How profitable really is a villa rental business?

[TheRudeTourist]

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

Ahh the rude tourists.
On average how much were running costs per month? I want to do some more beer maths

 

[TheRudeTourist]

Ye

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

Yea the set up is the key, and probably why many foreigners just wing it and rent on Airbnb without all the proper permits etc

 

[pantaiema]

Hak pakai is as good as owning, still can be converted to Hak Milik

You can only achieve this if you acquire Indonesian citizenship. For some, this might be a tough decision since Indonesia does not allow dual citizenship. Some real estate agents try to play semantic. They might tell you whatever you want to hear just to close the deal and they get their commision, such as telling you, you can obtain freehold (hak milik), but they will try to hide that this only applies to 'unlanded' properties. Essentially, this is similar to leasehold because you don't own the land. If the building needs to be demolished due to age, you would own nothing.

 

[TheRudeTourist]

You can only achieve this if you acquire Indonesian citizenship. For some, this might be a tough decision since Indonesia does not allow dual citizenship. Some real estate agents try to play semantic. They might tell you whatever you want to hear just to close the deal and they get their commision, such as telling you, you can obtain freehold (hak milik), but they will try to hide that this only applies to 'unlanded' properties. Essentially, this is similar to leasehold because you don't own the land. If the building needs to be demolished due to age, you would own nothing.

I don't wanna debate semantics but hak pakai can be purchased and sold (and converted to SHM) with Kitas/kitap. Yes taxes are higher but beats having a nominee structure with Pak Ketut

 

[Markit]

I don't wanna debate semantics but hak pakai can be purchased and sold (and converted to SHM) with Kitas/kitap. Yes taxes are higher but beats having a nominee structure with Pak Ketut

Naaah, not so much, actually.

HP is equivalent to freehold title and HM is often compared to leasehold. Last time I looked the only people that can legally hold HP are Indonesian citizens and even some of them aren't allowed to - for instance Indonesian citizens married to foreigners, because they just might die and the dreaded foreigner just might get freehold title to a jointly held property.

They were talking about making a non-landed property (apartment) available for foreign freehold but that was tied up into so much red tape I gave up on trying to understand it.

We can thank the Dutch for this bit of xenophobic property law.

The dreaded foreigner can buy free hold title (HP) all day long without the dreaded Pak Ketut getting involved IF the title is converted to HM title with the government as title holder. Should you wish to sell the HM title it must be converted back to HP first. Sounds like fun to me.

 

[pantaiema]

I don't wanna debate semantics but hak pakai can be purchased and sold (and converted to SHM) with Kitas/kitap. Yes taxes are higher but beats having a nominee structure with Pak Ketut

Sure, let's keep it clear to avoid translation issues. Also let's set aside the business aspects (which one is more profitable, etc) for now, as that's a separate topic. However, the legal details need to be clarified to prevent any misleading information, since this forum is also read by others with similar interests.

Can a foreigner own a property that includes both the building and the plot of land it’s on?

Is it possible for a foreigner to convert another type of land title such as from 'hak pakai' to SHM (Sertipikat Hak Milik) for a property that includes a building and the plot of land it’s built on?

As far as I know, this right is exclusively reserved for Indonesian citizens. Feel free to provide evidence if this isn't the case. Additionally, even for Indonesian citizens, not all "hak pakai" can be converted into SHM (Sertipikat Hak Milik).