7 Costs you need to cover in Bali Rental

 

So, you finally decide to set up a villa rental in Bali or even already own one! However, managing a villa comes with various expenses that you might not have considered. In this article, we'll outline the most common villa expenses in Bali rental to help you prepare and budget effectively. Let's dive in!

 

List of Bali rental monthly cost

 

1. Maintenance

 

Owning a villa in Bali requires regular maintenance to ensure it remains in excellent condition. Maintenance expenses may include repairs, refurbishments, landscaping, pool cleaning, and pest control. Setting aside a budget for maintenance is crucial to upholding the quality and attractiveness of your property. 

 

You must set aside your profit from the Bali rental villa for maintenance.

Photo by toa55 from akaratwimages

 

Saving a part of your rental revenue as a sinking fund for maintenance is the most common practice for villa owner who rents out their property. For routine maintenance, we advise to set the budget between 2-4% of your rental annual revenue.

 

2. Employee

 

Hiring employees for your villa rental is common in Bali. This expense covers salaries for housekeepers, gardeners, security personnel, and other staff members. Remember to comply with local labor laws and provide fair wages to your employees.

 

Indonesia has what's called UMK (Upah Minimum Kabupaten or regency minimum wage), which refers to the minimum monthly wage regulation that employers must adhere to. It is calculated based on the minimum costs that are needed to cover a minimum living standard for an individual in the region. So far, the UMK has always risen following the annual rate of inflation and rising prices of goods in the market.

 

Investing in employees by paying them well can get your rental villa in Bali goes far.

Photo by cottonbro studio in Pexels

 

Currently, in 2023, Badung Regency holds the highest minimum wage in Bali, with 3,1 million IDR per month which includes popular areas like Kuta, Seminyak, Canggu, Pererenan, Bukit Peninsula, and more. Notable areas outside of Badung Regency include Ubud, which is located in Gianyar Regency. You can check here for more info about UMK in Bali each year.

 

Besides the UMK, employers should also ensure that employees are covered by insurance, which must be paid through the government program called BPJS. BPJS payments are separate from the UMK and represent the minimum compensation employees should receive. Therefore, it's essential to include insurance payments in the overall salary package.

 

If you want to know more about what employers should or should not do in Indonesia, you can check more here.

 

3. Electricity

 

Electricity costs can be significant, especially if your villa has a large power source and offers various amenities like air conditioning, heating, or a smart home system. Implementing energy-efficient measures and being mindful of electricity usage can help reduce this expense.

 

4. Internet

 

Offering reliable and high-speed internet is a must for daily living in this day and age. So, unless you try to sell your villa as a hermit retreat, you should factor the expense of internet services into your overall operating costs.

 

Having an internet connection in a villa is essential in today's times.

Photo by PhotoAttractive from Getty Images Signature

 

One of the most popular internet service providers for villas or hotels in Bali is Global Xtreme & CBN. The lite package starts from 250K IDR while the ultra high speed at 1 million IDR per month, where you'll get a guaranteed 100 Mbps internet speed. Custom packages are also available if you need even faster speeds.

 

5. Banjar

 

In Bali, contributing to the local Banjar (community association) is customary. Besides further ensuring security around the neighborhood, the Banjar fee also supports various community initiatives, including local events and ceremonies.

 

Pecalang from a Banjar provides added security to the neighborhood.

Photo by Sue in Flickr

 

Read more: What is Banjar in Bali?

 

The fee of each Banjar varies, depending on each rule and policy of the local neighborhood. For a villa that is used as rental accommodation, the local Banjar will charge you, the rental business owner, between 50k IDR to 250k IDR a month.

 

6. Bin Collection

 

In Bali, the usual practice for bin collection involves a pickup service facilitated by dump trucks, following specific schedules. These trucks collect garbage directly from in front of the villa, maintaining a routine. It's important to be aware that during significant Hindu religious ceremonies like Galungan or Nyepi, the garbage pickup service may be temporarily halted, as the service providers participate in the ceremonies. 

 

Eco-friendly waste management can be a deal breaker for your villa rental in Bali.

Photo by Eco-Bali

 

On the other hand, the rising trend of eco-friendly practices in waste management is significantly impacting the villa rental landscape. Responsible waste management and recycling have taken center stage, and this eco-friendliness adds considerable value to your rental villa. In fact, for some prospective tenants, your villa's commitment to eco-conscious practices can even be a deciding factor. Exploring the costs associated with eco-conscious bin collection services not only demonstrates your commitment to minimizing your villa's environmental footprint but also appeals to environmentally-conscious renters.

 

If you’re interested in getting the service, you can connect to one of them here.

 

7. Income & Land Taxes

 

As a villa owner, you are subject to taxes on the revenue generated from rental bookings. Consult with a tax professional to understand your tax obligations and ensure compliance with local tax laws.

 

Rental villas in Bali are subject to taxes.

Photo by olm26250 in Getty Images

 

Land taxes usually cost way less than income tax. When you lease land in Bali, in most cases you pay the land taxes during the period of lease.

 

Owning and managing a villa rental in Bali can be a rewarding venture, but it requires careful financial planning. By acknowledging and accounting for the various expenses outlined in this article, you can run a successful and sustainable villa rental business in Bali.

 

Disclaimer: The information presented in this article is intended for informational purposes only. It should not be considered as a substitute for professional advice or used as a basis for making legal, financial, or investment decisions. Readers are encouraged to seek guidance from qualified experts or professionals before taking any actions based on the content provided in this article. The author and publisher do not accept any responsibility for any consequences or losses resulting from the use of this information

Extending Your Lease in Bali: A Comprehensive Guide to Secure Your Property Investment

 

Investing in property is a significant decision, and when it comes to leasehold properties in Bali, understanding the intricacies of lease extensions is crucial for protecting your investment. As a foreign investor or resident in Bali, navigating the lease extension process can seem daunting, with various legal and financial considerations to take into account. In this comprehensive guide, we will delve into the essential aspects of extending your lease in Bali, providing you with the knowledge and insights to make informed decisions.

 

I. Leasehold Property in Bali: An Overview

 

1. Understanding the basics of leasehold property in Bali

 

Leasehold property in Indonesia is regulated by the Undang Undang Pokok Agraria (Basic Agrarian Law). This law provides the legal framework for property rights in the country.

 

For non-Indonesian citizens, the most common type of title used when they lease property is "Hak Sewa" or Right to Rent. This title offers flexibility for negotiations and allows for various arrangements, including building on the leased land, making renovations, and changing the building structure. To obtain this title, all you need is a valid Visa.

 

Hak Sewa is the most popular choice for investors in Bali.

Image by Canva

 

The second type of title is "Hak Pakai" or Right to Use. While it offers similar benefits, it is rarely utilized by most investors in Bali due to the additional administrative requirements which include obtaining a KITAS (Limited Stay Permit).

 

The terms and conditions of lease extensions under the Hak Sewa title are determined through negotiations between the parties involved. This flexibility allows for securing the use of the property for an extended period and ensuring the interests of both the landowner and the tenant are aligned.

 

1. Rights and obligations of both landlords and tenants during the land lease

 

The renter, or tenant, of a leasehold property in Bali, has specific rights and obligations. These include the right to use and occupy the property for the agreed-upon duration, the responsibility to pay rent and other fees on time, and the duty to maintain the property according to the lease agreement.

 

Similarly, the lessor, or landowner, also has rights and obligations throughout the lease period. These rights include receiving rent payments in a timely manner, ensuring that the property is in a livable condition, and complying with any other terms stated in the lease agreement.

 

Image by Canva

 

It is important to note that while these rights and obligations are essential and regulated by the law, in practice, the specifics can be negotiated between the property owner and the lessee. This is because the principle of freedom of contract, known as "pacta sunt servanda," allows for flexibility in determining the rights and obligations between both parties.

 

1. Benefits of extending your lease in Bali

 

Extending your lease offers several benefits and holds great importance for property owners in Bali. By securing a lease extension, you maintain long-term control and enjoyment of the property and allows you to capitalize on the potential appreciation of property value over time.

 

1. Duration and terms of leasehold agreements

 

In Indonesia, there is no specific law that determines the maximum length of a property lease. The duration of a leasehold agreement usually depends on the agreement made between the owner of the land and the person leasing it. However, it's important to know that in Bali, notaries typically don't certify agreements with very long periods, like 80 or 100 years. Instead, they may suggest dividing the lease into shorter terms, such as 30 years, with the option to extend for another 20 years. In Bali, the lease duration is typically 20-30 years with the possibility of a 10-20 year extension. Although there are no specific laws governing this, this is a common practice in the Bali property market.

 

Lease extension in Bali is negotiable.

Image by Canva

 

Typically, the terms and conditions for the lease extension are outlined in the contract and can be negotiated until both parties reach an agreement. One advantageous condition for the lessee is a fixed rate for the lease extension. This means that you can pay for the extension period based on the price at the time of purchasing the property, rather than the future price after the lease expires.

 

However, it's important to note that most property owners set a time limit within which you must pay for the lease extension at the fixed rate. Usually, they provide around one to five years for you to make the payment.

 

Another important point to consider is that in Bali, notaries create separate documents for the original lease and the extension. For instance, if your initial lease is for 30 years and the extension is for 20 years, the notary will prepare one document for the 30-year lease and another separate document for the 20-year extension.

 

II. Extending Lease: To do or Not to do?

 

Factors to consider before deciding to extend your lease

 

When thinking about extending your lease, you have to consider various factors that can impact your investment. These factors may include:

 

Property Value: Assess the current and potential future value of the property. Consider factors such as location, market demand, and anticipated growth in property prices. A lease extension may be more favorable if the property's value is projected to appreciate significantly.

 

Rental Income: Evaluate the rental income potential of the property over the extended lease period. Analyze Bali’s market trends, rental demand, and potential returns on investment. Ensure that the rental income generated from the property justifies the costs and efforts associated with a lease extension.

 

Calculating the rental income potential of your property is essential.

Image by Canva

 

Long-Term Plans: Assess your long-term plans for the property and how they align with a lease extension. Consider whether the property meets your future needs and goals, both personally and financially. Evaluate whether extending the lease will allow you to achieve your desired outcomes and maximize the return on your investment.

 

Legal and Financial Advice: Seek professional advice from legal and financial experts who specialize in property matters in Bali. They can provide valuable insights and guidance tailored to your specific circumstances. Their expertise will help you make an informed decision and navigate the complexities of lease extension agreements.

 

By carefully considering these factors, you can make a well-informed decision on whether to proceed with extending your lease. It is important to weigh the benefits and potential risks to ensure that the lease extension aligns with your investment objectives and long-term plans.

 

III. Lease Extension Costs and Financial Considerations

 

Calculating the total price of land extension uses the same formula as leasing land where you have to multiply the price per are per year by the land size and the extension/lease duration:

 

Price per are x Land size x Extension/lease duration = Total price

 

For example, if you want to extend the lease of your 5 are land for 10 more years and the landlord asks you to pay 15 million rupiahs per are per year then here’s how to calculate the total price:

 

IDR 15.000.000 x 5 are x 10 years = IDR 750.000.000

 

This formula is used in Canggu, Pererenan, Umalas, Seminyak and Bukit Peninsula, hence it’s very uncommon to find landlords in those areas that would offer a global price both for leasing and extension. One crucial thing that you must do before calculating the total is you must ensure that the price given by the landlord already includes the notary fee (max. 1% of the total price) and agent fee (if a real estate agent is involved) or not, otherwise, you will have to take those into account as well.

 

Image by Canva

 

Generally speaking, the notary fee is the only additional cost that a renter has to pay whereas agent fee and income tax (known as Pajak Penghasilan or PPH) are the landlord’s responsibility. Annual land and building tax (Pajak Bumi dan Bangunan or PBB) throughout the extended period will still be the renter’s burden unless otherwise specified in the extension agreement or the initial lease agreement.

 

IV. Steps to Extend Your Lease

 

A. Engaging Real Estate Agent Assistance and Advice

 

When you have made the decision to extend your lease, it is advisable to engage the services of a reputable real estate agent who specializes in leasehold properties in Bali. A knowledgeable agent can provide valuable assistance and advice throughout the lease extension process, ensuring a smooth and successful experience.

 

Advice from local experts will be super helpful when you decide to extend your lease.

Image by Canva

 

At Bali Home Immo, we have a team of experts who possess a thorough understanding of the local property market. With over a decade of proven expertise, we have helped numerous clients navigate the complexities of lease extensions in Bali. Our dedicated team is committed to guiding you through the entire process, offering personalized assistance every step of the way.

 

B. Negotiating Lease Extension Terms and Conditions

 

Once you have engaged a real estate agent, they will assist you in negotiating the terms and conditions of your lease extension with the landowner or lessor. This negotiation process involves discussions on various aspects, including the duration of the extension, the price of the extension and payment terms. 

 

C. Drafting and Signing the Lease Extension Agreement

 

Once the terms and conditions of the lease extension have been agreed upon, a lease extension agreement will be drafted. This legal document will outline the agreed-upon terms, including the duration of the extension, any rent adjustments, and any other provisions specific to your lease arrangement. 

 

Image by Canva

 

It is essential to seek legal advice to ensure that all the terms are accurately reflected and aligned with your expectations. Once you are satisfied with the terms, both parties, including the landowner or lessor, will sign the agreement before a notary, making it legally binding.

 

V. Conclusion

 

Extending your lease in Bali can be a strategic decision to secure your property investment and enjoy long-term benefits. Understanding the basics of leasehold property, reviewing your current lease agreement, and considering the factors involved are crucial steps in the process. Engaging the services of a reputable real estate agent specializing in leasehold properties can greatly assist you throughout the lease extension journey.

At Bali Home Immo, we have a team of experts with extensive knowledge of the local property market and lease regulations. We recommend exploring our leasehold property catalog on the Bali Home Immo website, where you can find a wide range of properties with lease extension options. Schedule an appointment today and get a free consultation with our team.

Cost between building and buying villa in Canggu

 

The main reason why Canggu is such a wildly popular destination is that it has something for everyone: beach clubs, surf spots, international schools, coworking spaces, crypto exchanges, restaurants, yoga and fitness centers, rice fields, and most importantly—holiday villas. Because the demand for vacation rentals keeps getting higher and higher, it’s no surprise that the region’s villa rental industry is thriving and continues to attract eager investors even during the COVID-19 pandemic.

 

As time has proven, Canggu’s vacation rental market is a lucrative venture truly worth investing in and these days it has the potential to yield 7-10% ROI. But how much do you need to invest in a Canggu villa? Is it cheaper to build a brand new villa or buy one? To answer that, let’s go through a rundown on the cost difference between buying and building a villa in Canggu first.

 

Buy a Villa

 

In today’s market, the price of a newly built modern villa on a 3 are land in Berawa offered with a 25 year lease starts from $350.000. There are many similarly sized villas in the $100.000-150.000 price range, but they’re usually located a bit further from the beach and/or offered with a short leasehold duration that makes them not ideal for long-term investment. If you prefer tranquil rice fields to bustling beaches, consider investing in Pererenan as it offers a wide variety of villas under $300.000 and some of which come with a rice field or river view that you won’t find easily in Canggu.

 

Buying a slightly older villa and then renovating it to modern standards is a common practice as we have seen numerous holiday villas with an open air living area and outdoor bathrooms converted into modern villas with a fully enclosed living room and bathrooms more appropriate for the current market demand. While they’re not easy to find, there’s a good selection of fix-and-flip opportunities in Canggu.

 

If you want to own a brand new villa without the hefty price tag, then buying off-plan might be the right option. There’s a plethora of off-plan villas in the market today, many of which are offered with customization options too so you can add some personal touch. The price of off-plan villas are quite varied and competitive, but they’re generally cheaper compared to pre-existing villas with comparable size and specification. 

 

Build a Villa

 

The current market price of land in Berawa is around $1000-$1700 per are per year, which is roughly 2-3 times more than in Babakan or Padonan where land is offered for less than $600 per are per year. Regardless of where you pick, we strongly advise renting the land for at least 25 years to maximize returns.

 

After you have the land, you’ll need to obtain an IMB (Izin Mendirikan Bangunan) which is a building permit, but your contractor or architect will prepare all the paperwork and add the fee to their Bill of Quantity (BOQ). Starting from 2021, the IMB system is replaced by PBG (Persetujuan Bangunan Gedung) which essentially serves the same function so don’t get confused over these two. Note that you will also need a Pondok Wisata license if you plan to rent out the villa for daily rental or Airbnb.

 

Construction will cost around $500 up to $800 per square meter depending on the build quality, but it doesn’t include furniture so you’ll want to add 10.000$ - 20.000$ for a fully furnished 3 bedroom villa. Don’t forget to add 1% notary fee as well as 5% agency commission if you’re using their services in finding the land. In summary, a high quality 200 square meters villa on a 3 are land in Berawa will cost at least $220.000 to build from the ground up. 

 

Conclusion

 

In most cases, it’s cheaper to build than buy. The most difficult part of building, however, is finding good land because most (if not all) of the best land in Canggu are already sold while the few that are still available demand a very high price. Small plots (3 are or less) are exceedingly rare and their price per are can be much higher than a larger plot, so finding a land big enough to build just one villa is not only challenging but also pricey. Renovating a second hand villa can be faster and cheaper than building from zero, but finding the villa that suits your vision will certainly take some time as well.

 

Whether you decide to buy or build, having a competitive edge is the key to maximize the return of investment. Bali’s villa market is already saturated and you will struggle in getting the best price without any highlighting qualities that make your villa stand out. Having gold standard features such as enclosed living, spacious yard, and unique architecture may not be enough because we are seeing villas with cutting edge features such as smart home technology, earthquake resistant micropile foundations, climate responsive sustainable design, and many more in the current market.