Ever dreamed of owning an investment property in Bali?
Robert Hoving, CEO of GORO, did once upon a time, which led him down the path of starting an Airbnb arbitrage business with Bali villas.
Today in 10 minutes or less, you’ll learn:
- 🏡 Robert Explains Real Estate Investing 101
- 🏝️ Myths and Realities of Real Estate Investing in Bali
- 🇮🇩 Jakarta vs Bali vs Singapore Real Estate
- 💪 How Robert Invested in His First Bali Villa
FROM OUR PARTNERS
💚 Effortless Expat Tax Solutions with Greenback
Struggling in the maze of US Expat Taxes?
Look no further than Greenback Expat Tax Services for tax guidance.
I used Greenback to file my taxes in 2020 and 2021, which was a smooth experience.
Here’s three tax tips from their accountants:
Tax Tip #1: Did you know you can qualify for the Foreign Earned Income Exclusion, which allows you to exclude up to $120,000 (Tax year 2023) of your foreign income from US taxation?
Tax Tip #2: If you’re already paying taxes in your host country, you may be eligible for Foreign Tax Credits to offset your US tax liability, essentially preventing you from being double-taxed on the same income.
Tax Tip #3: Always keep meticulous records of your foreign bank accounts. The penalties for failing to file an FBAR can be severe.
Sounds interesting? Choose Greenback and let your personal accountant simplify your tax process.
They empower you to focus on your adventures abroad while taking care of the taxing details. Take the first step towards a care-free expat life today!
☀️ Investing in Bali Real Estate | Robert Hoving
Robert Hoving is the co-founder and CEO of GORO, Indonesia's leading fractional property investment platform. He was born in the Netherlands, where he spent most of his youth. At age 17, he moved to the UK for his studies and ended up living there for 7 years, building and eventually selling his first start-up.
For the past 8 years, he worked in sports tech in Singapore and now he’s building GORO, Indonesia's leading fractional property investment marketplace. GORO is backed by Iterative VC, XA Angel Network and property titans from Colliers, 99.co and proptiger.
🛣️ Tell us about your career journey from sports e-commerce to becoming a real estate investment platform founder.
I founded a retail e-commerce start-up during my final year of university in the UK. The business was acquired, which presented the opportunity to move to Singapore. I was involved in a variety of sports technology roles. Although I truly enjoyed my role, the entrepreneur in me was looking for a new opportunity.
During a visit to Bali, I started to wonder what the returns are like on the island of gods. I quickly realised that property in Bali offers strong returns. I ended up starting an Airbnb arbitrage business where I rented villas long-term and sublet them short-term.
My “side hustle” was delivering strong profits which caught the attention of my friends, who wanted a piece of the pie. This made me wonder if there was a bigger problem that needed to be addressed.
After validating the problem with a larger audience, I decided to give up my well-paid job in Singapore, to start GORO. I feel very fortunate to be able to work on a problem that can have a positive impact on millions of people in Indonesia and abroad.
🏡 Explain how real estate investing works to a 10-year old. Who do you typically see investing in the Real Estate asset class and why? How does it compare with other asset classes?
Real estate is known as one of the best-performing asset class in history. The world's richest have created generational wealth by investing in real estate. Generally, people invest in real estate for two key reasons: rental yield and capital appreciation.
Rental yield is passive income from the person or company renting the property. It is calculated by taking the total rental income per month, and deducting all expenses and taxes. The net income is multiplied by 12 (months) and divided by the purchase price of the property.
If the property is financed, the rental yield pays for the monthly financing costs and maintenance costs. If there isn’t any financing on the property, the rental yield makes an ideal source of passive income.
Historically, real estate has gone up in value. Capital appreciation is realised when the real estate is sold. To calculate the capital appreciation, simply deduct the net purchase price from the net selling price.
However, property usually comes with a high entry barrier and is illiquid, limiting its access to the public. To make real estate investing more accessible, fractional property investment platforms have entered the market globally.
For example, Arrived (US), Stake (UAE), Strata (India), Kasa (Korea). They allow investors to partake without having to purchase the entire real estate. These platforms take care of sourcing, managing and selling the property, serving as a great source of passive income. This helps to open up real estate to everyone.
🏝️ What are the common myths and realities of investing in Bali real estate?
The most common myth is that foreigners can’t own property in Bali. The reality is that the vast majority of villas in the top tourist areas in Bali are owned by foreigners.
The two types of land acquisition in Indonesia are leasehold land and freehold land.
Leasehold land can be acquired directly by a foreigner. A leasehold is technically a long-term rental of the land, typically spanning 25-35 years. The leasehold owner can build a property on this land for the duration of the rental.
Once the leasehold expires, the rights over the land return to the landowner. Leasehold titles can be sold to anyone during the validity of the term. This is by far the most popular way for foreigners to invest in Bali property.
Freehold land used to be restricted to locals only. However, the Indonesian government recently announced that foreigners can now own freehold land and properties with certain restrictions. Hopefully, this encouraging news will attract more foreign investments into Indonesia.
🇮🇩 What are notable differences you see with investing in real estate in Bali versus Jakarta vs Singapore?
Each of these 3 markets are very different. Singapore is a safe haven to invest in, but the country is not necessarily known to deliver a strong return on investment.
Most properties in Singapore deliver low, single-digit annual rental income. Even with the recent increase in rental prices, the yield is still low compared to the returns offered on Bali and Jakarta properties.
Jakarta, the capital of Indonesia, is one of the largest cities in the world, with a fast-growing middle class. There are many high-end condos which can rival Singapore condos in terms of design and facilities. However, most of them are empty or yield low, single-digit returns, like in Singapore.
The best-performing properties in Jakarta are the ones that the vast majority of the population resides in; these properties have proven to deliver around 10% net return per year.
Bali is one of the most well-known holiday destinations attracting tourists from all corners of the world. This presents a great opportunity for short-term holiday rentals. It is very common for Bali rental properties to return 12-14% net rental yield per year.
Most properties are bought on a leasehold title, meaning that capital appreciation is a challenge depending on the lease length. This is one of the reasons why we only purchase lengthy leasehold villas to create a positive exit for our users in 5 years.
🙅 What mistakes have you (or others) made while investing in real estate in Southeast Asia? What would you have done differently?
Many consider Bali properties as cheap, but this is subjective. Yes, property and land are much cheaper compared to Singapore for example, but it is important to keep in mind the rental yield potential and capital appreciation. One of the common mistakes would be to buy Bali properties for cheap, while ignoring their yield potential and the projected capital appreciation.
We invest for monthly returns as we can more accurately project the returns based on historical performance, so we tend to focus on tourist areas in Bali or high-demand areas in Jakarta.
The other common mistake I see people make is not seeking proper legal and tax advice, which makes them prone to investing in properties which may not have the right building permit or operational certificates. They may also not be aware of the local tax system, which might cause issues when the property is rented out or sold.
I always advise people to get sound legal and tax advice, and work with established property agents and notaries to ensure a safe investment.
What counterintuitive or lesser-known advice would you give to people looking to invest in real estate in Southeast Asia?
A common mistake I see many people make is that they invest in a property because they like how it looks and feels, instead of prioritising its return potential. They often end up buying a property in which they would personally like to live, while overlooking its rental income potential.
I often hear in Jakarta, “Oh Jakarta property has a poor return, I own a condo but the return is only 3%”. At GORO, we have proven time after time that you can make around 10% return on Jakarta property – not on condos, but rather entry-level houses including student housing. This isn’t unique to Indonesia; these types of properties tend to deliver the best returns in Western countries as well.
If you are buying a property for investment purposes, the returns – either rental yield and/or capital appreciation – should be the key driver. It shouldn’t matter if it is an entry-level property or a high-end condo; at the end of the day, the return will talk for itself.
Here are my tips for someone looking to get started with real estate in Indonesia:
It is pretty manual due to the lack of data available in Indonesia. How I started, and we still operate in the same way to a certain extent:
- Find a property that you think can be good for investment purposes.
- Search Airbnb, bookings.com or any other OTA to find the listing to see the current pricing, occupancy and reviews to date. This will give you an indication if the property is investment-worthy.
- If yes, speak to the selling agent and request a historical rental income report. Which can then be compared to the Airbnb listing. The selling agent can also give more insights into the property.
- Study the area in which the property is built, to understand what the neighbouring properties look like and charge and look out for construction that may impact rental income. You can also consult other property agents to get their thoughts on the property and area.
- You can also research via third-party data platforms like Airdna, that scrape data on the pricing and occupancy of Airbnb. It isn't 100% accurate, but it helps with building the investment case.
Layering all the data and info should be sufficient to decide whether to invest or not.
It is a complex and time-intensive process, this is where GORO comes in, and we take care of all the heavy lifting. Our expertise also allows us to move much faster as we have existing data and agents only reach out to us when they have a property that meets our requirements.
Where can we go to learn more about you?
- GORO: As Indonesia's leading fractional property investment marketplace, we allow users to Invest in high-yielding property from $1. Users will earn monthly paid rental yield and capital appreciation when the property is sold. On average the GORO property portfolio delivers 11% net rental yield per year from properties in Bali and Jakarta.
🌐 Beyond your borders
🇵🇹 Portugal is shuttering its foreign tax breaks - cut-off is in 2024 (link)
🇪🇺 9 cheapest countries in Europe to buy property as an expat (link)
🇺🇸 How prepared are consumers for a recession? (link)
🇸🇬 Certificate to own car in Singapore rockets to $106,000 (link)
🤩 Words from the waddle
👉️ How I can help
That’s all for today!
Whenever you’re ready, here’s how I can help you:
- Work with me 1:1 - Book a coaching or discovery session for your career and wealth goals.
- Sponsor this newsletter - Promote your business to 5k+ tech professionals and founders.
- Join my course waitlist - Learn expat investing 101.