Renting vs Buying Real Estate in Bali

Author of the article:

Artem

Indonesia
Real Estate Specialist

Date:  29.08.2024

Reading time: 10 min.

Views:  544

Bali isn't just a tourist paradise, it's a dream come true for expats looking for a new place to live. With its stunning beaches, rich culture and warm climate, it's no wonder that many are thinking about staying here for the long term. But before making a decision, there's an important question to consider: renting or buying real estate in Bali? Each option has its pros and cons, and in this article we'll go into detail about what's best for you.

In this article, you will learn:

• Advantages and disadvantages of renting real estate in Bali.
• What are the pros and cons of buying a home on this island.
• Legal aspects for foreigners wishing to invest in real estate.
• Financial aspects to consider when making a decision.

Now let's delve into the details and figure out which to choose: renting or buying?

Real estate for rent in Bali

Advantages of renting

When I first arrived in Bali, I was amazed at the variety of places to stay. Renting a property in Bali opens up a lot of possibilities for you. Firstly, flexibility is probably one of the main advantages. You can easily change residences by trying different neighborhoods, from bustling Seminyak to quiet Ubud. This allows you to assess which lifestyle suits you best before deciding to buy.

Also, renting does not put you in a long-term commitment. You can rent for a few months and then, if you like it, extend the contract or find something new. This is especially convenient for those who are just starting their Bali trip and want to avoid making a large financial investment right away.

You should not forget about the lower initial costs. Renting requires a much lower start-up cost compared to buying a property. You don't need to raise a large capital for a down payment as is required when buying. Instead, you can use the funds for other needs, such as traveling around the island or exploring the local culture.

Disadvantages of renting

But like all good things, renting has its drawbacks. One of the most significant is the lack of ownership. You won't own the property, which means that at any time the landlord can decide to sell or use your property as they see fit. This can be stressful, especially if you are already used to your new home.

It is also worth considering possible changes to the terms of the lease. For example, the landlord may increase the rent or change the terms of the contract, which can lead to unexpected expenses. I remember a friend of mine faced a similar situation: his rent increased by 20% after only a year and he had to urgently look for a new place to live.

Finally, rising rental rates are another factor to consider. Bali is becoming increasingly popular with tourists and expats, which has led to an increase in rental prices. If you plan to stay on the island for a long time, this can have a significant impact on your budget.

Buying real estate in Bali

Advantages of buying

Now let's talk about buying real estate in Bali. This decision can be a great long-term investment. If you expect to stay on the island for a long time or even move permanently, buying can be a smart move. Not only are you securing a place to live, but you are also creating an asset that can grow in value over time.

The upside potential for real estate values in Bali is also impressive. In recent years, the prices of Bali real estate have increased significantly, and many experts predict that this trend will continue. If you buy a villa or apartment now, in a few years it could be a profitable investment.

Don't forget about the psychological comfort of owning your own home. When you own real estate, you feel more confident and stable. You can do whatever you want in your home: change the interior, host parties, or just enjoy the privacy without worrying about rent regulations.

GREEN VIEW VILLAGE

from $250,000

Indonesia, Bali, Ubud

VILLA CAPELLA

from $415,000

Indonesia, Bali, Ubud

VILLA MARBELLA

from $435,000

Indonesia, Bali, Ubud

VILLA HARMONY

from $395,000

Indonesia, Bali, Ubud

FOUR-BEDROOM VILLA

from $441,000

Indonesia, Bali, Ubud

DOUBLE VILLA

from $364 350

Indonesia, Bali, Ubud

Disadvantages of buying

However, buying real estate in Bali is not without its challenges. The first thing you will encounter is a high initial investment. Unlike renting, where you can get by with a small deposit, you will need a significant amount of money to buy. This can be a major barrier for many, especially if you are just starting your career or business in Bali.

In addition, legal restrictions for foreigners are another important aspect to consider. Bali has strict rules regarding property for foreigners. For example, you can't just buy land. Instead, you will have to use the so-called "nominee" system, which can cause additional complications and risks. I remember an acquaintance of mine ran into legal problems when he decided to buy a piece of land through a local person. This led to long legal proceedings and loss of time.

Another problem can be the difficulty in reselling the property. If you decide to sell your property, it may not be as easy as you expected. The real estate market in Bali can be unpredictable, and it's not always possible to find a buyer quickly at the price you want. I've heard stories of people who have been trying to sell their villas for a long time and ended up having to lower the price to attract interest.

Legal aspects for foreigners

At buying real estate in Bali for foreigners there are several key legal aspects to consider. Let's take a closer look at the main points worth knowing:

Prohibition of direct ownership of land
Foreigners cannot directly own land in Bali. This means that you will have to use alternative schemes to legally purchase real estate.

Long-term lease
One of the most common ways is through a long-term lease. You can rent a property for up to 30 years with an option to renew. This gives you the opportunity to use the property without breaking local laws.

Use of nominee
Another option is to use a nominee owner, where a local citizen becomes the formal owner of the property. However, this approach carries certain risks:

• Trust: You need to trust this person completely as they will be legally responsible for the property.
• Protection of rights: In case of disputes, you will find it difficult to defend your rights, which can lead to legal problems.

Need for legal aid
Due to the complexities of local law, it is essential to conduct all transactions with a qualified lawyer who understands the legal aspects of real estate in Bali. This will help you avoid potential problems and protect your interests.

Taxes and fees
Don't forget to consider the taxes and fees associated with the purchase of the property. These may include:

• Property transfer tax: Usually amounts to about 5% of the value of the property.
• Other expenses: It's also worth considering the potential costs of maintaining and servicing the property.

Financial planning
All of these aspects require careful financial planning. Make sure you take into account all possible costs to avoid unexpected expenses in the future. This will help you make informed choices and avoid unpleasant surprises.

Understanding these legal aspects will help you confidently navigate the Bali real estate buying process and avoid potential risks.

Financial aspects

When choosing between renting and buying a property in Bali, it is important to consider not only the initial costs but also the long-term financial implications of each option. Let's compare the costs of renting and buying in the table to get a better idea of what to expect.

It is also important to consider hidden costs that may arise after the purchase. For example, property maintenance, including property taxes, utilities and maintenance costs, can be a significant budget item. I know people who underestimated these costs and ran into financial difficulties when their property maintenance costs began to exceed their expectations.

Consideration of long-term goals

When deciding whether to rent or buy a property in Bali, it is important to consider your personal and financial goals. If you only plan to stay on the island for a few months a year, renting may be a smarter choice. It will give you the opportunity to enjoy life in Bali without a large financial commitment.

However, if you are considering a permanent move or want to create an asset that will generate income, buying real estate can be a great solution. For example, I know a couple who bought a villa in Changgu and now rent it out when they don't live in Bali themselves. Not only does this allow them to cover their living expenses, but it also generates additional income.

It is also important to consider how your decision fits into your long-term plans. If you want to start a family or start a business in Bali, having your own place to live can be an important factor for your stability and confidence in the future.

Conclusion

Ultimately, the choice between renting and buying real estate in Bali depends on your personal circumstances and goals. If you are looking for flexibility and less financial commitment, renting may be your ideal solution. But if you want to invest in your future stability and create an asset that will generate income, buying real estate may be more beneficial.

Remember that each option has its pros and cons, and it is important to carefully weigh all aspects before making a decision. If you still have questions or would like professional advice on choosing real estate in Bali, do not hesitate to contact our team. We are always ready to help you make the right choice and realize your dream of living on this amazing island.

If you would like to learn more about buying real estate in Bali, contact us. We will be happy to answer all your questions and help you find the perfect home in Bali!