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WHAT – a villa in Bali?

This question, I was asked frequently in the last weeks, months and even years. This article will introduce you to some crazy steps I’ve been taking, the reason behind them, obstacles & upside potential which accompany my journey.

How did I end up having a villa in Bali?

There’s this 17-year-old girl Nicole, thinking about possibilities of how to earn passive income and become financially free. She was reading plenty of books, and articles, watching videos and just educating herself to the fullest. She already is into the game of stocks and she’s making the most of her free time to earn more money. Now’s the question: What to do? How to scale up? How to reach the goal of becoming financially free? This was the beginning.

And out of nothing, there appeared this online course on how to travel the world and earn passive income through an Airbnb business. Alright, sounds good to her, so she got the online course about Airbnb. Hours and hours of watching, hours of “the right way to set up an Airbnb business”. After a few weeks, she watched the whole course and is ready to take off.

Next step? Finding a flat and try this business model out in Regensburg (Germany). She was having plenty of visits to flats in the beautiful ancient old town – a perfect location! There was one obstacle: She approached several flats, and several homeowners… but none of the owners allowed sub-rentals.

The dream seemed to be destroyed and she quickly tried to forget her dream of passive income via Airbnb. 

Months later, there was this thought: “Wait, the guy in the online course also did his business in Thailand. Why shouldn’t I go global as well? Once, I was in Bali, and I loved it. I can imagine having a 2nd home base on this South East Asian Island. Let’s give Bali a try!”.

That’s about quite the beginning of my journey. 

Why I was not going the easy way but went all in – risk & money-wise

In 2019 I was taking a plane to Bali with the mission of my perfect villa to rent it out via Airbnb, achieve passive income and at the same time get a 2nd home base!

Note: In Bali, it is common practice that a German citizen cannot easily just buy land and own it forever. I mean, practically there is a way to “buy” land via the so called free-hold contract, but this option is quite expensive so whenever one is talking about doing business with property in Bali they are talking about “lease-hold rental”. Lease-hold rental is a type of rental agreement where a tenant is granted the right to use and occupy a property for a specified period of time, typically for several years or more, in exchange for paying rent to the owner of the property (in Bali, usually upfront payments). In a leasehold rental agreement, the tenant has a legal right to use it for the duration of the lease term.

Considering my goal of finding a perfect lease-hold agreement, this is what the first two weeks looked like: Travelling around all the beautiful areas in Bali, visiting one villa after another, and trying to find the perfect villa on a 1-year-rental-basis. Sub-renting wasn’t a problem, the Balinese agents rather seemed to be used to this approach, since many Europeans and Americans follow this business model for years already. 

Another obstacle occurred: BALI WENT EXPENSIVE!

I was visiting breathtaking villas located in the middle of rice fields, but 17K€ yearly rent for a 3BR villa in Canggu was pretty overpriced at this point. I made the necessary calculations and concluded: This was a too high time-invest, money-invest, risk and uncertainty for a comparatively low income (Looking back now, God thanks I didn’t do it! Especially as corona crashed in, there wouldn’t have been anything left). 

And again, my dream seemed to be destroyed. I gave up.

Buuuuut… As the universe has always a plan for us, a Facebook post just popped up and said: Three Bedroom (3BR) Villa in Berawa, Canggu, 13 years for 90K€ (=7K€/year). My eyes got shiny, I made a quick calculation. Long story short: I took it and ended up with a 13-year lease-hold contract for a 3BR Villa in Bali. 

Obstacles I needed to face

All of the above didn’t come the easy way. It was not like: “Let’s do it and we pay monthly”. No, back then, I decided to “play investor”. Me and my business partner paid the whole amount for 13 years upfront but in instalments, which means every couple of months we paid 30 % of the whole investment. By Mid-2020 all the rental costs were covered.

All of this just seemed like my dream finally came true. Finally, I got a villa for 13 years. Let me summarise the obstacles I still needed to face.

1. Humidity and construction work

We’re not talking about villa in Germany, where you utilise big machines and highly developed strategies to build a villa. We’re talking about a tropical island in Indonesia,

1. which has a tropical climate which means it has high temperatures and high humidity year-round. The average humidity in Bali ranges from 70% to 90%, with the highest levels occurring during the rainy season from October to April. During the dry season from May to September, the humidity levels are slightly lower, ranging from 60% to 80%. 
2. where true-man-power is the main component of construction work. Additionally, there’s a lack of strict building codes and regulations, which may lead to substandard construction practices, the use of poor-quality materials, and inadequate structural design.

That being said, a German girl may underestimate the risks that come with the above. And she (I) did. 

2. Being naive

Balinese guys take your money with warm hands. And if you’re unlucky and attract the wrong business partners, they’ll use it for THEIR best interest. This is what happened to me with one person I made business with – The owner of the land.

During the whole process of finding a villa, doing the analysis of the land, the surroundings and the construction work, I was called “Bali family” and felt like I found the best opportunity of my life, where I can trust the person I’m doing business with and at the same time, I’d make a lot of money. 

What was the outcome of my naivety and trust? 

Well, it was not just that we had to cope with the owner of the land who was running away with the money before the villa even got finished. No, this guy even left back a villa with a non-waterproof roof, that needed further investigation and investments to finally be waterproof. 

What was even more frustrating, back then, our “Bali family” told me they were bankrupt, they spent all the money on the villa and cannot even afford the tuition fee for their son. In September 2022 I found out: That was 100 % a lie & with my money, they bought another land and build a 2nd villa there. And I’m like: Bash, in your face, Nicole! 

Well, lesson learned: Some Germans are naive and will be taken advantage of if they don’t know the game. To any of you who may be considering investing in Bali: Please be careful who you do business with. It’s a game and you need to calculate well to win – or find the right strategic partner to do so. 

3. There are MORE costs

“The rent is already paid for 13 years upfront” sounds pretty great, right?! What I found out later was, that there are not only maids, laundry, water, wifi and electricity each month (which is already approx. 10% deducted costs of your monthly revenue), but there’s also general maintenance that needs to take place to maintain the quality of the house. It’s not anyhow related to taking care of a house in Germany or generally Europe, where you just do a fix here and there. It’s rather some bigger fixes here and there because remember Lesson 1: We’re talking about up to 90% humidity and extreme temperatures that make any material get bad quite soon. 

This is why I recommend saving 10 % every month to do some fixes by the end of the year. Some years, you may not need it fully and you’ll be happy about it. But another year, you may need it and just thank God that you have saved enough money to make your villa pretty and fresh again.  

4. Working attitude of Balinese

It’s not a secret that some Balinese citizens have a different working attitude than Germans. But still, it is quite funny to evaluate the whole thing since whenever I was in Bali and visited any of the small renovations, I saw some relaxed workers sitting around looking at their smartphones and having lunch – for which I paid the salary. That makes a German girl not happy as you can imagine. Maybe interesting to consider, an Indonesian construction worker is approximately earning 150K IDR a day, which is like 10 €. Still, it sums up! 

In comparison, when you find the right access to the right people in Bali, you’ll have the most qualified, best connected and most helpful and knowledgeable people around you who make their whole network come together only just to find a solution for your problem. The more I am visiting Bali, the more this fact translates into reality. As of now, I have a list of telephone numbers of the 15 best construction workers, designers, notaries, and property agencies to contact for whenever I’d have any problem with my villa or if any of my friends need help with something. And I am 100 % convinced: With those joint powers I am able to prevent myself from making any more stupid mistakes!

4. Company in Bali (PMA Investment company)

Note: If you want to list your property on Airbnb in Bali, you will need to have a company or a local representative to manage your rental. This is because the Indonesian government has regulations in place that require property owners to have a company or a local representative to legally rent out their property on Airbnb or other vacation rental platforms.

Therefore, to establish a company in Bali, I went through a process of company registration, which includes obtaining the necessary licenses and permits, and registering your business with the Indonesian government.

For all of this process, I hired my friend Carolin who did all the processes, planning, registrations and legal matters for me. If you’re planning to do the same, I suggest you getting the right person who’s legit in balinese law and who’s evaluating your personal situation and goals – since this is one of the key success factors in how to set up the company and making money legally in Bali.

You think “Ahh no I don’t need a company, the Balinese government will not get me”? Then, rather listen: Failing to comply with the regulations can result in penalties or even legal consequences. You may not even be allowed to enter the island of Gods (Bali) again if you do big mistakes here. A key person to rely on therefore is more important than you may think. 

After all, there are also some practices in place to save in taxes, but for that, you may need to talk to me in private 😉.

Does a villa in Bali make sense? 

Yes, a villa in Bali makes total sense. Imagine starting a business during a global pandemic. This pandemic especially had a significant impact on industries such as travel, hospitality, and retail. But me – calculated on a yearly cost breakdown – I covered all my costs, made a couple of thousand profit and eventually, now, as of February 2023, made 3.000€ in revenue in one month, which is almost covering the whole 2023-rent (remember, yearly rent would be at around 7.000€). 

I made initially many mistakes. With more caution regarding my business partners, with more time to surveillance the whole process and with the knowledge I have to the current point, I would have saved more than 30K Euro, I am not joking. I don’t want to dive too deep into all numbers, figures and stories, but I believe that there’s many things you need to consider if you don’t want to make unnecessary mistakes and you’re thinking about an investment in Bali. If you do those steps right, trust me, you’ll become financially satisfied. If you don’t trust me, just take a look into my 2023 calculations.

Learnings

Looking back to 2019, even if there were many hard moments with many helpless thoughts and regrets, I acquired so much knowledge, experience, friends and wonderful souls that will accompany me through the rest of my life. The way of start doing business in Bali allowed me to grow personally and what’s more: Did allow me to come closer to this beautiful folk of spirits, energy and true belief. I’d get a villa in Bali anytime again & cannot wait for my next opportunity so start another Bali-Experience!

This is what you can learn from my experience in order to make passive income by having an Airbnb in Bali:

1. Find experienced people who have already gone through the process
2. Choose carefully who you do business with and always get diverse opinions for any decision you make
3. Never pay all upfront. In case of a >10 years lease-hold contract as an investor, do the last instalment when the villa is ready to move in
4. Save 10 % every month for doing small renovations and keeping your villa at an high-end standard
5. Enjoy your life and don’t overthink. Life’s too short to spend your time with hundreds of concerns. LIVE YOUR LIFE!

That’s it from my side. Considering the above points & you’ll have not only a beautiful villa at your disposal in which you can make a holiday whenever you want but also will have a reliable 2nd income source that allows you to come closer to the life you want to live.

In case you find the above interesting but still don't know how to apply it to your plans, please don't hesitate to reach out to me. I'm happy to help! 

With love & only good intentions,

Nicole