The Ultimate Handbook for Managing a Rental Property in Bali

Bali, known for its breathtaking natural beauty, vibrant culture, and warm hospitality, has long been a popular destination for tourists worldwide. With the island’s thriving tourism industry, owning and managing rental property in Bali can be a lucrative and rewarding investment. 

A common question is: How does the property landscape in Bali look for the years to come? There is no easy or sure-shot way to answer this question. 

Can a Foreigner Rent a House in Indonesia?

As a foreigner, you can rent a house in Indonesia. However, there are certain considerations and legal aspects to be aware of to ensure a smooth renting experience:

1. Visa and Permit Status

Your visa type will influence your ability to enter a rental agreement. Some visas, like tourist visas, are intended for short-term stays and might not allow you to sign long-term leases. Suppose you plan to stay in Indonesia for an extended period. In that case, it’s advisable to obtain a proper visa, such as a work permit or a residence visa, which often permits long-term housing arrangements.

2. Lease Agreement

Renting a house in Indonesia involves signing a lease agreement with the property owner or landlord. This agreement outlines key terms and conditions, including the rental price, lease duration, security deposit amount, and any specific rules or regulations related to the property.

3. Lease Duration

Rental agreements in Indonesia typically have a minimum duration of one year. In tourist areas or locations with high expatriate populations, landlords might offer more flexible lease terms to accommodate shorter stays.

4. Documentation

To establish your rental eligibility, you’ll likely need to provide several documents, including your passport, visa, or permit details, and potentially a copy of your employment contract if applicable. Landlords may also request personal references or other forms of identification.

5. Security Deposit

Landlords commonly require a security deposit from tenants. This deposit, usually equivalent to one or two months’ rent, acts as insurance against significant damages or unpaid rent. The terms governing the deposit refund should be clearly stated in the lease agreement.

6. Rent Payment

Rent is typically paid every month. The lease agreement should specify the due date, preferred payment method, and any consequences for late payments.

7. Maintenance and Repairs

The lease agreement should outline the responsibilities of both parties when it comes to property maintenance and repairs. Generally, landlords are responsible for major repairs, while tenants are expected to maintain the property’s condition during their stay.

8. Lease Renewal and Termination

If you wish to extend your lease beyond the initial term, communicate your intentions to the landlord well in advance. Similarly, if you want to terminate the lease early, be aware of any penalties or notice periods outlined in the agreement.

9. Legal Support

Given the potential complexity of Indonesian property laws and regulations, seeking legal guidance or consulting with experts experienced in local real estate matters can provide valuable insights and assistance.

Foreign Direct Investment in 2015 grew by 19.2% compared to the preceding year, with investment realization of IDR 365.9 trillion. 18.9% to IDR 66.7 trillion in the second quarter of 2013. Domestic investment also increased by 15.0% of IDR 179.5 trillion (Source: BKPM. 2015. Press Release: Investment Realization 2015 Exceeded Target).

Indonesia offers you many opportunities for beneficial investment in land and property. However, there are characteristics that can frustrate investors and harm the investment climate, such as complicated bureaucracy. But don’t worry InCorp Indonesia can assist you to own the property and also help you to make the most suitable investment plan in Indonesia. 

As the Government of Indonesia introduced new regulations for property law, it is reasonable to expect higher foreign investors would be interested in delving into the Balinese property market.

How to Invest in Rental Property in Bali

Indonesia has a set of regulations regulating each sector to provide legal certainty. The most important thing is to monitor our licenses and investment restrictions. What follows is an elaboration of the two:

Licenses

Acquiring the Homestay License or the Pondok Wisata License is integral for investing in and developing a homestay. The license explicitly allows the operation of a villa for vacation rentals and applies to properties with between 3 and 5 rooms. 

In order to operate a building with more than five rooms, it is necessary to obtain either a Hotel License or a Melati License, which entails fulfilling several requirements.

For example, it may include the proximity of the premises to the tourism zones. 

Another relevant license is the Building License or the Izin Mendirikan Bangunan (IMB), which allows for building construction. Obtaining IMB could be beneficial in order to construct property to entice the tourist market.

However, the only party with the right to obtain this license is the owner of the building structure. 

Investment Restrictions 

Previously, Indonesia had a Negative Investment List, which listed all the business sectors fully and partially open to domestic and foreign investors. 

However, as of 2021, the Indonesian government released a Positive Investment List, which effectively replaces the previous list. The new list contains all the business sectors open to domestic and foreign investors. 

Therefore, checking that the business activities align with these regulations is essential. 

Read more: The Ultimate Guide to Property Investment in Bali

How to Deal with Multiple Rental Properties

Juggling one rental property and liaising with different guests in itself is a challenging task. In addition, having multiple rental properties add a level of difficulty for property owners. 

There are several things to keep in mind when owning multiple rental properties, amongst others they are:

• Ensure a safe and habitable condition
• Perform periodical property inspections
• Manage move-in and move-out items 
• Record the state of the rental property before and after the rental period 

How Do You Manage a Rental Property?

In managing a rental property, there are several things to look at. The main part, however, is the management of the property itself to ensure that it is clean and hospitable for guests. 

This may be challenging for investors who own several properties or live away from their rental properties. 

Can You Manage a Rental Property by Yourself?

Having a strategy to manage a rental property is crucial. It includes setting aside a specific portion of the budget for property maintenance.

The most important indicator to keep an eye out for is the occupancy rate of the rental properties. It is challenging for investors who are not used to conducting such tasks. 

Fortunately, you can hire a good property management service that offers revenue management services, which look into a rental property’s data to ensure maximum returns through a revenue projection model. 

How to Navigating Rental Property Management Remotely

Although managing a property remotely alone is not impossible, it is highly challenging. 

Several things need in-person tending to explicitly cleaning and maintaining a rental property with ease, providing hands-on management of properties from cleaning, maintaining, and air support in emergencies.

Additionally, in-person management allows for a more personalized approach to tenant communication and problem-solving, fostering a sense of community and satisfaction among tenants. 

However, with technological advancements and communication tools, remote property management has become more efficient and streamlined, enabling property managers to handle rent collection, maintenance requests, and tenant communication from a distance. 

It allows property managers to oversee multiple properties or properties in different locations without needing constant travel or on-site presence, making remote management a convenient and cost-effective option for property owners.

Read more: How to Choose the Right Property Management in Bali

Why You Should Choose InCorp Indonesia

In sum, the property sector in Bali is expected to see upward growth in 2023. Therefore, those considering investing in property should consider Bali. 

Having a trustworthy and capable partner in property management and ownership can make all the difference in the success and profitability of a rental property. 

By collaborating with experts like InCorp Indonesia, property owners can have peace of mind knowing that their assets are in good hands. 

In addition, InCorp Indonesia’s expertise in land and property ownership and company registration matters can help property owners navigate the complexities of property management, ensuring a seamless and hassle-free experience. 

As a result, property ownership and management can be rewarding and profitable with the right partners.