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Are Bali rental villas in high demand?
Foreign property investors have had an amazing run as the market for Bali rental villas has grown in line with increasing levels of tourism.
Tourist visits in 2024 are showing no signs of slowing down as the Ministry of Tourism anticipates 7 million tourist visits to Bali.
The island’s appeal goes from strength-to-strength and the trend for holiday villa rentals will remain in hot demand as a result.
Investing in property in prime locations is a proven strategy the world over. Buying a villa in an area of high tourist demand can generate a regular and significant passive income.
Getting in early on a real estate market property boom will have life changing wealth generation benefits as property values rise in line with increasing demand.
Continue reading to learn;
- If Bali rental villas are a good investment;
- How to research real estate markets in Bali;
- The best property market in Bali to match your needs;
- How to run a rental business in Bali;
- Passive income and wealth generation;
- Efficient ways to maximise your ROIs.
Are Bali rental villas a good investment?
Buying the right property in the right place can have life changing financial benefits. However, not every property investment goes to plan and getting it wrong can have disastrous consequences.
The property market in the South of Bali has been on a tear for the past 20 years. Property investors with the foresight to get in early on the real estate boom have made a lot of money.
In fact, many owners continue to make a lot of money as the demand for holiday villa rentals remains.
Rising land and property prices
Land prices have risen during this time in places like Canggu, Seminyak, Sanur and Uluwatu. So much so that a 3-bedroom pool villa purchased in 2015 for $180,000 is likely worth upwards of $750,000 in 2024.
As land and property prices rise, so do the rental rates for holiday villas, restaurants, coffee shops and bars.
There comes a point when a real estate market grows so fast that property prices inevitably stagnate before entering a period of decline.
The data in this article has been complied through using the research tools on the AirDNA platform.
AirDNA is an industry leading real estate data analytics platform that measures holiday rental property performance around the world.
How to research Bali’s villa rental market
Understanding your market is the starting point to your villa rental investment journey. Unfortunately, quality and reliable publicly available information on Bali’s rental villa market is difficult to find.
However, as a lead developer of Bali rental villas, we make it our job to provide detailed research on the many real estate markets in Bali.
We pay to use a number of rental market analysis tools to make sure the advice we give to our clients is up to date and accurate.
Bali Property Investment Report 2024
This comprehensive Investment Report is a must read for property investors focused on the Bali real estate market.
Rental villas in the South of Bali
The tourist destinations in the South of Bali are showing clear signs that a period of stagnation is close. More details on how property cycles behave can be found by reading the 18 Year Property Cycle in this free Investors Report.
Now, we are not saying that the real estate market in the South of Bali is about to collapse and villa owners are set to lose all their life savings. Not at all.
We are simply trying to point out that the market frenzy can not go on forever. After an unprecedented run of land, property and rental price appreciation, tourist demand can not continue to stimulate the growth cycle further because pricing pressures come into play.
A two week holiday of fun in the sun is getting expensive in the most developed tourist areas of Bali.
What type of investor are you?
There are now two ways of looking at the market from an investors perspective;
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Existing investors – Those already owning property will continue to benefit from high rental prices driven by sustained tourist demand. Owners are being rewarded with a high rate passive income because they had the foresight to buy into the market during the early stages of the growth cycle.
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New investors – Those looking at the the developed tourist areas are faced with the following options;
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Buy into the market whilst property valuations are at their current peak and enjoy the rental rewards over time. In this scenario, the capital required to buy into the top end of the market is high so the bottom line ROIs will be low. It will take a more time to pay back the initial investment and therefore longer to make a profit.
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Buy into a growth stage market where property valuations are lower and tourist demand is on the rise. In this scenario investors benefit from both rising rental income and explosive property valuations.
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Concentration of Bali rental villas
The map below shows the heavy concentration of 3-bed/3-bath villas for rent in the South of the Island. Places like Canggu, Seminyak, Kuta and Uluwatu are heavily saturated with rental villas.
Ubud‘s rental market has is also heavily concentrated whilst other areas of the island face less competition.
Amed in the northeast of Bali has a significant shortage of quality 3-bed/3-bath villas for rent.
So much so, as detailed later in this article, the occupancy rate for 3-bed/3-bath rental villas in Amed is over 90%!
Identify the best market for your needs
Your investment into a Bali rental villa will be determined by a number of factors that are entirely relevant to your personal situation.
You should try to answer the following questions to help you match your individual preferences with a specific area of Bali
Consider the following;
- How much money do I have available to invest?
- Is the villa used for personal holidays, as a rental investment, or as a combination of both?
- How many bedrooms does the villa have?
- If my heart set on buying a Bali rental villa in a particular area, do I have enough money to buy the property?
- Can I get more for my money in a emerging market?
- Which area of Bali gives me the most upside profit potential?
Emerging markets vs developed markets
By researching how Bali’s rental villas are performing, we can deliver impartial advice based on the individual needs of each client we talk to.
We are able to identify the best investment proposition based on what you want to achieve from your Bali rental villa.
For example, if your budget is $300,000 and you want to invest in Uluwatu, the best you will get is a 1-bedroom studio in an apartment block.
The same $300,000 investment can buy you a large 3-bed/3-bath pool villa with ocean views in a developing market such as Amed.
Maxmize your ROI potential
Whilst buying into a developed market may appear to provide more security on your investment, the reality is that the higher upfront capital cost has a dramatic impact on your rental ROIs.
Buying into an emerging market actually provides a greater margin of safety. The returns on investment benefit greatly from a compounding effect driven by rising demand and rising rental prices.
The lower upfront capital cost of buying into an emerging market puts your capital to work at a more exponential rate. This results in a more profitable investment decision over the long-term.
The information below is based on on 3-bed/3-bath villas in four of Bali’s most popular tourist destinations, Sanur, Cemagi, Uluwatu and Amed.
Data for rental villas in Amed
Data for rental villas in Sanur
Data for rental villas in Uluwatu
Data for rental villas in Cemagi
Running a villa rental business
Turing your rental property investment into a highly profitable cash generating machine requires effective management of your costs. You will also need to provide top notch client management services to enhance your reputation as a leading rental manager.
Costs involved in renting your villa
The table below details the basic running costs involved in managing your Bali rental villa. The figures based on a villa purchase price of $279,000.
Occupancy Rate | 60% (Pessimistic) | 70% (Realistic) | 80% (Optimistic) |
|---|---|---|---|
Rental days available | 219 days | 256 days | 292 days |
Rental price per day | US$215 | US$215 | US$250 |
Gross Revenue | US$47,085 | US$55,040 | US$73,000 |
Pool & Garden | US$3,000 | US$3,000 | US$3,000 |
Bookings Fees (4%) | US$1,885 | US$2,200 | US$2,920 |
Breakages & Costs (5%) | US$2,355 | US$2,750 | US$3,650 |
Electricity | US$1,660 | US$1,825 | US$2,005 |
Cleaning | US$1,425 | US$1,665 | US$1,900 |
Total Expenses | US$10,325 | US$11,440 | US$13,475 |
Net Profit | US$36,760 | US$43,600 | US$59,525 |
ROI % | 13% | 16% | 21% |
Client communications and management
Making sure that your client relationships are managed properly is vital to your long-term success as a rental host. Building a great reputation as a host on platforms like Airbnb helps to you rise above the competition.
If your Bali rental villa is located Canggu, Seminyak or Ubud, then you are most likely faced with a lot of competition due to the massive supply of villas available. If your reputation stands out from the rest, you have a much better chance of renting your space.
Insider tip;
- Respond to guest enquiries promptly
- Resolve all issues in a timely and polite manner
- Prepare a detailed welcome/information pack for guests
- Leave bottles of water and a fruit selection for new guests
Cleaning your rental villa
Many hosts get this part completely wrong. Preparing your villa for new guests is an essential part of building a strong reputation. Make sure that your every corner of your villa is absolutely spotless.
Bedding and towels must be clean and fresh and bathrooms should be disinfected every time a guest checks out.
Guest turnover
Depending on how you intend on managing your rental activities, welcoming guests into your home is an important part of the relationship building process.
If possible, try to meet and greet guests on arrival to set a lasting impression on their experience. A simple tour of your villa goes a long way and being there to answers any questions on where to go and what to do will help your guests to quickly settle into their holiday experience.
At checkout time, collecting the keys and getting some face-to-face feedback will encourage the guest to leave a glowing review on the reservation booking platform.
Managing your Bali rental villa in this way can encourage repeat business and also be the base of referrals.
Passive income from renting your villa
After you have bought your dream investment property, transferred the ownership rights and furnished it to your liking, it is time to put your efforts to work by generating a passive income from renting your Bali villa.
Unless you are a full time resident of Bali, careful planning will be needed in order to make the most out of your investment. Managing your rental business venture from abroad can be very challenging.
If you following the checklist in the previous section, cleaning the villa and greeting guests as they check-in and check-out requires a local team to be in place to manage these highly important functions in order to maximise your investment potential.
The simple solution is to employ a specialist property management team. In this way you would simply go about your day-to-day life in your home country whilst the property manager runs the rental operation on your behalf.
Rental villa management services
Paying a professional company to manage your rental villa can relive you of the headaches involved by managing your investment from abroad. By employing a villa rental management company yo essentially pass on the day-to-day running of your Bali rental villa.
From reservation bookings, client communications, check-in and check-out, to villa cleaning and financial reporting, a villa rental management company can deliver a hassle for passive income from as little as 15% of your total rental revenue.
Occupancy Rate | 60% (Pessimistic) | 70% (Realistic) | 80% (Optimistic) |
|---|---|---|---|
Gross Revenue | US$47,085 | US$55,040 | US$73,000 |
Total Expenses | US$10,325 | US$11,440 | US$13,475 |
Net Profit | US$36,760 | US$43,600 | US$59,525 |
ROI % | 13% | 16% | 21% |
Management Fees (15%) | US$7,060 | US$8,255 | US$10,950 |
Net Profit PA | US$29,700 | US$35,345 | US$48,575 |
ROI | 11% | 13% | 18% |
Bali rental villas - Summary
Your motivation for buying a Bali rental villa is entirely unique to your situation. Unless you are buying the villa as your permanent residence, it makes perfect sense to put your hard earned capital to work by renting the villa out when you are not using it.
Identifying the ideal location for your Bali rental villa will be dependent on what you want to achieve and how much money you have to invest. If you have a large budget, want to generate a high rate passive income, then a developed location like Canggu or Uluwatu should be on your radar.
The downside to choosing a developed location is that land and property values are already at a very high level. This restricts the long-term growth of your capital as property prices do not explode in established real estate markets.
If your capital budget is limited, then looking at an emerging market like Amed is a great option. Short-term rental income for 3-bed/3-bath pool villas with ocean views can delivery high ROIs in excess of 20% per year.
Factor in that as land and property value explode, your long-term capital appreciation rate can deliver exceptional returns. For example, a villa in a prime location of Amed can be purchased for $279,000.
In five years time the same villa can easily be worth half a million dollars ($500,000). In terms of total ROIs, buying a villa in Amed is the best use of your investment capital in a Bali villa rental over the long-term.
A Brand New Villa Concept
The first of its kind development featuring nine luxurious 3-bedroom villas in a secure maintained gated complex, nestled between tropical hills of the Celuke Valley, complete with breathtaking views of the Bali Sea
Interested in buying a villa in Amed?
Talk to us for more information on buying a villa in Amed.
Our Amed based real estate specialists will be happy to answer your questions.
We will provide you with all the information you need to know on how to buy, own and capitalize on the real estate market in Amed.
