4 Strategies to Invest in Bali Real Estate

Bali is a popular travel destination. At the same time, it is a property investment hotspot for international investors. Investing in luxury property in Bali includes a range of options, from buying completed properties to building custom villas. Each option has different returns, time investments, and levels of risk. In this article, we will discuss four major investment strategies to help investors navigate this dynamic property market.

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1. Buying a Completed Property: Low-Risk with Immediate Rental Returns

Investing in completed properties is a relatively low-risk option that provides immediate returns. Buyers can assess the property before purchase, ensuring transparency and reducing uncertainty. Completed properties offer rental income potential from the outset, allowing investors to start generating returns right away. While the return on investment may vary depending on factors such as location and rental demand, completed properties generally offer a stable and predictable income stream. In addition, generally speaking, 1-bedroom and 2-bedroom properties often provide better rental returns for investors – they are easier to rent out as they appeal to a wide rental demographic, the price-to-rent ratio is lower due to the fact that they have a lower capital entry point compared to larger units, they are cheaper and easier to furnish and have a lower maintenance cost.

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2. Buying an Off-Plan Villa: Customization with Potential Capital Appreciation

Buying an off-plan property means investors commit to purchasing a property either before or during the construction phase. Investing in off-plan villas provides numerous significant advantages.

• Highest return on investment – It allows investors to purchase a property at the earliest and lowest possible price and choose their preferred units in the development. It also means that, investors have the opportunity to personalise their investment and witness the value of their property increase as construction progresses, we call it capital appreciation. As an example, the value of the land around Palm Development’s ADAYA project has increased over 40% during the construction period.
• Lower up-front costs – Off-plan property payment plans often offer installments from initial purchasing to completion and handover. Some developers only require 10-20% down payment and the outstanding balance to pay based on construction progress. It offers flexibility from a cashflow position. 
• Flexibility in customization options – Off-plan properties in Bali also often offer customization options, allowing investors to choose the specific features and finishes which is impossible with completed properties. 

However, investors have to understand the risks associated with investing in a property that is still under construction, and it requires a longer time investment until completion. It is crucial for investors to buy properties from a reputable developer since the developers typically take care of all the necessary construction and development work, including obtaining necessary permits and approvals from the local government, contracting building works, and completing the construction process.  Choosing a good developer with a proven track record can reduce investment risks, such as delays or project abandonment, price volatility, and simply avoid any fraud. 

Investors who are interested in buying an off-plan villa can check out Palm Developments’ latest project in one of the best locations in Bali. 

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3. Building a Villa: High Potential Returns with Greater Time, Effort and Risks

Constructing a villa from scratch provides the opportunity for high potential returns but requires a significant time investment and greater involvement. Building a villa allows investors to customize every aspect of their investment, from location to design to materials used. While the process can be more complex and time-consuming compared to purchasing completed or off-plan properties, the potential returns can be substantial. Investors should carefully consider factors such as construction costs, market demand, and the overall management of the project to mitigate risks. 

Speaking of the risks of building a villa, there are many foundation works required for a successful project, some examples are: 

• Understanding the restrictions of the land certificates, such as the Right to Build and the Right to Use.
• Understanding the value of the land by considering its accessibility (i.e road access) and other infrastructures rather than focusing only on pricing  
• Checking the zoning in the area for later building permits or any business license applications
• Carrying out full due diligence on any possible issues with the property, accuracy of the property’s documents, the property’s land history and hidden conditions. Managing local contractors and material purchasing to ensure a high-quality result.

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4. Rental Arbitrage/Timeshare: Passive Income with Personal Use and Moderate Risk

Rental arbitrage or timeshare offers a passive investment strategy that generates income through short-term rentals while allowing personal use of the property. This option allows investors to offset ownership costs and earn rental income during periods of non-use. While the returns may not be as high as other strategies, rental arbitrage provides a balance between generating income and enjoying the property for personal vacations. Investors should consider factors such as location, property management, and rental demand to optimize returns and mitigate risks associated with occupancy rates and market fluctuations.

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Selecting the Right Strategy for Bali Real Estate Investment

Investing in Bali luxury real estate presents a range of options, each with its own set of returns, time investments, and risks. Buyers can choose to purchase completed properties, invest in off-plan villas, build their own villa, or explore rental arbitrage that suitable for their financial and personal requirements. However, for investors who recognise the significant opportunities in Bali's real estate market but prefer not to engage in full-time development, off-plan investing emerges as an exceptional option. By partnering with a trusted and experienced development company like Palm Developments, investors can capitalise on the potential appreciation of off-plan properties while entrusting the development process to industry experts. With Palm Developments' commitment to excellence, meticulous attention to detail, and transparent processes, investors can navigate the market confidently, maximising their investment returns.

Ultimately, investors must evaluate their financial goals, risk tolerance, and capacity for involvement to select the strategy that aligns best with their investment objectives. Whether opting for a more hands-on approach or seeking a passive income stream, Bali's real estate market offers opportunities that, with the right strategy and partner, can lead to substantial returns on investment.

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