Buying a property for foreigners in Bali is a dream come true. Most foreigners can’t buy Bali real estate as Indonesian laws can be strict.
But, don’t stress as there are other more accessible options where you can invest in your slice of tropical heaven.
Posted by Nathan Ryan – 30 June 2020
Owning land or a Bali villa is not possible unless you’re an Indonesian citizen. The government makes this process quite tricky, and although it’s likely the challenges and hurdles to attain this are lengthy and expensive.
The other, much simpler option is to either rent or leasehold the property. While both are very similar, there are differences that you should know about before speaking to any Bali real estate agents.
Most people will think that leasing a long term property is the same as a long term rental. In some ways, they are the same but having a Bali asset for some time has significant differences.
When you’re signing a Long-term Rental property, the lease is generally 1 to 5 years, and a leasehold is anywhere from 5 to 30 years. A leasehold agreement must be drawn up by a local property lawyer known as a Notaris. There are many Notaris in Bai, and your real estate agent should be able to point you in the right direction and be able to recommend reputable lawyers they have worked in the past.
So with this limited knowledge, what is the best way to go for you. You first dip your toes into the Bali real estate market by signing a long term rental agreement or do you go all the way and commit to a leasehold agreement.
Long-term Rental and a Leasehold property: know the difference.
A long-term rental property is usually between 1 to 5 years, and the owner of the villa will rent his property out for this period. The tenant will pay the years rent in advance. The owner and the tenant sign the rental agreement, and there’s usually a witness by the real estate agent.
Advantages of a long-term villa rental
1) you come back and forth to Bali and need a permanent place to stay.
2) you are going to be working in Bali for a specified period.
3) great for families that intend to relocate to Bali.
4) you have a limited budget and don’t want to invest lots of funds upfront for a villa.
5) no lengthy contracts
6) you might be able to bargain more with the owner if you take it for a more extended period
7) you get villa staff included in the rental such as housekeepers, gardeners, security and villa manager in some cases.
8) any maintenance issues are paid by the owner – this is important to note as, in Bali, some villas may have many problems such as mould, water leaks, broken air-conditioners, wifi, etc.
9) you might be able to sublet the property if you need to break the agreement. You will need the permission of the owner to be able to do this.
10) you can move around the island and rent somewhere else at the end of the agreement. Basically, it doesn’t tie you into one area for an extended period.
Advantages of a leasehold villa
Although as a foreigner you do not own the villa or the land it sits on, you have the lease of the villa for a very long period. The ownership remains in the name of the titleholder or landowner.
You can lease the property or land generally up to 30 years with the opportunity to extend another 20, 30, 40 or 50 years. Under this arrangement, the foreigner can sublease the villa to another tenant as a short or long term rental agreement.
Many foreigners make money this way by investing in a leasehold agreement and giving it to an agent to put up for lease or holiday rental. The advantage of this is that an agent can market the villa and get higher rents ( especially if the villa is in popular tourists areas like Seminyak, Canggu or Sanur ). The ROI is so much higher if you do it this way, and in some cases, it can be as much as 10-15%.
Also read: The top 8 areas to buy real estate in Bali in 2020
Just imagine having a leasehold on a villa near Seminyak Square or Eat Street. The nightly rental rates ( especially during peak holiday periods ) are huge. And, the beauty of it is you can use the villa whenever you come to Bali for a holiday. If you buy wisely a leasehold villa makes a fantastic investment
The drafting of any leasehold agreement should be through a lawyer as you need to make this rock solid. Plus you want to make sure that the lease renewal is in place without too much of an increase.
Once it expires, and you do not renew the lease, all rights and titles revert to the original owner, and it becomes a freehold Hak Milik property again.
In summary
Renting a property or securing a long term leasehold for foreigners may seem complicated, but if you are working with the right team; like us at Bali Realty, it will go smoothly without any hassles. For over a decade, helping foreigners from all over the world enjoy living in Bali.
This post was created by Nathan Ryan, senior property & marketing agent at Bali Realty who knows everything there is to know about investing, buying and selling real estate in Bali. If you’re thinking about investing in bali real estate, Nathan is the best person to speak to.
