How profitable really is a villa rental business?

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
 
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
 
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.
 
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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
 
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.
 
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? We are talking here ownership freehold of Building and Land built on it. What typically a foreigner own here is a long-term lease up to 80 years extendable for up to 20 years with maximum of 100 years in total. In Indonesia this is called HGB (hak guna bangunan) or HP (Hak pakai). Essentially, this is similar to long term leasehold because you don't have the freehold of the land. If the building needs to be demolished due to age, or if the (80+20 yr) has elapsed you would own nothing.

Is it possible for a foreigner to convert 'hak pakai' or HGB *Hak guna Bangunan) to SHM (Sertipikat Hak Milik) for a property that includes a building and the plot of land it’s built on? Nope. This will only be possible if you sell it to Indonesian citizen before (80+20yr) has elapsed. It can not be converted by the foreigner just because they thought they own that land. Additionally, even for Indonesian citizens, not all "hak pakai HP", "hak guna banguan HGB" can be converted into SHM (Sertipikat Hak Milik), there are some restrictions.

Hak milik, freehold of land is exclusively reserved to Indonesian citizens. It is not even a grey area it is clearly written in the law without any ambiguity. Feel free to provide evidence if this isn't the case.

I am aware there are a lot of investment scammers, influencers try to twist this land ownership issue to those who do not understand the land titles in Indonesia aiming for huge commissions, fees. Indonesia is a highly protective country in many areas, land ownership, trading, taxation, etc.
 
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We built two villas. Charge 2.5jt-4jt a night for each.

Staffing costs are 4jt a month, plus pool guy and 1jt we pay for a shared security chap.

No gardening - its all plants in pots.

Electricity and water - all calculated into our costs of course.

It‘s a very nice living with minimal involvement from us. All the guests to date have been a delight. Young couples mostly.

We have more land and will probably build another two.

I’d have to check but In think we have >200 days already booked for next year already.
 

Been getting, "Oops! We ran into a problem' several times today which led to this post being set twice. When I tried to delete this second copy of the post I got, "Oops! We ran into a problem."​

How profitable really is a villa rental business?

The answer is; how long is a piece of string. There are so many variables.
There are two villas more or less identical in good locations. Villa A charges $250 a night and villa B charges $150 a night.
Villa B is always around 85% capacity so is making a better profit. Or Villa A has regular, faithful customers who enjoy the villa because it is less crowded and is making a better profit.
Or Villa A cost $500,000 more to build and Villa B moves into profit much more quickly.
Or 5 years down the track Villa B is paying enormous maitenance bills and is losing money.
There are so many factors between success and failure.
Mt Agung blows up and all traffic is suspended and there is another pandemic. Villa A has been stretched to the limit of funds and goes bankrupt. Villa B has reserve funds and rides out the downturn.

In Australia six out of ten start up businesses fail within 5 years. The circumstances here are very different but I am sure similar business principles apply that results in success or failure.
 
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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
Buy shares in Petrobras (NYSE) and enjoy 20% gross dividend at current share price (was 40% in 2022). Then lean back and have no worry about the shenanigans going on in Bali! People say stock market is risky, but then they should try doing business in Indonesia. [This is not a financial advice -- just an example]
 
Buy shares in Petrobras (NYSE) and enjoy 20% gross dividend at current share price (was 40% in 2022). Then lean back and have no worry about the shenanigans going on in Bali! People say stock market is risky, but then they should try doing business in Indonesia. [This is not a financial advice -- just an example]
PBR gross div 14%
PBR-A gross div 15%
 
Buy shares in Petrobras (NYSE) and enjoy 20% gross dividend at current share price (was 40% in 2022). Then lean back and have no worry about the shenanigans going on in Bali! People say stock market is risky, but then they should try doing business in Indonesia. [This is not a financial advice -- just an example]
Investing in individual stocks can be very profitable but it also comes with significant risk. It is better suited for those with deep expertise in stock valuation, have an educated guess when to buy and other strategies like taking profits or repurchasing shares, dollar cost averaging (DCA). Additionally, it requires substantial financial resources to remain confidence during extreme drops in stock value, sometimes as much as 80%+ as long as the original investment thesis holds true. This approach is commonly practised by hedge fund managers.

Investing in Amazon Stock and experiencing drop of 90%. It did happen with AMZN in early 1990s. Many people might be doing a panic selling before reaching to that point. But people who understand the valuation instead of selling it, they will keep buying more, doing dollar cost averaging (DCA) to reduce their average cost of their holdings.
https://www.cnbc.com/2018/12/18/dot...rcent-long-term-investors-still-got-rich.html

Compare the stock price in early 1990s and the current price.

But for majority of people they are probably be better off by buying an index such as S&P500, NASDAQ100, FTSE100. Han Seng, DJIA, or even a global index etc. This is not a financial advice, people interested in investing need to do DYOR.

1732366269774.png
 
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The same applies to NVIDIA (NVDA) stock, a leading player in AI hardware that has benefited significantly from the rapid rise of AI. A few decades ago, how many could have foreseen AI, Machine Learning, Video Game advancing to its current level in such a relatively short time?

1732366989815.png
 
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All the rest is blah! blah! the only thing he got right was: "But for majority of people they are probably be better off by buying an index such as S&P500, NASDAQ100, FTSE100. Han Seng, DJIA, or even a global index etc.".

Time and again all best the fund managers in the world have lost in comparison to indexing.
 
Buy shares in Petrobras (NYSE) and enjoy 20% gross dividend at current share price (was 40% in 2022). Then lean back and have no worry about the shenanigans going on in Bali! People say stock market is risky, but then they should try doing business in Indonesia. [This is not a financial advice -- just an example]
Now the dividend is back
I just had a look a few minutes ago. Now changing to the better

PBR: Forward Div 20.63%, P/E Ratio (TTM) 5.33; Current Price: USD13.64, Analyst price target USD16.00
PBR-A: Forward Div 22.24%, P/E Ratio (TTM) 4.77; Current Price: USD12.22, Analyst price target USD16.31

I personally own this stock, but very small percentage of my portfolio. For people want to invest, this is not a recommendation, please do your own DDs, take your own profit but consequently take your own loss.
 

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