4 Tips for Maximizing ROI for Your Bali Property

Making an investment in the Bali property market can be a profitable addition to your business plan. Bali’s thriving tourism industry and prime locations make it easier to conduct business. Those two are the best recipe for garnering a high potential return on your investment. 

However, maximizing your ROI requires careful planning and execution. This article will equip you with the knowledge and strategies to make your Bali property investment a financial success.

Bali Property Market Trends 2024

The Bali property market has improved significantly after the pandemic, showing significant signs of improvement and growth. The real estate market in Bali appears favorable in 2024. 

Tourist interest is expanding beyond traditional hotspots like Kuta, Ubud, Sanur, Seminyak, Canggu, and Uluwatu to include western Bali, such as Seseh, Kedungu, Cemagi, and Tabanan, as highlighted by Alex Shtefan, founder and proprietor of Alex Villas.

Moreover, experts anticipate that property values and returns in Bali will remain attractive and stable, with consistent growth throughout 2024 and beyond.

The Ongoing Projects in Bali

Exciting developments are taking place in Bali to strengthen the property market. Some of these developments include:

Projects	Descriptions
The Bali Light Rail Transit (LRT)	The Bali Light Rail Transit (LRT) project connects Bali International Airport to 16 stations in major resort towns in South Bali.
New Bali Theme Park	The New Bali Theme Park, which Paramount Pictures is building on the western coast of Bali, is slated to open in 2025 and become the largest theme park in Southeast Asia.
Improvements in Connectivity	Improvements in connectivity, with ongoing roadworks and transportation enhancements aimed at easing traffic flow into significant resort areas in the south.
New Tourist Destinations	Developing new tourist destinations such as the West Bali National Park, the eco-tourism village of Penglipuran, and the cultural town of Tenganan Pegringsingan is expected to attract visitors and bolster the property market.
Gilimanuk-Mengwi Toll Road	The construction of the Gilimanuk-Mengwi Toll Road, which will span three regencies, 13 districts, and 58 villages and be completed in 2028, will significantly enhance transportation infrastructure.
Gilimanuk Harbor	Extensive renovations at Gilimanuk Harbor are underway to facilitate travel connections to West Bali and East Java.

Tips on Investing in Bali Property

If you plan to invest in Bali’s property market, it is crucial to research and take certain precautions to make informed decisions. Such measures enhance the likelihood of success and ensure the realization of the lucrative prospects offered by this renowned global tourist destination.

1. Clarify Your Investment Goals

Before investing in Bali property, determine whether you intend to settle for good, spend a significant portion of the year there, visit occasionally, or seek a lucrative return on investment. This assessment will guide your Bali property investment decisions effectively.

2. Choose Between Freehold and Leasehold

Only Indonesian citizens can legally own property freehold, so foreign investors often opt for leasehold arrangements, typically 25 to 30 years, with potential extensions.

Alternatively, establishing a foreign-owned company, known as a “PT PMA,” enables property acquisition under freehold status, albeit with certain restrictions and a maximum lease term of 50 years.

3. Assess Building Options

If there is enough time available, creating a customized property is in line with investment goals and provides complete personalization. Although building from scratch generally yields the best return on investment, it entails additional steps such as land acquisition, contractor selection, and villa furnishing.

4. Establish A PT PMA or Foreign Company

Creating a “PT” company offers various benefits, mainly if the property generates substantial annual profit exceeding USD 30,000. This approach enhances financial viability and facilitates property management.

READ MORE:

• How to Choose the Right Property Management in Bali
• The Ultimate Handbook for Managing a Rental Property in Bali
• The Ultimate Guide to Property Investment in Bali

How to Calculate The ROI of Bali Property

When investing in Bali property, it’s essential to assess your Return on Investment (ROI) to gauge the profitability of your venture. ROI represents the relationship between net profit and the initial investment cost.

When computing ROI, various expenses must be factored in, including the property purchase price, closing expenses, property taxes, insurance, upkeep charges, and other related outlays. Moreover, estimating prospective rental income or resale worth is imperative.

Achieving a 10% ROI

For instance, if you allocated USD 100,000 toward a property investment and yielded USD 10,000 in net earnings, your ROI would be 10%. Notably, owning property in Bali may entail supplementary costs like property management fees, marketing expenditures, and local levies.

Therefore, a comprehensive analysis of all expenses is indispensable for accurate ROI evaluation.

Maximizing ROI

Optimizing the ROI of your Bali rental property hinges on determining the optimal daily rental rate. You can gain comprehensive market insights and establish competitive pricing strategies by assessing a spectrum of rates encompassing lower and upper thresholds.

Bali experiences fluctuating tourist demand throughout the year, peaking during significant holidays and cultural festivities such as Christmas, New Year’s, and local celebrations.

Calculating Occupancy Rate

Calculating competitors’ average occupancy rates is crucial for forecasting rental income accurately. While occupancy rates vary based on property size, location, and amenities, establishing general ranges aids in estimation.

In Bali’s famous tourist hubs, short-term rental occupancy rates typically span from 60% to 80%, indicating that properties are occupied for 60% to 80% of the year on average. However, these figures are approximations and subject to variation.

Anticipating Income and Net Profit

Your income denotes the residual amount after deducting all expenses from rental revenue. You can anticipate net profit by subtracting total costs from revenue estimates at both ends of the spectrum.

Assessing Investment Payout and Yield

Determining the investment’s payoff period entails dividing annual profit by the investment cost (or the property’s land and building value). Evaluating both low and high-investment payouts accommodates scenarios and aids decision-making regarding investment viability.

How Can InCorp Maximize Your Property ROI?

Investing in rental properties presents a promising avenue for generating passive income. Yet, achieving optimal return on investment (ROI) necessitates a thoughtful and strategic approach. 

To achieve this, you need to consider various factors that can impact the profitability and sustainability of your rental properties.

Thorough Market Analysis

Engage in comprehensive market research to pinpoint areas exhibiting robust rental demand, favorable supply-demand dynamics, and potential property appreciation.

Explore Financing Options

Explore diverse financing avenues, such as mortgages, loans, and equity leveraging, to optimize cash flow and amplify ROI. Compare interest rates, loan conditions, and initial payment requisites to select the most advantageous financing strategy aligned with your investment objectives.

Efficient Property Management

Implement streamlined property management protocols to mitigate vacancies, trim operational costs, and boost rental revenue.

Tactical Renovations

Enhance the opportunities to elevate the rental property’s allure with cost-efficient renovation, heighten rental rates, and augment overall ROI.

Prioritize enhancements delivering the most significant ROI, such as upgrades to kitchens and bathrooms, integration of energy-efficient elements, and improvements to aesthetics.

Harnessing Technology

Maximizes your rental property performance and attracts qualified tenants by harnessing the power of rental management software, digital listing platforms, and online marketing tools. These essential tools will streamline your operations and take your business to the next level.

Utilize InCorp’s Services

InCorp Indonesia has over a decade of experience in market entry, and our services can be tailored to meet your specific requirements.

If you’re interested in investing in Bali’s property market, we offer various services to help you overcome the complex regulatory environment. These services include land and property ownership and company registration. 

Moreover, we have a collection of handpicked property listings that are ideal for investment opportunities in Bali. Fill out the form below to quickly navigate Bali’s real estate market.