Starting a property rental business in Bali can be exciting, but also a bit overwhelming. As a foreign investor, it’s normal to feel unsure about the local rules, regulations, and how the market really works.
But don’t worry, we’ve got you covered! This guide lists all the key questions you should ask yourself when doing your initial research or speaking with your real estate agent.
We’ve also grouped the questions based on where you are in your journey, whether you’re:
- Searching for a Bali property from abroad,
- Preparing to rent out your villa, or
- Managing your villa to earn consistent profits.
Take your time, explore each section, and use it in the way that helps you most!
Common Questions When Buying a Property in Bali as a Foreigner
Buying a property in Bali from abroad is actually possible. We have many clients doing so, as you can see in this video.
However, there are some questions to consider before you make any purchase:
1. Is It Better to Buy or Lease Land?
Deciding whether to buy or lease land depends on your long-term goals and financial situation. Leasing land and building your villa can save you significant costs compared to buying an existing property.
However, it requires a longer commitment and involves more risks. Weighing the pros and cons with your objectives in mind will help you make the best decision. If you want to know more about it, check out: Investing in Land vs. Buying a House: Which Is Right for You?
2. What’s the Best Area in Bali to Buy Property?
Finding the right location for your dream home is crucial. And the right area typically depends on your goals:
| Preference | Recommended Areas | Key Benefits | Things to Consider |
|---|---|---|---|
| Want to stay near popular destinations | Canggu, Seminyak | – High tourist traffic – Strong demand for rentals – Higher rental yields | – Property prices are generally higher |
| Prefer a peaceful or slower lifestyle | Tabanan, Uluwatu | – Better value for money – Strong long-term growth potential | – Less tourist activity (may affect short-term rental demand) |
| Moving with family or kids | Umalas, Nusa Dua | – Convenient daily living – Family-friendly environment – Close to schools, shops, and restaurants | – May need to check distance to key amenities before buying or renting |
Another important point to consider is the local land zoning. Some areas in Bali have strict regulations that limit the type of developments allowed, preserving the island’s cultural and environmental integrity.
Read More: 10 Best Areas to Invest in Bali Real Estate 2025
3. How Do Property Rights Differ for Foreigners?
There are two types of property rights available to foreigners in Indonesia:
| Type | Definition | How It Works | Pros | Cons |
| Hak Sewa (Leasehold) | A common way for foreigners to invest in Bali property is by leasing land, villas, or apartments for a fixed period (usually up to 25 years, extendable). | You lease the property for a set time. You can live in it, rent it out, or build on it. Once the lease ends, the property returns to the landowner unless renewed. | – Lower upfront cost than freehold – Foreigners can legally control and use property – Good for short-to-mid-term investment | – Land isn’t truly yours – Must renew lease to continue using property – Value may decrease as lease period shortens |
| Hak Pakai (Right to Use) | A title that gives foreigners the legal right to use land for residential purposes, recognized by the Indonesian government. | Granted for 30 years, extendable twice (25 years each), up to 80 years total. Registered under your name and tied to the property certificate. | – More secure than leasehold – Legally recognized – Suitable for long-term living or investment | – More legal steps required – Process can be complex – Usually limited to residential use |
4. How Does the Leasehold System Work in Bali?
In Bali, foreigners cannot own land under freehold directly, but they can lease it.
Leasehold agreements can range from 25 to 99 years, providing long-term stability for your investment. You have the chance to extend the lease based on your agreement with the property owner.
It’s essential to negotiate terms that are favorable and clearly outlined to avoid future disputes.
Read More: Freehold vs Leasehold: Which Ownership Type is Right for You?
5. When Was the Villa Built?
Age matters when buying property. A newer villa might come with modern design, amenities and fewer maintenance concerns. But older properties? They often have a unique charm and character that can appeal to certain renters or buyers.
So, knowing when the villa was built helps set expectations. New builds mean less hassle upfront, while older properties may need more attention to stay in top shape.
6. Why Is the Owner Selling?
This question can reveal hidden truths about a property: Are they selling because the property isn’t performing as expected? Or are they upgrading to something better?
Knowing the owner’s motivation can give you insights into the property’s potential—or uncover red flags.
7. Is There Any Major Renovation Needed?
Renovations can turn a good property into a great one, but they can also eat into your profits if you’re unprepared.
Before buying, ask if the villa has undergone any major renovations. If not, assessing what upgrades or fixes might be needed is essential. This will help you budget properly and avoid any unpleasant surprises.
Meanwhile, cosmetic changes—such as a fresh coat of paint or new fixtures—can enhance the villa’s appeal without draining your budget. By weighing these potential costs upfront, you’ll have a clearer picture of the total investment needed to get your property rental-ready.
Tip: If you’re planning a renovation or redesign, Ilot Architect can help you transform your villa with smart, cost-efficient design solutions that maximize both beauty and ROI.
8. Can I Get a Loan from an Indonesian Bank?
Yes, but the rule is stricter for foreigners, as explained in our dedicated article here. That’s why most property purchases in Bali are made in cash. There are several alternatives you can try:
- Invest in an off-plan project: Off-plan investment often has a manageable and cost-effective payment plan.
- Set up a company in Indonesia (PT PMA): Setting up a local company will give you a legal identity. This method can help you borrow money from the bank.
- Getting a loan from Big International Banks: Some big banks worldwide operate in Indonesia and understand how to help people from other countries buy property here. For example, if you’re an Australian who wants to buy a house in Bali, a bank that works in both countries might be able to help you.
Read More: How Much Does It Cost to Build a Villa in Bali?
9. How Do I Pay for the Property?
The smartest way to pay for your property is through property agents. They work with reliable notaries to manage your funds, making it safer than handing money directly to a developer.
Your agent also handle most of the paperwork and legal procedures for you. This way, you might be able to pay part of the price at the beginning and the rest over time.
10. Should I Worry About Legal Issues?
Legal complexities can be daunting, but they are manageable with the right support, such as a reputable local lawyer or real estate agent.
They can help you understand ownership structures, secure necessary permits, and comply with local regulations. This proactive approach will help you avoid legal troubles and protect your investment.
Read More: How to Choose the Best Real Estate Agent in Bali
Questions When Starting Your Property Rental Business in Bali
Now that you have your property and are ready to start your rental business in Bali. Here are some key questions to investigate when creating your business plan:
1. Is the Bali Rental Market Stable?
Before diving in, you need to understand the current situation of Bali’s real estate market. Good news, Bali still sits within a unique real estate environment.
Bali tourism in 2025 increased by around 25.56%, according to the BPS (Badan Pusat Statistik) report. This number is also supported by a rise in the occupancy rate, which reached 57.23% by April.
2. How Does the Indonesian Property Market Cycle Work?
The Indonesian property market works differently compared to other countries. There are three phases and their impacts to consider: growth phase, plateau phase, and decline phase.
| Market Phase | Description | Impact on Investors |
|---|---|---|
| Growth Phase | Characterized by rising property values and high demand. In Bali, this often follows a surge in tourism, boosting the real estate market as investors seek rental income. | Ideal time to buy property. High potential for strong returns, especially in tourist hotspots with high rental demand. |
| Plateau Phase | The market stabilizes with slower property value growth. This happens when initial investment and development meet current demand. | Offers a stable environment to consolidate investments. Good for evaluating long-term strategies as prices remain relatively steady. |
| Decline Phase | Triggered by economic downturns, natural disasters, or reduced tourism. Property values may drop, and demand slows. | Though challenging, this phase can be a chance to buy at lower prices. Strategic investors can hold properties until the market rebounds. |
3. What’s the Rental Yield and ROI?
Here’s the deal: buying property isn’t just about owning a slice of paradise. It’s about making it work for you. From our experience as real estate developers and agents, we’ve seen returns ranging from 7% to 12% annually, with 20% considered lucky.
However, several factors influence Bali villa ROI, such as purchase price, nightly rental price, occupancy rate, annual rental income, operating expenses, monthly expenses, and monthly and annual net income.
Read More: How to Figure ROI on Investment Property in Bali
4. Where Should I List My Villa for Maximum Occupancy?
- Airbnb: Favored by first-time visitors to Bali for its strong reputation and easy-to-use interface. The platform offers both security and convenience for travelers.
- Facebook Groups: Popular for finding hidden gems and negotiating better deals. Many foreigners who have lived in Bali for a while use these groups to find or rent villas directly from owners.
- Real Estate Agencies: Some villa owners also choose to work with real estate agencies to market their properties. This is because agencies have wider reach, professional listings, and experience in handling foreign clients.
5. Do I Need a PT PMA to Start My Rental Business in Bali?
While a PT PMA (Foreign-Owned Company) provides more security, it’s not a must-have for starting a rental business in Bali. Many investors successfully operate without this structure—for example, through a leasehold agreement.
6. What Business Permits Do I Need?
For daily rentals, you’ll need a Pondok Wisata permit. If you’re purchasing a property that’s ready to rent, the previous owner might have already secured this permit. Always double-check to avoid any legal issues down the road.
7. How Does the Villa Rental Market Work in Bali?
You can either buy a villa or lease land to build one.
Renting out your villa can be a good way to make money, but it’s important to understand the costs involved. You might need to pay a commission to agents, and you’ll need to keep your villa well-maintained.
It’s also a good idea to hire a good property manager to help you, especially if you don’t live in Bali. They can handle guest bookings, maintenance, and any issues that come up. This way, you can ensure your villa is always ready for guests and keeps earning money.
8. What About Taxes?
Tax considerations can be a significant concern for any property investor. Here’s a simple breakdown:
- Income Tax: Foreign investors must pay a 10% tax on their gross rental income.
- Property Tax (PBB): This is an annual local tax based on the property’s value. It’s usually a small amount, around 0.1% of the property’s assessed value. For example, if you earn $10,000 from renting your villa, you’ll pay $1,000 in income tax.
- Capital Gains Tax: Selling a property in Bali can result in a capital gains tax on the profit from the sale. The rate is set by Indonesian law and applies to the difference between the purchase and selling prices of the property.
However, the tax rates and regulations can vary and change, so it’s vital to consult with a local tax advisor to make sure you’re following all the rules and paying the correct amount.
It’s also okay to ask your tax professional for advice on how to minimize this tax, such as timing the sale or reinvesting the proceeds in a tax-efficient manner.
9. How Do the Local Culture and Regulations Affect Property Investment?
Bali is a beautiful place with many traditions and rules you must follow, especially if you want to make a good investment. Here, some places are very special and considered sacred. If you want to build near these places, you have to follow special rules, like making sure your building isn’t too tall.
If you don’t follow these rules, you might upset the local people or even get into trouble, just like what happened to Set Up Jimbaran recently.
Read More: Airbnb Business in Bali: Investor’s Roadmap to Success
With over 20 years of experience helping expats create their homes in Bali, here’s what we do best:
- Design a villa that matches your style, personality, and vision
- Guide you through the entire building process, from start to finish
- Manage your villa long-term to maximize quality and returns
Questions When Running the Business and Keeping It Steady
Finally, it’s time to manage your Bali rental business and keep it steady in the long run! Here are some questions that can hopefully guide you:
1. How Can I Ensure a Steady Cash Flow Throughout the Year?
Seasonal fluctuations can affect cash flow, so diversifying your marketing strategies is crucial:
- Offering special promotions during off-peak times and targeting different segments of travelers can help maintain occupancy rates.
- Building a strong online presence and gathering positive reviews will also attract more guests year-round.
Bali doesn’t have a strict off-season, which means your property has to stand out to maintain a consistent occupancy rate.
2. How Can I Manage My Property Remotely?
Managing a property remotely is a common concern for foreign investors. So, hiring a reliable local property management company can be a game-changer.
They can handle everything from guest check-ins to maintenance issues, giving you peace of mind and ensuring your guests have a seamless experience.
Read More: Managing Property Yourself vs. Hiring a Company: What’s the Right Choice for You?
3. What Are the Ongoing Costs of Running a Rental Property in Bali?
Running a rental property involves several ongoing costs, including maintenance, utilities, staff salaries, and taxes. Regular maintenance ensures your property remains attractive to guests and reduces the risk of costly repairs in the future. Budgeting for these expenses is crucial to maintaining profitability.
4. What Insurance Policies Are Recommended for Properties in Bali?
Considering Bali often faces earthquakes and volcanic eruptions, it’s wise to have property insurance that covers these risks. These events don’t happen often, but when they do, they can damage homes and other buildings.
Here are some insurance policies worth considering:
- Comprehensive Property Insurance: Covers damage from natural disasters like earthquakes, floods, or eruptions—helping you avoid large repair costs.
- Liability Insurance: Protects you if someone gets injured on your property (e.g., a guest slips by the pool). It covers medical or legal costs, especially useful if you rent to tourists.
5. What Are the Potential Risks, and How Can They Be Mitigated?
Investing in Bali’s houses and land is exciting but comes with some risks, just like any big investment. Here are some of them:
- Legal Issues for Foreigners: Foreigners face more rules when buying property in Bali. You might run into problems with land ownership, building permissions, or changing laws.
What to do:- Always check that the land legally belongs to the seller.
- Understand local building rules.
- Stay up to date on laws for foreign buyers.
- Work with a trusted local agent who knows the legal process.
- Property Price Fluctuations: Property prices in Bali can go up or down depending on the economy, tourism trends, and global events. This affects both the value of your property and the income you can earn from it.
What to do:- Don’t invest all your money in one type of property or one area.
- Diversify—buy different types of properties in different locations.
- Keep a long-term mindset: real estate values often grow over time.
Read More: Protecting Your Bali Investment from Sudden Rule Changes: 3 Proven Ways
FAQ
You must deposit a minimum of IDR 2.5 billion in capital per business activity (KBLI) upfront.
Property management and vacation rental businesses.
Yes, it’s possible through a PT PMA, which allows 100% foreign ownership as long as the business sector is listed under Indonesia’s Positive Investment List.
Conclusion
Starting a rental business in Bali can be an exciting journey, but it also comes with its own set of challenges. By asking the right questions and doing proper research, you’ll be better prepared to navigate Bali’s real estate scene with confidence.
And remember, having local guidance can make a huge difference. If you ever need help, we’re here for you.
ILOT Property Bali has spent over 20 years helping clients understand the Bali market, invest wisely, and build profitable properties. You can chat with our team for free—no pressure, no obligation—by booking a quick consultation here.
