Run a villa rental business in Bali legally and safely. Here's what you need to know to protect your investment and avoid unnecessary losses.
Renting out a villa in Bali is one of the most common business activities among foreigners on the island. However, misinformation and a lack of experience often leads to unnecessary problems for foreigners renting out villas in Bali.
This article will explain how you, as a foreigner, can rent out a villa in Bali legally.
Why start a villa rental business in Bali?
Bali’s reputation as a paradise island describes its historical accommodation market. Many people look for the feeling of getting lost in paradise during a cozy getaway – something that will increase in demand as covid restrictions are lifted around the world.
According to the Bali Statistics Agency, about 6.28 million international tourists visited Bali in 2019. The number of foreign visitors dropped to under 2 million in 2020 due to the pandemic. Although asking prices remained the same, the decline in tourism resulted in a standstill in the property sales from February to April of 2020.
Opportunities to Purchase Property in Bali
Although asking prices have not changed much, local realtors have seen deals closing below what they would have been in 2020.
VIVO ASIA property analysts expect that rental market will recover, favouring investors that wish to buy-to-let and establish long-term lifestyles in Bali.
Adding the numerous entrepreneurs and nomads who have already chosen to relocate to Bali permanently, the demand for long-term rental accommodation will most likely bounce back before other areas of the property market catch up.
Profitable villa rental businesses for foreigners
People have different motives for renting out a villa in Bali. In most cases, foreign investors seek the lifestyle and not just the financial benefits of running a property business in Bali. The most popular business models amongst foreigners being:
Buying and renting multiple villas for holiday getaways
Buying a villa for personal use, renting it out occasionally during high seasons or while traveling
Both – building a villa complex that has units for renting out and others for personal use
Changes to the Negative Investment list in Indonesia now prevents foreigners from owning businesses classified for villa rental. This is now reserved exclusively for Indonesians.
Renting out a villa (or villas) is still very achievable as a foreigner. There are two primary solutions to structure your business for villa rentals. Choosing between them depends on whether you want to provide short-term or long-term rental options.
Choose the right business classification for your company
Short-term rentals
To rent out a villa on a daily or weekly basis, you can set up a Hospitality Management Consulting PT PMA with 100% foreign ownership. This business structure allows you to purchase land in tourist zones of Bali and manage the buildings on that land including the provision of short-term and long-term rentals.
Owning a Hospitality management business in Indonesia also allows you to manage multiple accommodations in different locations. This involves less licensing time, cost and paperwork than other business classifications.
Long-term rentals
Foreign investors can set up 100% foreign-owned real estate businesses in Indonesia. However, only long-term rentals are legal under this classification. This is the only option available if your property lies in a residential zoning area.
Monthly rentals qualify as long-term rentals. So this works well if you plan on living in your villa for half a year. You can lease it out to tourists for the rest of the year but you cannot rent out your villa to tourists on a daily basis.
It is possible to register a real estate company using a virtual office. This means that your company will not have an actual office. Instead, it will use a registered address where your mail can be delivered.
Having a virtual office also means that you can register the company before buying the property. Consequently, you can acquire the property under the name of the company.
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