Bali real estate can yield up to 12% per annum in dollar terms. But simply investing in a nice villa isn’t enough; you need to know what to look for to avoid losing money. In this article, we’ll explore the mistakes an inexperienced investor can make and how to avoid them.
Mistake No. 1 - Not understanding your needs
“I’ll buy it and then figure out how I’ll use it.” If you haven’t yet decided whether you plan to live in the villa, rent it out to tourists, or do both, it’s best to postpone the purchase until you have a clearer understanding.
For example, if you’re buying a property for permanent residence, you need to immediately consider what will happen to it in your absence, who will look after it, and who will ensure utility bills are paid on time. For example, each Magnum Estate property has a management company that handles all these administrative matters for you.
If you’re renting it out , consider not so much your personal preferences as the demand for a particular property type and location among tourists. Currently, tourists are more interested in properties with high-end hotel services than villas where they have to worry about buying water and linens.
If you’re buying a property for both residential and income generation , you need to consider tourist demand to ensure the property doesn’t sit idle in your absence. It’s also worth rationally assessing the area’s development prospects: whether there’s growth potential and how easy it will be to sell the property. For example, the Sanur district, unlike Canggu, which is 97% built up, is actively developing and is being built up with new investment projects: a cruise ship port, a shopping center, and a medical clinic.
Read also: Buying Property in Bali: Expectations vs. Reality
Mistake No. 2 - Investing in real estate anywhere – “It’s Bali.”
Real estate market analytics and figures are impressive: housing is 85% occupied on average, and tourists flock here year-round thanks to Bali’s lack of seasonality. It seems like the island is a gold mine, where you can invest and earn high returns right now. And it doesn’t matter what area you buy in—it’s Bali, after all.
However, not considering location and its prospects is a big mistake. Each area can differ in infrastructure, proximity to the ocean, development, and the presence of major investment projects.
Housing prices in tourist areas also vary greatly. Access to the ocean, beaches, lifestyle, and pace of life; all these factors must be taken into account when planning a real estate investment. For example, there are areas like Sanur where hotels and villas predominate, with virtually no apartment complexes. Buying a villa is a profitable venture, but it’s important to understand that competition will be fierce due to the vast majority of such properties, and the wide selection. At the same time, investing in Sanur itself is very profitable. It’s a developing area, and even the Indonesian government is investing in it: major projects are being built here that will attract large numbers of tourists, such as an International Clinic and a cruise ship port.
Read also: Bukit is the Perfect Place to Buy a Villa in Bali
Mistake No. 3 - Purchasing Real Estate in the Private Sector (Without an Intermediary in the Form of a Management Company)
Private villas and apartments are for sale all over the island. This may seem like a good investment, as these options are cheaper than those located in complexes. However, buying a private villa or apartment from the owner can be a major headache.
Buying a private villa means that all responsibility for managing any issues falls on the owner’s shoulders. To focus on your vacation or simply earn passive income, we recommend choosing villas with a management company. This way, you won’t have to worry about administrative issues, as the management company will handle them for you.
Read also: Dubai, Türkiye, Bali, or Thailand: where is investing worth it?
Mistake No. 4 - Superficial inspection of an object
Whether you are buying land or a house, it is important to conduct a thorough inspection.
01. Developer
The risks are very high with a private individual, as there’s no one to hold accountable if something goes wrong. If it’s a company, find out what projects have already been completed.
02. Status of the Land Plot
The full land certificate verification process can take more than a month:
Obtain consent from your neighbors for construction, as well as permission from the local community. Failure to do so will result in the construction being illegal.
Make sure that the property and surrounding area do not encroach on neighboring properties.
Pay attention to the access road to the house: whose road is it, and can you use it? If this isn’t legally documented and specified in your building permit, the construction may be considered illegal.
Be sure to check the certificate for duplicates.
03. Site Features and Building Permit
When purchasing property from a private owner, you should check for building permits and inquire about the land’s zoning. This determines whether a certain type of property can be built there.
However, to avoid such complications when purchasing, choose reputable developers with years of construction experience. This way, your transaction will be 100% legal, and the property will be built to all standards.
Read also: Buying Real Estate in Bali: Step‑by‑Step Guide for First‑Time Foreign Buyers
Mistake No. 5 - Buying real estate at the top end of the market
Look for attractive offers, but also analyze the price justification. If you buy a property at the top end of the market, reselling it for a higher price or for the same price will be difficult; it needs to be a sought-after property. However, this approach is perfectly acceptable. It may suit more conservative investors: they buy ready-to-rent properties that can be rented out immediately without worrying about resale.
However, if you plan to resell the property, there’s an important factor to consider. Some developers don’t factor in future price appreciation at the start of construction. If you buy a property at a high price right away, selling it for even more will be difficult; there will be more modern options available at a more attractive price.
Magnum Estate builds its pricing policy with appreciation in mind, so you can resell at an even higher profit if needed.
For example, one of our investors purchased an apartment in the five-star Magnum Resort Sanur for $390,000 and resold it just five months later for $510,400. The investor’s profit was over $120,000, and the ROI, after all taxes, was over 30% in less than six months.
Read also: What Areas in Bali are Suitable for Investment Property?
Let’s Sum It Up
It might seem easy to navigate the market and analyze available purchase options on your own, just like with property ownership options and other legal matters.
But in reality, this carries a huge risk: you could lose your entire investment. The Bali market is in high demand, so there are many companies with dubious reputations.
We recommend enlisting the support of a reliable partner with experience doing business on the island, especially if you want to conduct the transaction remotely.
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