Having one or more types of passive income is one of the ultimate goals that everyone wants to achieve. There is no doubt that starting a villa rental business in Bali could help foreigners reach that goal.
Over the years, villa rental in Bali has become one of the most popular businesses on the island and many of the villa rental businesses are run by foreigners.
If you are a foreigner and you want to enjoy a handsome profit out of this rental business, you can. However, if you do not have enough experience or adequate legal information of villa rental business in Bali, it is likely for you to lose your money instead of earning profits.
This article explains how you can conduct a villa rental business as a foreigner in Bali legally, without putting yourself and your investments at risk.
Villa Rentals are Profitable Business in Bali
The villa rental demand was pushed to a brand new height when the foreign tourists arriving in Bali reached 6.5 million in 2018, according to Bali Tourism Board. The growth increased by 8% in just one year compared to 2017. It was further reported that Bali would gain another 1.5 million tourists in 2019, making a total number of international tourists becoming 8 million.
This resulted in an increasing number of digital nomads and aspiring entrepreneur flocking in Bali, leading to a spiking demand for housing on this beautiful island.
The unique atmosphere and nature of Bali makes villa rental stand out even more as foreigners are fond of this paradise-like experience, no matter if they just visit for a short time or settle down permanently.
Foreign Ownership of Property in Bali
Unfortunately, the Negative Investment List (DNI) in Indonesia does not include the villa rental category. Therefore, if you as a foreigner have the intention to run a villa rental business in Bali, you can still do so legally through what is called a local company.
You can run your villa rental business through a local company with no issues. This means that as a foreigner, you will need to partner with a reliable third-party to run the villa business through a local company.
A local company is basically a company registered under a Indonesian national (called special purpose vehicle) and owned by a foreigner (called beneficiary). There is no restriction by the NIL as the company is locally-owned legally.
Furthermore, there is no minimum capital required for your villa business through the special purpose vehicle arrangement. This is by far the best option for foreigners who would like to earn their first profit in this sector right away.
Through the arrangement of professional shareholders/directors/commissioners by Cekindo, your rights as a beneficiary of the company are safely guarded through a loan agreement. Cekindo will help buy shares of the local company with the loan provided by the beneficiary.
So if a foreigner engages in an individual shareholder/director/commissioner (such as friends or family) in Bali on their own without a trustworthy third party and a proper agreement, you might put yourself at huge risk of losing all your investments, since there is basically no written protection for you and everything is based on unwritten trust that could change anytime.
Requirements for Villa Rentals in Bali
Once you have decided to go ahead with a special purpose vehicle for your villa rental business, there are some requirements you will need to fulfill as well:
- The minimum land size for a villa in Bali is 1,000 m2.
- There is no minimum or maximum requirement for the room size, but a villa can only have a maximum of 25 rooms.
- The building of your villa must comprise of different units, and each unit must contain several rooms. Please take note that “rooms” are not the same as hotel rooms in this context.
To know more about business of villa rentals in Bali, get in touch with us now. Our professional consultants will guide you through the local company process. You can also visit us in our office.