Renting vs buying (/w prenup)

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JackStraw

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Mar 14, 2017
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Hey there,
I'm married to an Indonesian woman, we have a prenup and are looking to move to Bali at some point.
One question that we can't seem to resolve is whether it would make more sense to rent or to buy. Since she is Indonesian, she could actually own the land, and since we have a solid prenup it's also low risk for me. The questions we have are: It seems to make little financial sense to own, as property prices on Bali are relatively high (for Indonesian standard), while rent can be quite reasonable (for someone coming with a little bit of Western money).
My main question is: Are the prices to purchase a little villa for example significantly different if the buyer is Indonesian compared to the freehold lease stuff for foreigners?
If so, are they lower or higher? On the one hand I can see foreigners paying a lot more, simply because they tend to be wealthier on average, on the other hand I would imagine that a freehold lease should be cheaper than actually transferring ownership of the land.
Anyone know whether there are in fact two property/real estate markets in Bali existing in parallel, one for Bules and one for locals and, if so, how they relate in terms of price? Thanks!

You are married to an Indonesian woman and you still don't know there are two markets for both bules and locals in Indonesia? This doesn't only relate to real estate but anything in general.

As it goes with anything in this country, have your wife or lokal friend do the nego for you and sit back, hide and keep your mounth shut until the day you show up to pick up the keys to the house, car, motorbike, (insert whatever it is you are buying here) after purchase is complete.
 
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Balifrog

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Dec 30, 2017
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Depends on your age....
Passed a certain age, renting makes more sense than buying, except if you want to leave it to her later.
Rental gives you also more flexibiliy to move if any problem arises, being it with the house, the neighborhood or the wife.....
 

britoo

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Sep 11, 2018
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Max,

here's my 10c worth to take or leave as you please.

I certainly agree with your main point, there's more of what I'd call a 'fresh off the boat' premium which increases according to your haste, general gullability regardless of race, skin palor and demeanour for sure. If you swagger around acting like a baller, you are going to naturally attract a baller price. If you look on swanky websites, blindy trust total strangers - your new best friend(s) - you are going to get hosed and end up paying easily twice the fair market price and possibly more.

Particularly with a properly motivated native speaker (your wife) acting in your joint best interest, by being patient, taking time to understand the market and by clocking up a lot of scooter miles and doing lots of talking before you do anything, you should be able to avoid the pit falls that await fresh-off-the-boat guy.

Note: just by buying a "villa" rather than a "house" may add 50%+ on :)

Some tricks you should think about using might be as follows:
1. Get your wife to speak to the BPR banks and obtain their repo lists for defaulted properties. Even if you dont want to buy this way it gives a better take on the fair market price. Undrstand they are playing the game too but they are often more motivated sellers and you can get tothe fair price far quicker..
2. As per mrrfixit (https://www.mrfixitbali.com/buying-property-and-land/land-price-cost-of-building-90.html) do a back of the envelope calculation of the replacement cost ie land cost + cost of building and see how it compares to the market price you are being offered for a given property. What's the mark-up?
3. Google Earth Pro is your friend. Check out any parcel of land you are interested in, lengths, areas, whats nearby - rubbish tip, 30m phone mast etc. Just be aware there's some distortion in the image so its more guideline but will quickly let you know if 5are is only really 3..

Apologies if I am teaching you how to suck eggs here.

Your choice as to freehold vs leasehold obviously depends on many things mainly your needs, goals, desire for mobility and circumstances which I know nothing about so I'll only give my thoughts on - if leasehold offers value relative to a freehold.

In my opinion and experience, the answer is generally NO , if you can and its appropriate to your needs and goals then I think a freehold generally offers much better value ...... and security. Its not uheard of for lessors to try to infringe your rights, snatch back property early, to default on paying land taxes or to just be disinterested in cases where you might need the legal owner to intervene.

Onviously the terminal value of a lease is zero wheras a freehold is a perpatuity so its terminal value is current market price when you want to sell it. You are right that the frictional costs are marginally lower for a lease assuming just a notary fee of perhaps 2.5% vs more like 8-10% for all in purchase costs. I'd argue this will probably be negligible when comparing the lease and freehold values just 5 - 10 years in.

In my experience, I don't think your argument holds, that fair rental values are low vs fair property prices and I havent found this to be the case. Rental values in my experience are pegged to some multiple of property prices and not normally dislocated. If you are comparing rental price to a doubled 'bule' pruchase price then for sure, they appear better value but if you can get the property at its fair market price then this illusion of value goes away.

I also think locally the lease multiple used is extreme ie a 30 year lease is often priced the same as a freehold (perpituity) which is in my opinion absurd except in cases of the most exclusive and prime properties.

I am not sure I understand what you mean by a " freehold lease" unless you just mean the lease of someone else's freehold which I would just call a lease.

I am also not an expert in this and maybe another more experienced member on here can give a definitive view rather than my untested belief. I was under the impression that the purpose of the required pre-nup was to throw you under the bus rather than to protect your interests so perhaps my udnerstanding is totally wrong.

I'd understood, to be compatible with the Indoensian constitution not allowing foreigners to control land and this conflicting and overriding civil law that states married couples have equal ownership of all assets, the pre-nup must assign all rights to the Indonesian party, so in this case your wife, at the expense of the foreigner (you). So in summary, you are hosed, not protected. Hope I am wrong about this.

Hope this makes sense and is helpful
 

Markit

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Sep 3, 2007
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9 out of 10 people that try and talk down freehold have never owned anything here except their lunches and are terrified of the stories told by other leaseholders explaining their own lack of testes.

Freehold is the only way to go BUT it's the road to hell within a marriage and will cause it to fail more often than not.

Best way for foreigners to "own" their own bit of paradise here on Bali?

Buy freehold in the wife's name and have the notary list you as the mortgage holder with your wife as debtor for the "loan".

YOU keep hold of the land certificates where she can't get at them. Surprisingly yours would not be the first mixed marriage to go down the tubes here.

Get the Notary to make out a 25 year leasehold agreement in your name. NOT HERS!!!.

Now enjoy your wedded bliss in safety and happiness in Bali and if she does find another you still have the house...

Belt and braces anyone?
 

PERtoDPS

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Dec 31, 2018
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You are very lucky to get some great advice in this thread, feel like quoting every single post and liking it, but I'll throw in a bit more for you, Bule male here in relationship with Indo Mrs 3 going on 4 years, some of which have been turbulent, other bits best times of my life:

There is most likely two totally different sets of values at play here from two different cultures, western society is typically quite individual and if you work with anyone financially it's usually your wife that is about it.

I think you might find the Indonesian side, the often want to marry the women out and they see the long vision, when you die, they have likely already planned out the next 3 generations the house would be passed down to.

I am not going to go through and answer your questions one by one, enough people did that already, just another perspective for you.

Good luck.
 
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sakumabali

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Apr 2, 2010
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but would need to be sold within 12 months after the divorce is finalized at fair market price

I'm not talking about your relationship. But people in Indonesia can easily hide their addresses; so in case the couple broke up and he WANTS to get a divorce he has to FIND her first...in the meantime she can rent her property. I'm trying to sell a plot since 7 or 8 years; my business partner used his maid as a nominee (she then later got divorced and married again). Since years we are searching for her ex husband because he needs to sign the papers!
Once you find your ex she has to agree to a deal. So it'll be easily 70 / 30 the other way around! Only because you are the foreigner...if you'd be an Indonesian male you'd be highly advantaged. Another reason why pretty Indonesian girls would choose a "wealthy" foreigner. (*to be a middle class earner in Indonesia you just need 3-4 million rupiah monthly)

just like the idea of owning things, rather than renting them

If you have a pre-nup you will not own anything your wife does!

And one last thing re "buy things cheaper via your partner"; I was in the business for years and I have seen more than one Indonesian wife or girlfriend who wanted a hidden 5 % commission for a property that would be IN HER NAME - only because her guy would pay for it on top - easy extra money!
 
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sakumabali

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There's no answer to that mate. It's all negotiation & how badly the seller needs the money. Was there a volcano eruption? An economic crisis? Good for you...
If not you have to be a confident purchaser...
There is no property price calculator as in England or Germany. There are property taxes as everywhere; if you try to use them as a calculation key to value see above...

And even IF there would exist something close to that, no longterm expat would tell a newbie because he spends too much dollars, sweat, blood & tears to find it out. Sounds silly but it's true...
 
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Markit

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Yall seem dedicated to talking about how Indonesian women screwed gullible Western men. Perhaps a self-help group (sponsored by Bintang) would be in order?
And you seem dedicated to explaining how well you know Indonesia/Jakarta and asking the dumbest of questions. For instance the next one.
Jokes aside, does anyone actually know what the price differences are between leases, freeholds and purchases? What's the multiple, give or take?
There is no effective price difference between any of them IF you can negotiate like a MF. For instance I'm selling a house either leasehold or freehold for the same price - it depends soley on what the buyer wants to have. If he wants to lease it for 25+25+30years they "be my guest". If he wants to buy it freehold then the price is the same. I just want to make him as comfortable as possible.
I'm starting to think the answer will be "I will ignore that but let me tell you how Indonesian women are super evil and only want your money." Again. *sigh*
If you followed my advise above it wouldn't matter what your lady did or didn't do in any possible future. You would/could have the place for your natural life time. Now if you prefer to rent then be prepared to be fucked over regularly by the owners and have zip to show for it at the end except calluses on your ass.
 

Mark

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Apr 19, 2004
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Yall seem dedicated to talking about how Indonesian women screwed gullible Western men. Perhaps a self-help group (sponsored by Bintang) would be in order?

Jokes aside, does anyone actually know what the price differences are between leases, freeholds and purchases? What's the multiple, give or take?

I'm starting to think the answer will be "I will ignore that but let me tell you how Indonesian women are super evil and only want your money." Again. *sigh*

My two cents are that long term lease prices tend to be lower than freehold purchase, based on the total outlay. For example, freehold in our area of Gianyar Regency transacts at around 175-250 million per are, depending on view, access, degree of seller desperation etc. However, rental is around 2.5 - 3 million per are per year. So, for a thirty year lease you would pay the equivalent of 75-90 million per are. Yes, I know that the terminal value of a lease is zero, however, if you are looking to minimize your outlay, a long term lease is not as bad as it sounds. It can be sold on and with a properly drafted renewal clause can be extended on reasonable terms. On the other hand, your wife (like mine) may think otherwise. Few Indonesians are keen on anything other than hak milik title, ie freehold.
 

tel522

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Oct 30, 2015
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I have been renting for the last 14 years , 10 in the same location, I have been fortunate with an honest owner whom honors his liability in the fair contract I wrote, for all major repairs quickly , I pay a reasonable rent yearly with a "force majeure" clause so i can exit if needed .
Build quality here on the majority of construction is "crap" , worse than the majority of poor African countries I lived in previously , houses in Mogadishu are better built than here :eek: .

Whoda thought it !
 
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Markit

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Build quality here on the majority of construction is "crap" , worse than the majority of poor African countries I lived in previously , houses in Mogadishu are better built than here :eek: .

Whoda thought it !
I'd be interested as to why you think that is? Living here in the east I've noticed that back in the day all the locals built with bricks but now more and more of them are using the same cement blocks (breeze without the hole?) as us expats tend to use. Both types seem to do alright.

I controlled the makeup of the cement blocks I used that the cement and sand content was correct and have suffered not a single crack or lost tile in the years of earthquakes and winds.

Just after the 2018 earthquakes here and on Lombok I noticed quite a few cracked walls and lost roofing tiles but not really many.
 
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tel522

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I'd be interested as to why you think that is? Living here in the east I've noticed that back in the day all the locals built with bricks but now more and more of them are using the same cement blocks (breeze without the hole?) as us expats tend to use. Both types seem to do alright.

I controlled the makeup of the cement blocks I used that the cement and sand content was correct and have suffered not a single crack or lost tile in the years of earthquakes and winds.

Just after the 2018 earthquakes here and on Lombok I noticed quite a few cracked walls and lost roofing tiles but not really many.

You built your place I know ,and controlled construction and clearly benefited from your efforts , most houses here are not built with such care .

Normally built houses suffer from damp , weak construction , termite damage especially in roof construction, its quite normal for renovation between 5 to 10 years , etc etc ,and of course limited contractor guarantee, normally a few weeks .

My experience of housing in somalia and eritrea , they were tough and strongly built in the italian art deco style ,50 to a 100 years old , they did not leak, no damp and needed painting every couple pf years ,thats it .
 
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Markit

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I suspect that the problem with expat building here is that almost anyone can do it without the checks and balances that are an integral part of the western system. That being the case people with no clue are building then selling their disasters on.
 
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JackStraw

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You built your place I know ,and controlled construction and clearly benefited from your efforts , most houses here are not built with such care .

Normally built houses suffer from damp , weak construction , termite damage especially in roof construction, its quite normal for renovation between 5 to 10 years , etc etc ,and of course limited contractor guarantee, normally a few weeks .

My experience of housing in somalia and eritrea , they were tough and strongly built in the italian art deco style ,50 to a 100 years old , they did not leak, no damp and needed painting every couple pf years ,thats it .

Few weeks contractor guarantee? TIme to find a new contractor then. The one I use has a 1 year guarantee.
 

SamD

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Sep 7, 2006
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You built your place I know ,and controlled construction and clearly benefited from your efforts , most houses here are not built with such care .

Normally built houses suffer from damp , weak construction , termite damage especially in roof construction, its quite normal for renovation between 5 to 10 years , etc etc ,and of course limited contractor guarantee, normally a few weeks .

My experience of housing in somalia and eritrea , they were tough and strongly built in the italian art deco style ,50 to a 100 years old , they did not leak, no damp and needed painting every couple pf years ,thats it .
Wow. Somalia and Eritrea. I would like to chat about your experiences there over a few beers. I built a house on Fiji before the coup and thought I was pretty adventurous. Can't imagine dealing with Somalians who just want to kill you.
 

tel522

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Wow. Somalia and Eritrea. I would like to chat about your experiences there over a few beers. I built a house on Fiji before the coup and thought I was pretty adventurous. Can't imagine dealing with Somalians who just want to kill you.
Ya it was an interesting experience , especially somalia at the start of the war in 90 , bullets flying around , I didnt stay long after the chaos started .
Pre the shooting ,ya a difficult place, power water etc the usual , but the best beaches and water iv seen , otherwise a keystone cops movie set .
 
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harryopal

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....., but the best beaches and water iv seen , otherwise a keystone cops movie set .

I was thinking of having a swim near the Italian club in Mogadishu and that same day a fellow had his lower leg bitten by a shark. I don't mind sharks so much but not too keen if the water is milky and you can't seem them.

Interesting people the Somalis. Even just having a discussion sounds like a fight. Not too keen on queuing so chaos if there are more than half a dozen people seeking attention. Do I dislike Somalis? Not at all; just different ways such as don't walk by when the President is speaking or you will be shot. That was during Siad Barre's time.

But to be back on topic. We are leasing a house in a developed area about 8 years old. Most of the long window frames in our house others are falling to bits. I don't know what was used for exterior paint but it was a job not well done. The underside of the roof (two stories) seems to have been laid with a plaster material meant for interiors so this last couple of months it has been falling to the ground. I quite like the place but I am glad there was no question about buying it.

P1060760.JPG
 
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tel522

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I was thinking of having a swim near the Italian club in Mogadishu and that same day a fellow had his lower leg bitten by a shark. I don't mind sharks so much but not too keen if the water is milky and you can't seem them.

Interesting people the Somalis. Even just having a discussion sounds like a fight. Not too keen on queuing so chaos if there are more than half a dozen people seeking attention. Do I dislike Somalis? Not at all; just different ways such as don't walk by when the President is speaking or you will be shot. That was during Siad Barre's time.

But to be back on topic. We are leasing a house in a developed area about 8 years old. Most of the long window frames in our house others are falling to bits. I don't know what was used for exterior paint but it was a job not well done. The underside of the roof (two stories) seems to have been laid with a plaster material meant for interiors so this last couple of months it has been falling to the ground. I quite like the place but I am glad there was no question about buying it.

View attachment 3453
Ya harry mogadishu was a magnet for sharks bcs of the local abattoir , they used to dump the waste direct in the sea a good chum line for the cruising sharks .
I used to swim outside the city jezira area ,no people white sand water like glass , ,lovely.
Back on topic ,ya I have never seen relatively newish property falling apart ,like in this country its scary .:eek: