When buying a property in Bali, it seems like a stable monthly income is guaranteed, as tourists flock here year-round. Plus, buying property on the island is quick and easy, you don’t need to be present during the transaction, and you can even pay with cryptocurrency. However, the property you buy can either yield 12% annual interest in dollars or become a headache for years to come. Let’s figure out which apartments and villas will generate a good income, and which ones will bring more problems and expenses.
Quality housing cannot be cheap.
Considering not only Bali’s premium properties but also lower-priced ones, apartment prices can be found starting at $1,800 per square meter, while villas start at $1,500 per square meter. To understand the price range, it’s important to assess all the risks and understand the ins and outs when purchasing real estate:
- who is the developer;
- What technologies were used during construction;
- how the foundation was laid;
- engineering features;
- quality of building and finishing materials;
- organizing access to housing and much more.
If groundwater or the island’s seismic activity weren’t taken into account during design and construction, the soil beneath the foundation could erode. This could cause subsidence and cracks in the walls. Incorrectly installed wiring could cause short circuits, and an incorrectly selected pool pump could quickly burn out.
Many people want to save money and buy homes at below-market prices. Let’s find out if quality real estate can be affordable.
Let’s imagine you’ve come across a tempting offer: a three-bedroom villa for just $300,000 in a prime location in Canggu. Let’s explore what a developer should consider when building such a home, and what the minimum costs are:
- Land in this area under a leasehold agreement costs an average of $1,500 per acre per year. For example, if you buy a villa with a 300-acre plot, over a 30-year lease, that would be $135,000 for the land alone. Plus, about 30% would need to be added for the common areas and the entrance. Ultimately, the land alone would cost $175,000 for a 30-year lease.
- Developers are required to pay a PPH tax of 10% of the property’s value. In our case, the villa’s price is $300,000, so the tax is $30,000.
- The average cost of a swimming pool including equipment is $15,000.
- Landscaping the property will cost an average of $20,000. This includes landscaping the common areas, including the foundation and paving of open spaces, fencing, landscaping, and the entrance area to the villa.
- The development company’s income . At this price, the villa would be around $50,000. This includes the company’s sales, operating expenses, and employee salaries.
The total cost is $290,000, excluding the cost of building the villa itself.
To build a villa, a company needs to cut corners. There are a ton of options for doing this. They can use:
- illiquid lands;
- land lease for less than 30 years;
- tiny plots of land;
- cheap labor;
- cheap and uncomfortable furniture;
- a wooden roof that will need to be replaced in just a few years;
- minimal foundation , from which the villas subsequently begin to crack;
- thin reinforcement and low-grade concrete, which can cause walls or ceilings to deform, crack, and even collapse after a few years;
- Cheap cladding materials. For example, limestone, an inexpensive natural stone, is used for cladding. While it looks beautiful when new, it loses its quality after a year: dust and moisture get into its pores, making it dirty and unattractive, forcing the owner to replace it. Wood is also often used in villa finishing, but under the influence of hot and humid climates, it deteriorates, shrinks, and attracts termites, forcing the owner to replace it regularly.
Ultimately, the construction company will save around $50,000 on the expenses described above. When building a house, including finishing and furniture, they try to keep the cost under $60,000. It’s easy to guess what quality the buyer will receive after construction, even taking into account these savings.
This all leads to the investor incurring losses: they must constantly renovate the property, invest in new materials and hiring workers. At this point, they cannot rent out the property and generate income. This is why there is so much cheap housing on the Bali market: owners are tired of constantly renovating.
The cost of building a decent villa with finishing and furniture is $700 per square meter. For a 200 square meter villa, this comes to around $140,000. And this is only the cost of the villa, without the common area, pool, and other living space.
Housing Requires Constant Maintenance
If you plan to rent out your villa yourself, you’ll need to set up a company and obtain an operating permit and license. And if you decide to outsource your villa management to another company, you may encounter difficulties overseeing its reports and management expenses. Ultimately, villa owners become tired of this and try to sell their properties, which is why there’s a lot of this type of property on the market.
To generate a stable income from renting out your property, you also need to constantly manage it: find tenants, clean up after guests, maintain appliances and utilities, and carry out cosmetic repairs. And it’s not as simple as it seems. Imagine your power goes out or you have no water. Who would you turn to in a foreign country? Therefore, in addition to the quality of the accommodation, the presence of on-site management is essential.
Apartments and villas with hotel services offer a strong competitive advantage. They have a management company that takes care of technical issues, repairs, cleaning, and finding tenants.
It’s important to understand that a property that requires constant repairs and lacks a management system won’t generate 12-15% income. At best, you’ll get 6-8%, or even less, and face a lot of problems.
Magnum Estate has maintained its competitive advantage for years
It’s important to remember: the cheaper the type of property, the more difficult it is to rent out. In this case, your competition is thousands of similar villas on the island. The appeal and profitability of such properties is declining every year. More modern, high-quality options are appearing on the market, and their rental demand is much higher.
Where would you prefer to stay: in an old, isolated Balinese villa or in a new, modern, gated community?
We build premium real estate to maximize investor returns and maintain its appearance for years to come:
- We carefully select locations with high occupancy rates in key tourist areas;
- We are building a real estate format that is in demand in this particular location;
- When designing, we take into account all the features of the terrain and land;
- In construction we use materials that do not deteriorate under the influence of the Balinese climate;
- we purchase high-quality equipment;
- We order furniture according to individual designs that differ from similar offers on the market;
- We develop and implement smart home and remote property management technologies.
Even after five years, such housing will have competitive advantages and generate a good return.
We don’t just build and sell housing; we build service and management to ensure our properties generate maximum income, and we take full responsibility for the quality of our services.
Objects Worth Paying Attention To
1. Magnum Resort Berawa
- Winner of the prestigious Property Awards
- The complex boasts the longest rooftop pool in the world – 190 square meters. This feature will attract tourists from all over the world.
Located in the most popular tourist area of Bali.
The complex has everything you need for living and relaxing: a rooftop, lounge bar, chill-zone, fitness center, coworking space, and a restaurant.
2. Magnum Resort Sanur
- Winner of the prestigious Property Awards
- The first ultra-luxury complex in Bali
- The only complex on the island with its own beach club
- Residents of the complex have access to their own yacht.
The complex has several bars, a lounge area and a luxurious swimming pool with azure water.
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