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Is it profitable to rent out a villa on Airbnb in Bali?

I see many people asking about buying or leasing a villa and renting it out on Airbnb. Here I was thinking people just want a way to make money while living in Bali, but doing some research to whether it is profitable to rent out property in Bali on Airbnb, I have discovered, at least in 2017, Bali is one of the most lucrative places to be a landlord according to this article, ahead of Tokyo and Barcelona in annual earnings.

Airbnb's highest earners by city

Bali tops the chart for Average yearly earnings

How profitable can Airbnb rentals be in Bali?

Admittedly, Bali is not a city and the figures are for 2017 and there may have been a bit of a decrease in tourism following the volcano eruption, but I still find the figures to be quite amazing. The graph below shows the dollar value by city. Bali is just second to London, even with a significantly less number of properties.

Airbnb income by city

Now, I know London is often mentioned as one of the most expensive cities to live in the world, so you could probably expect the running expenses of running a rental property to be quite high. While Bali’s property prices are also high, at least it has a lower cost of living. I think you could surmise that Bali is potentially one of the most profitable places to run an Airbnb in the world, or is it?

Stiff competition

The popularity, however, of starting an accommodation business in Bali, amongst locals, expats and international companies is at fever point. Hotels, private villas and people renting a spare room are all in competition with each other and most people would say there is an oversupply of rooms on the island.

Legality of running an Airbnb in Bali

Getting compliant with the correct licenses is not easy or cheap as I have written about before. Since most people would expect properties to be fully air-conditioned and have access to a pool, energy costs, along with all of the other expenses, including taxes, can be fairly significant.

You also have to consider, will you manage the property yourself, rely on staff or utilize a management company. A management company could charge anywhere around 20-30% of the rental income. If you are a foreigner actively managing a property in Bali, you will need to have a working visa, which of course is not cheap to get.

To buy or lease in Bali?

Since freehold property is off-limits to foreigners in Indonesia, most people considering this business will likely have to rent or lease their property. This is known as ‘rental arbitrage’ in real estate. You will get a greater discount on the rent, the longer you lease the property. If you have a bit of financial acumen you will be able to calculate the Return on Investment or ROI of a property. When estimating occupancy rates, you should not be overly optimistic. Bali is subject to any number of events which can affect tourist levels: volcanoes, earthquakes and terror attacks.

Managing the property

It is possible to manage a property remotely, but not easy. We have stayed at villas before and the owner was living in Australia and they had staff who greeted us and managed the cleaning and maintenance of the property. Obviously, the challenge in this scenario is finding suitable and trustworthy staff. I met someone who owned a hotel in Bali while they lived in Australia and he had quite comical stories about his staff. Like one time when the manager decided that all of the guest rooms should be painted pink. The manager had a family member doing the painting unbeknownst to the owner until he was presented with the bill!

My thoughts on running an Airbnb business in Bali

My own opinion is unless you can acquire a property at a significant discount, it can be very difficult to make renting out properties on Airbnb profitable. It can be stressful, think of late-night phone calls from guests with no electricity or water, dealing with complaints and managing staff. One of the advantages, however, and maybe one of the reasons what motivates people to do this business, is that they can enjoy the property themselves and have a place they can kind of call “home” in Bali, even if it is only temporary.

What is your experience running an Airbn? Have you been able to make it profitable? Let us know in the comments!

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