Anyone contemplating starting a tourist rental business will have many hurdles to overcome before booking guests. These include finance for the investment, property management, and how to market the villa to attract guests. However, before any of that can happen, they need a villa to rent to tourists, which can provide the biggest hurdle of all.
It is a difficult hurdle to overcome because, in Bali, which is governed by Indonesian law, it is illegal for a foreign individual to purchase land or property. Before you tear up your plans for your Bali villa business, let us state that there are workarounds, some of which are perfectly legal and sound, and some which, whilst legal, carry huge risks. Here are some of your options based on first-hand knowledge from the professionals at Luxury Villas Bali.
Use A Nominee
By far, it is the riskiest option, which needs massive due diligence and care. The nominee is an Indonesian citizen with the right to buy property in Bali. What happens is you fund the purchase, but the title for the property goes into their name. To protect yourself, you would have a notary draw up an agreement between you and the nominee, but these are far from watertight, and if the nominee goes rogue on you, it can be a costly experience.
Leasing A Villa
With leasing, you would never own the property in the eyes of Indonesian law, as your landlord’s name would be on the title deeds. However, because leases can run for 25 years and beyond, you effectively ‘own’ it because you can live there or rent it out to tourists as part of your business.
To rent it out to tourists, there are some caveats you must cover first. These include checking access rights to the property. If these rights are owned by someone else, nobody, including you and your guests, could drive up to the property. You also want to check zonal usage rights, which apply throughout Bali and could restrict your ability to use it as a rental property.
Purchase A Villa Via Your Own Company
The safest way to purchase a Bali villa is not to do anything as a private individual but to purchase it in the name of an Indonesian company. These are called PMAs, a type of foreign investment company, and that company would have the right to invest in property or land upon which you could build one or more villas.
Setting up a PMA requires a fair amount of administration and paperwork, including creating a business plan and some regulations relating to the amount being invested.
Safety First
If you did not know it already, it is clear being Australian, or indeed any nationality other than Indonesian, makes purchasing a villa in Bali and using it as the basis for a rental business is not straightforward and in some circumstances, nigh on impossible.
For these reasons, we implore you to follow the best advice we can give you, which is to seek the best possible expert legal advice and representation you can. Whether setting up a company in Bali, purchasing or leasing property, or running your business, you must know how to do all of them legally.