Should you rent or buy in Bali?

Should you rent or buy in Bali? For most people moving here, rent first. Not because buying is wrong, but because almost everyone changes their mind about where they want to live within the first year.

The short answer

Rent if you have not yet lived through a full wet season, you are not sure which area suits you, or you might leave within five years.

Buy when you know the area, you plan to live here or hold the property for ten years or more, and the purchase still makes sense once you count everything a lease costs you.

What renting really costs

A one-bedroom villa starts around IDR 17.5 million a month in Canggu and around IDR 15.6 million in Seminyak. Two-bedroom villas run roughly IDR 15 to 45 million a month, depending on area, pool, condition and how well you negotiate.

The catch is the payment: most landlords offering a good yearly rate want the whole year up front. Monthly rentals avoid that and cost noticeably more per month. See rent in Bali.

What renting gives you: flexibility, no maintenance bill, and a year to learn the island.

What buying really costs

Buying is not the price. It is the price plus:

• Around 7 percent in transaction costs: notary, taxes where they apply, due diligence, translation.
• Fit-out, USD 25,000 to 50,000 for a three-bedroom to a standard that rents well.
• The yearly cost of the term. A USD 300,000 villa on a 25-year lease uses up about USD 12,000 of its value each year, because the land and building revert to the owner at the end.
• Running costs: maintenance, staff, utilities, land and building tax, insurance. See what a villa costs to own each year.

Rental income can offset part of that, if you rent it out while you are away and it is licensed to do so.

A simple way to compare

Put the two yearly numbers side by side.

Renting: a year of rent for the villa you would actually live in.

Buying: the yearly cost of the term, plus running costs, plus what your money would have earned elsewhere, minus any rental income you can lawfully earn.

If buying comes out close to renting and you plan to stay ten years or more, buying starts to make sense. If buying is clearly more expensive, you are paying for ownership feelings, which is fine, as long as you know that is what you are paying for.

When buying wins

• You have lived here at least a year and know the area.
• You will hold for ten years or longer.
• You can rent it out lawfully when you travel.
• You found a long remaining term with an extension clause that is priced and binding on heirs. See extension clauses.

When renting wins

• You are new to Bali, or still choosing between areas.
• Your visa or work situation could change.
• The only villas in your budget have short remaining terms.
• You would need to sell within five years.

A middle route

Rent in the area you are considering for a year, and use that year to look at property properly. You will see which streets flood, where the traffic is, what neighbours build, and what villas really rent for. Most good purchases I see were made by people who rented first.