to photograph nicely and fool some people for short term stays but maintenance will be required every couple of years.

But yeah, I don't think people would be getting into the rental business if it wasn't working out well. The numbers don't lie. It's just how long will the gold rush last is what concerns me.
Click to expand...
Agreed, eventually will be oversupply so location will be important. And with the number of tourists increasing exponentially, at what point does that plateau as well, doesn’t look like slowing down anytime soon unless something crazy happens.
Is it wise getting 25 year leases, when one expects the bubble to burst?
 
Markit said:
Depends on your reasons for doing it. Some people seem to think they are going to make 15 to 20%/year ROI and that might happen for the first year or 2 but in the long run, with renovation and personal costs that just aint sustainable. If you have high residency then you also have high wear n tear on the premises and one bad review can ruin you, yes really, one bad review. So it aint "build it and sit on the pool with your Pina Colada and watch the dosh roll in".

If you think you can use it as a way to meet really nice people and supplement your income/savings to make a nice life on Bali possible, then that's closer to the reality.

Make sure you charge for (and offer) top level accommodation and you will get a nice clientele. You do not want to cater to the lower end of the market, really!
Click to expand...
So if you’re saying 15 to 20% per year, are you talking for example the villa is valued at 200jt per year, they’ve paid 5 years up front so 1M all up, they’re making 20% on the 1M or the yearly rate? Or are you talking longer term investments ?
 
YachtRock said:
There is crap construction here. But there are also some beautifully designed and well made buildings as well. I think the top-tier luxury villas do make more than a passive-income on their properties but for the most part, it's as Markit said: a relatively easy way to make some money and live a simple life in Bali.
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Yes though there’s a number of foreigners who seem to live relatively comfortably from villa rentals alone, usually with multiple rentals
 
TheRudeTourist said:
So if you’re saying 15 to 20% per year, are you talking for example the villa is valued at 200jt per year, they’ve paid 5 years up front so 1M all up, they’re making 20% on the 1M or the yearly rate? Or are you talking longer term investments ?
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It would be on the yearly rate and 20% would be gross yield( if the 20% is even true).

Factor in staff, running cost, maintenance ( and in Bali that is a BIG thing) then your theoretical 20% starts to look a bit more like 5-7% which is in line with most other world rental returns.

And depending on season 5-7% can be optimistic.

Cheers
pessimistic Ken
 
How
gtrken said:
It would be on the yearly rate and 20% would be gross yield( if the 20% is even true).

Factor in staff, running cost, maintenance ( and in Bali that is a BIG thing) then your theoretical 20% starts to look a bit more like 5-7% which is in line with most other world rental returns.

And depending on season 5-7% can be optimistic.

Cheers
pessimistic Ken
Click to expand...
How does that work though if the yearly rate is reduced because someone gets a longer term lease, their profits would go up which would be a higher percentage right? And let's say 20% on a 200jt per year villa would only be around 40jt profit, surely loads of people wouldn't be trying to get in the market for a small profit like that..
 
How
gtrken said:
It would be on the yearly rate and 20% would be gross yield( if the 20% is even true).

Factor in staff, running cost, maintenance ( and in Bali that is a BIG thing) then your theoretical 20% starts to look a bit more like 5-7% which is in line with most other world rental returns.

And depending on season 5-7% can be optimistic.

Cheers
pessimistic Ken
Click to expand...
How does that work though if the yearly rate is reduced because someone gets a longer term lease, their profits would go up which would be a higher percentage right? And let's say 20% on a 200jt per year villa would only be around 40jt profit, surely loads of people wouldn't be trying to get in the market for a small profit like that..
 
Dude there is so much wrong with your beer mat calculation I suggest you go out into the real world, talk to some people that actually live on the island(s) and then come back to "Rentals On a Silly Island" and we can talk. Until then your grasp of the answers shows you haven't even understood the questions.
TheRudeTourist said:
How

How does that work though if the yearly rate is reduced because someone gets a longer term lease, their profits would go up which would be a higher percentage right? And let's say 20% on a 200jt per year villa would only be around 40jt profit, surely loads of people wouldn't be trying to get in the market for a small profit like that..
Click to expand...
 
I know a guy living here since over 20 years.
He buys a land, builds a house, lives 12 months in it and flip it.
Roughly one every 2 years.
He is OK, but he doesn't drive a Merc nor does he lives in a dream villa!
And that's before speaking about the legal side.....
 
Alright enlighten us then dude
Markit said:
Dude there is so much wrong with your beer mat calculation I suggest you go out into the real world, talk to some people that actually live on the island(s) and then come back to "Rentals On a Silly Island" and we can talk. Until then your grasp of the answers shows you haven't even understood the questions.
Click to expand...
 
gtrken said:
I am just going to sit back with the popcorn..

Markit , your up...

Cheers
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He hasn’t done it himself or failed miserably, so can’t really give any real indication of what people are making.
I’ve spoken to many people that “actually live” on the island and I’m far from new here myself. But it’s just nice to get as many opinions as possible. Talking to friends I’ve found mixed reviews and sometimes I feel not so honest, it’s like with people gambling they’ll tell you how much they win but not how much they lose.
Even talking to a good friend who makes a living out of villa rentals, yet tells me it’s not worth it, he also told me don’t buy land in Bali, yet my land has more than doubled in price..so who do we really believe, I guess we should believe Markit
 
TheRudeTourist said:
He hasn’t done it himself or failed miserably, so can’t really give any real indication of what people are making.
I’ve spoken to many people that “actually live” on the island and I’m far from new here myself. But it’s just nice to get as many opinions as possible. Talking to friends I’ve found mixed reviews and sometimes I feel not so honest, it’s like with people gambling they’ll tell you how much they win but not how much they lose.
Even talking to a good friend who makes a living out of villa rentals, yet tells me it’s not worth it, he also told me don’t buy land in Bali, yet my land has more than doubled in price..so who do we really believe, I guess we should believe Markit
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A foreigner can not own land here.....
 
TheRudeTourist said:
He hasn’t done it himself or failed miserably, so can’t really give any real indication of what people are making.
I’ve spoken to many people that “actually live” on the island and I’m far from new here myself. But it’s just nice to get as many opinions as possible. Talking to friends I’ve found mixed reviews and sometimes I feel not so honest, it’s like with people gambling they’ll tell you how much they win but not how much they lose.
Even talking to a good friend who makes a living out of villa rentals, yet tells me it’s not worth it, he also told me don’t buy land in Bali, yet my land has more than doubled in price..so who do we really believe, I guess we should believe Markit
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Alright, to give you some insight,
We, as in My Indonesian wife and I purchased land in Bukit back in 2014 and built a small Kost Di Exclusiv with pool etc. Made money and was always full BUT repairs, staff wages , payment while on ceremonies and the locals have a LOT of them , banjar fees, local donations etc etc etc made it a very skinny deal.
We sold and made good money purely on the fact the land went up dramatically.
Fast forward to 2022 and we have repeated the process plus added a house and still in Bukit. Still the same problems and add in increased traffic, rude tourists who expect 5 star on a Kost price and again we are looking at selling. Is making money but if you think you going to make 20% ( and yes that is based on the yearly rental price ) then I am sorry but it happens VERY rarely.

Get it now?

Cheers
Ken
 
TheRudeTourist said:
How

How does that work though if the yearly rate is reduced because someone gets a longer term lease, their profits would go up which would be a higher percentage right? And let's say 20% on a 200jt per year villa would only be around 40jt profit, surely loads of people wouldn't be trying to get in the market for a small profit like that..
Click to expand...
Yep, correct . Lot of outgoing for a small income return.
Starting to understand why I and your friend are saying do not buy.

Understand that in some cases the return isn't the outcome. It's the fact they have got the money out of their country and not in a bank and using a local nominee.

Cheers
Harsh reality
Ken
 
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