1. What is investment property
Investment property is property (land and/or building) held by an owner to earn rentals and/or capital appreciation.
Real estate is one of the oldest investment vehicles. Before English and Dutch traders came up with joint ownership of shares in the 16th century, the real estate sector was the largest recipient of investment capital.
And although the markets for financial instruments are larger, real estate is the most stable investment vehicle, given that its resource is limited with a constant population growth.
Passive income. To make a profit from the purchased apartment, you do not need a lot of effort.
Minimal risks. Even in a crisis, real estate can really be sold or rented out.
Price increase. Real estate is not affected by inflation, just like gold. The cost is only increasing.
Multivariate investment. There are different options for how to make a profit: rent by the day or for a long time, resell, divide into small segments and others.
Long payback. Real estate will start to generate income above the cost in 5-10 years.
Additional expenses. This includes utilities, major repairs of 20% of the rental value and tax of 11% of the transaction amount.
2. Stages of development of investment property
Before acquiring real estate for the purpose of investing for a long time, it is necessary to understand at what stage the market of the country where it is planned to purchase real estate and receive rental income is. In total it is considered to be 4 stages of development of the real estate market. The duration of each stage is on average 5 years.
A. The recession cycle is when the market is over-supplied, high housing costs and high rental rates. The number of unoccupied buildings is increasing. The proportion of negative returns is increasing. The construction of new facilities is halted and the value of real estate is expected to fall.
B. Absorption cycle. Due to the lack of new construction, which is the result of a cycle of decline, natural demand begins to gain momentum and the market moves into a new cycle - the cycle of absorption of the created object. Once the investment surplus is absorbed, rental rates will start to rise. In line with the increase in demand and decrease in supply, pre-investment studies on the creation of new properties are being restored.
B. The cycle of new construction. The cycle of new construction corresponds to an increased demand in the construction market along with a reduction in offers for vacant land plots. Rental rates increase along with the price of real estate. During this period, the inflation rate rises, and the cost of construction increases, which increases the selling price of the property.
D. Market saturation cycle. Growth in real estate sales is slow and eventually shrinks. There is a surplus of finished construction products and capacities. Employment is starting to decline and construction activity is gradually coming to a halt.
The best time to expand properties is during the acquisition cycle or new build period!
At the same time, the rarest stage of the real estate market is precisely the birth of the real estate market that we see in Bali.
3. International investment property market.
Today, in general, the investment property market is in a decline in demand due to the market saturation cycle (stage D) and the resumption of growth in the real estate market can be expected in 10 years.
Currently, the average return on investment in various countries and regions of the world provides 4% per annum and in some countries it may be negative. Rating of international real estate.
At the same time, there are other countries that are at the beginning of the emergence of the market and therefore are countries with high investment attractiveness!
These are the markets we find and offer to our clients.
4. What you need to pay attention to when choosing a country and a property.
Return on investment differs within the country depending on the region and city. Therefore, it is necessary to locally study the return on investment. An example of how to do this, we set out in the article - "Calculating the return on investment."
Also, be prepared for the features of depositing money, registering land and real estate, and generating income.
We outlined the skills necessary for an investor in the article - 7 skills of a real estate investor.
5. Why Bali
Macroeconomically - Indonesia is a developing country of 275 million people, just entering the world economic markets.
According to TripAdvisor, Bali is the top tourist destination in Asia and ranks 4th in the world. Forbes ranked Bali 4th in the world in terms of investment attractiveness. While according to the world ratings of investment attractiveness in real estate, Bali is number 1 GoBankingRates
1. World Investment Property Ratings state that Indonesia and Bali are number 1 in real estate investment returns. Article - "Top countries for investment"
2. We see significant economic growth in Indonesia and an increase in tourist flow relative to other countries. Bali is in the top 20 most visited cities in the world. On average, 12 million people fly to Indonesia a year, most of which visit the island of Bali with a population of 4 million people. On average, tourists in Bali rest for 1 month.
Thus, every fifth person in Bali is a tourist.
At the same time, tourists, expats and older people who stay in Bali for years are not taken into account. Currently coming to Indonesia
3. We constantly carry out actual recalculations of the return on investment in real estate in Bali, showing a high payback - the yield exceeds 15% per annum. Payback examples can be seen here -
ROI Calculation
What makes Bali so popular among tourists?
1. Firstly, the equatorial climate - the average air temperature is 26 degrees with an average water temperature of 29 degrees Celsius. At the same time, according to Russian standards, summer is here all year round.
2. Secondly, nature - Bali is washed by two oceans and is a green island of 5,415 m2, where you can live in the most beautiful locations in the world - near the ocean, near a palm forest, on the banks of a river or lake, and even in cool mountains.
3.Culture and Religion - Balinese Hinduism aims to respect and benefit people. Residents of Bali are the kindest people who treat tourists with respect and provide them with the most comfortable living conditions.
What makes Bali so popular with investors?
1. Currently, only three regions of Bali are the tourist centers of the island, where it is almost impossible to purchase land or build an object. At the same time, more than 10 regions are already actively developing, and deals with land and real estate are just beginning there in order to build facilities for further leasing.
2. In fact, tourism in Bali is limited by the volume of finished housing, so in most cases real estate is bought at the construction stage. After construction, the cost of housing increases by 30% - 50%
3. And finally, the investment climate in Bali is aimed at attracting investors and developing infrastructure, so the state has made it as easy as possible to obtain land and build real estate.
- There are three types of income you can earn in Bali:
- 1.Purchase of real estate at the stage of construction of the object - allows you to earn 50% per annum during the sale.
- 2.Purchase of new built real estate - allows you to earn 30% per annum.
- 3. And finally, leasing provides a yield of 7 - 15% per annum.
- 7% on economy class real estate (Bali style houses - finished with local materials)
- 13% on Middle class real estate (European level of real estate with finishing from local and European durable materials).
- 17% on Premium class real estate (European level of real estate with finishing from expensive durable materials).
- Lux class property is not intended for rent and is intended for personal use
At the same time, the annual growth in the value of objects in Bali is 15%, which in 7 years will significantly increase the value of the acquired property.
