4 Missteps Buyers Make When Purchasing Bali Property – And How to Avoid Them

Buying a villa in Bali can definitely be one of the most exciting experiences of your adult life! It’s a time that sparks a range of emotions but generally speaking, villa buyers are thrilled about the prospect of acquiring a property here on the island of Bali. However, we must always keep in mind that this is a business decision as it is most likely one of the largest financial purchases you will ever make, so it is very important to avoid some of the historic pitfalls along the way! The more informed a buyer is about Bali real estate and the process of foreign ownership of Bali Property, the better he or she can anticipate the steps along the way. Knowing what can happen helps to be prepared for the process of purchasing that gorgeous new villa! These are 4 pitfalls buyers should avoid when purchasing their Bali property.

1. Not Being Cashed Up

Let’s face the facts, you need to be cashed up! Oddly enough, your local bank may not be that much help, as lending money for overseas purchases is typically not part of their business strategy. You may have savings or a Super-Annuation Fund that you can tap into. Maybe you have saved enough money to jump into the deep end of the Bali Property Market. No matter the situation, you need to have the money to buy that gorgeous villa right there and then when it is up on the market for sale. Buyers who still need to create some liquidity back home before they can pull the trigger on an offer often risk losing out on their dream property simply because while their hearts and minds were ready, their bank accounts were not.

We’ve heard these stories all too often, even from experienced potential investors who ask all the right questions. If you still need to arrange the money, most likely the property has been sold already to the family that was cashed up by the time you become fully “ready”.

Some of our investors have leveraged assets back home in order to raise quick cash and while this is certainly a well thought out strategy, the banks may not be of the same mind. What a lending institution is willing to lend on a property will depend upon many factors including an appraisal and the strength of the buyer. If you have poor credit, fluctuating income, and employment which is not stable, then you may not be able to obtain the additional financing you are looking for.

It is so easy to go out and look at villas and fall in love with an area only to find out that a villa may be or may not be in alignment with your price point. Establish what you can afford prior to beginning the home search process. Otherwise, you might end up searching for a home which you cannot afford and this can cause disappointment and frustration. We suggest that you avoid beginning the villa search process until you have your intended purchase price prepared or you have met with a lender so you know the price point that you should be searching for.

2. Not Considering Home Re-Sale Value

A significant factor when purchasing Bali real estate is considering the resale value of the villa in the future. Look at past market trends to see how the neighbourhood has added or decreased value to the property. The rice paddy or ocean views may not be there in the long run, decreasing value, or perhaps the tourist area is spreading more towards your property, adding value to the villa.

You will want to have a villa that is desirable, appealing to a larger buyer pool. Having a villa that is too trendy or unusual may limit the number of buyers who have the same level of appreciation of the property as you do.

If you are shopping for leasehold property – either as a home or as an investment property, make sure you understand the language and the dynamics of the lease extension articles in the lease agreement you are considering. A good working knowledge of how lease extensions can be actualised is absolutely critical in determining the timing of your exit strategy.

3. Skipping a Professional Home Inspection

This is a very important factor when purchasing a villa in the tropics! The last thing you want to purchase is a money pit! It is your right as a buyer to find out everything you can about the Bali Villa that you are considering purchasing, and being aware of any deferred maintenance or defects may deter you from making the purchase all together! A home inspection will provide information about the systems of the house and may trigger other inspections.

4. Set Aside a Fund for Maintenance – This is the Tropics After All

When you are a villa owner in Bali, there are always things that come up, and best to be prepared financially for anything that might come up with the villa or other personal emergencies. If you’ve invested in a rental property to create cash flow, deferred maintenance or upgrades will slowly and insidiously creep into your reviews which will impact your occupancy rate which will impact what you can charge for a nightly rate which will impact your ROI which will impact your enjoyment of the investment altogether… see where we are going with this?

A righteous real estate agent will help point out areas of concern on any villa you are considering to buy so that your inspections have some teeth and can influence the seller to either complete the unfinished work or force him to reduce his price expectations.

Final Thoughts

You will want to avoid these pitfalls during the villa buying process as it will help ensure a smooth transfer of ownership and ultimate success in closing a WIN-WIN purchase. Contact us any time if you have any concerns or questions. Put our experience for you.