As a Real estate investor, one of the key thing to consider is ROI or Return on investment. It determines the percentage of the initial investment that is retrieved from the net profit made every single year from the property.

Simply, if you buy USD 1 Million villa in Bali and later on the villa make a stable USD 100K net profit per year, you are enjoying a 10% ROI every single year. With assumption that the villa don’t increase its prices on the following years, your USD 1 Million will be returned in 10 years.

There are several main factors that will maximize your ROI after buying the property including but not limited to:

• Rental arrangement
• Occupancy rate
• Rental price
• Property management
• Operational cost

Let’s break down into the case for one by one factor!

Rental Arrangement

It refers to how as an owner, you will need to determine the term of rental you will offer. It is whether for daily and weekly rental, monthly rental, or yearly rental. In Bali, daily and weekly rental is a rental arrangement that makes the most amount of revenue in a year (under normal circumstances).

Occupancy Rate

Short-term rental like that will mean nothing without good occupancy rate. It refers to how many days in a month or in a year you can rent the properties for, to how many days it is vacant or available. If your villa is full for the whole month or year, you should be making the most money right?

Rental Price

Relating to the previous factor, well, it is not necessarily. Because it depends on the rental price you put on the property. If you put a very low rental price, a lot of people will obviously rent it. While if you put it too high, probably will result in a very low occupancy rate for the whole year. A well priced rental property with average of 80% occupancy rate and above will definitely make the most amount of money — So pretty much the combination of the three factors.

Property Management

Another thing to consider is property management, which is the operator of your rental properties. They offer various services including marketing, staff management for cleaning, maintenance, technician etc. Some property management offers limited services like marketing only, while others offer all of it at once. The typical commission model varies at 10% to 30% from the gross profit. It is considered as an additional cost for the property. However, if you outsource this to another company, it gives more time and flexibility to you. Especially, if you manage to have more than one job in your career.

Operational Cost

Lastly, we should not forget about the operational cost. It applies to every single cost that are covered by property owner such as utilities, internet plans, maintenance, staff salary, etc. This cost aims to maintain the property to always be in good condition and to serve the tenant staying at our property.

With all these factors considered, great executions in each of them will definitely help property owners to get highest ROI per year. Based on our research, here are the benchmark percentage of every ROI classification:

• Acceptable ROI: 5-9% per year

• Good ROI: 10-14% per year

• Great ROI: Above 15% per year

Finally, now that you know how the ROI can affect your decision, discuss with your agent on this before buying your next rental property.

So, are you ready to be a real estate investor in Bali?

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