Bali Villas on Airbnb: What You Need to Know as a First-Time Airbnb Host

Websites like Airbnb and Vrbo have been exploding in popularity. Most probably, you have heard about friends or acquaintances raking in some extra money as a Vrbo or Airbnb host. As a real estate agent I have been fielding questions from clients who are considering to buy a villa in Bali and rent it out on Airbnb but what do you need to know before buying Bali property and becoming an Airbnb host?

WHAT IS AIRBNB?

Airbnb started in 2008. It is a website that allows a host to share their living space with guests or rent out their entire villa or house. Becoming a host on Airbnb is a great way to possibly convert your extra living space for a short period of time into cash.

You will find tents, yurts, RV’s, extra bedrooms, small suites or even entire villas on the Airbnb market. Everything from the extremely unique to just a downtown studio can be available in a given area on Airbnb. Airbnb basically is a warehouse of available living spaces all around the globe. The units and properties are provided as short term rentals that give guests more of an experience than just a hotel room.

WHAT DO YOU NEED TO KNOW AS A FIRST TIME AIRBNB HOST?

Before you run off and buy a beautiful Bali Villa to rent on Airbnb you should know what you are getting into by being a host.

KNOW YOUR LOCAL LAWS REGARDING SHORT TERM RENTALS

As Airbnb and others have become quite commonplace, local governments are realising a need to start regulating short term rentals in their communities. The legislation covers taxation, registration and in some cases, impact fees for short term rentals. You need to be aware of laws for the village your short term rental is in. Individual villages can have drastically different regulations on short term rentals and before you pull the trigger on a purchase you need to understand the laws in that community. This goes for any place around the world but especially for Bali where property ownership by foreigners already is a complicated matter. Bali real estate is booming but Bali villa owners will all tell you leasing property in Bali is not something to be taken lightly – you need to be well informed and the same goes for Airbnb hosting.

For example:

Certain areas of Canggu do not allow for short term rentals at all. Others will allow them, but only if the management is conducted by a third party, not the villa owner. Seminyak and Legian appear to be wide open and ready for the short term business model. The Bukit is also fairly wide open. Ubud has its own rules about who can do what and how often. Other communities restrict short term rentals to owner-occupied properties only, where the owner is just renting out a room or small suite where the owner must live on-premise.

Be assured that as the short term rental market becomes stronger more laws will be coming.

WHAT IS THE TIME COMMITMENT TO BEING AN AIRBNB HOST?

Like any money-making venture, there will be a time commitment to renting out your Bali villa on Airbnb. I think it is easy to overlook some of the time commitment it will take to be successful on Airbnb. You don’t just make your unit available and the money rolls in. You will have to find the sweet spot for pricing, prepare your unit for guests, prepare your listing, clean in between etc…

But one area first-time hosts overlook is managing the inquiries. You can spend hours every week just handling questions and inquiries. It is also important to handle them in a timely manner.

TAX IMPLICATIONS AN AIRBNB HOST SHOULD BE AWARE OF

Speak to your accountant about tax ramifications of collecting rents from Airbnb guests. Of course, you will have to pay income tax on any profits from your short term rental, but how is this done? The local laws may mandate that you pay a hotel or lodging tax in addition to your income tax on the profits. Make sure you understand your financial obligations with your proposed village before deciding to jump into the short term rental business.

INVITING THE UNKNOWN

If you are renting out part of your villa in Bali while you are occupying the villa as well, you must realise you really don’t know who you are inviting into your home. Is the thought of putting a few bucks in your pocket worth the hassle of dealing with unknown guests? At the very least, your unknown guests can be rowdy, noisy or messy. But what if there is theft or personal safety issues involved? Is it worth it? While as an owner-occupant of a short term rental you have some leeway screening guests, you still need to be aware that the internet is fairly easily manipulated so that a poor guest can have a shining profile.

MARKETING YOUR SHORT TERM RENTAL

The most successful short-term rental units on Airbnb and Vrbo have several things in common: First off, they create a unique experience you can’t get most places. Crafting a description of what your unit provides and what the surrounding area provides is important. Following up with high-quality photos is also instrumental in the success of your short-term rental. You need to paint a picture for your guests.

Second, the devil is in the details. Let your guests know exactly what they are getting and what they are not getting so that there are no disappointments from your guests. The disappointment comes when a guest is expecting one thing and gets another.

RISK AND LIABILITY

By opening up your Bali home to many different people you are increasing your risk and opening yourself up to liability. The first thing is to get the proper insurance in place in case something does arise. The second line of “defence” is to scrub your rental villa. Make sure there are no unsafe conditions. Trip hazards, furniture falling over, the electrical is safe, etc… Minimize as many risks as you can! At the end of the day, as multiple people move through your villa, things will happen. Minimize the risks and get great insurance and be over vigilant in seeking out any potential hazards.

THE EXPERIENCE AND REVIEWS ARE THE KEY TO AIRBNB SUCCESS

When you book a Marriott or Hilton hotel room, the brand itself gives you a good idea of what you are getting. Whereas an Airbnb room or Bali villa is unbranded and each property is unique to themselves. We talked earlier about providing exacting details about the experience your guest will have when they arrive. So, now, you have booked your first guests but the real work now begins on delivering that experience that you described. I’ll be honest with you, an Airbnb is not much cheaper than a hotel room by the time all the fees and taxes are paid as a guest. Airbnb guests are looking for that homey, unique experience they cannot get in a hotel and you need to deliver on it. Being truthful about what you don’t have is as important about describing what you do have. At the end of the day, your success will rely on getting a book of great reviews and possibly obtaining Superhost status. By doing so, you will show interested guests that you deliver on what you promise

BE REALISTIC ABOUT THE AREA’S DRAW

I have had a few buyers looking at buying villas for short term rentals without giving much thought to the draw to the community. Just because you can list it on Airbnb doesn’t mean the guest will come. Assess first if the community your rental is in will provide enough income to be viable and make it worthwhile. What would draw short-term rentals to the area? Are there shops, restaurants and spas, is the community a tourist destination?

Here in my area, I have had people look at villas in Seminyak to use for Airbnb. It makes sense as it is a tourist town with beaches. But I also have had people talk about using properties in north Canggu or Tabanan for short term rentals. I am not sure those communities have enough of a draw to provide a thriving business. Also look at the rental property itself. Is the property unique enough to draw in visitors? Maybe you have a small guest house on a large estate. Or a small studio 2 bedder with great rice field and mountain views? Is there possibly something unique about the property itself?

Be realistic of why your rental will draw a steady flow of guests.

IN SUMMARY

Rental sites like Airbnb and Vrbo have really only taken hold in a few short years. They are becoming part of the growing sharing economy but while it is in its infancy, some villages are finding there are some problems that come with short term rentals and are starting to address these issues with laws that restrict and ban the short term rental entirely. On the other hand. If you have some unused space in or around your villa in Bali, an extra detached bungalow with an en-suite, an under-used wing on the villa, a studio next to the garage, etc… Airbnb may be the perfect place to put some extra cash in your pocket. Just make sure you know what you are getting into before becoming an Airbnb host. Don’t buy a Bali property for short term rentals without checking your local laws.