Owning and renting it

The licence comes first

Short-stay letting requires a Pondok Wisata licence. Without one you are letting illegally. It is common, it is tolerated until it is not, and it makes your insurance close to worthless: a claim on a property in unlicensed commercial use is a claim that gets declined.

The licence attaches to the property and its zoning, not to you. It is therefore either obtainable on that plot or it is not, and no amount of paperwork changes that. Obtainable and held are different answers. If it is obtainable, ask who is obtaining it, by when, and put the answer in the contract.

The operator takes more than you think

Bali operators charge fifteen to twenty-five per cent of gross, and the good ones earn it. What matters is what the percentage is of, and what sits outside it.

• Is the fee on gross booking value, or net of platform commission?
• Who pays for linen, consumables, utilities and minor repairs?
• Who pays for listing photography and paid placement?
• What are the block-out rules for owner use, and how far ahead must you book?
• What is the notice period, and what happens to forward bookings if you leave?

Ask for twelve months of actual performance on three comparable units they manage. Not projections. If they will not produce it, treat the projections as aspirational.

Tax on the rent

Rental of land and buildings in Indonesia attracts a ten per cent final tax on gross rent. Final means it discharges the liability on that income, and it means it is charged on the gross – so it does not shrink when your costs rise. That single fact explains most of the distance between brochure yields and achieved ones.

Where a property is run as short-stay accommodation rather than let on a conventional tenancy, the treatment can differ: an accommodation business operated through a PT PMA is generally taxed on profits under the ordinary corporate income tax regime rather than on gross under the final rental tax, and regional hospitality charges may apply on top and are normally billed to the guest. Which regime applies to your arrangement depends on your actual contracts, and it is the most valuable hour you will buy from an Indonesian tax adviser.

What the net really looks like

Start with gross. Take off the operator's fifteen to twenty-five per cent. Take off running costs – cleaning, linen, utilities, consumables – at another ten to fifteen. Take off tax on gross. Then take off the fixed annual charges owed whether or not anybody stays: service charge, maintenance and sinking fund, licences, land and building tax, insurance, and company compliance if you incorporated.

A property marketed at fourteen per cent gross lands somewhere between four and eight per cent net at honest occupancy. Four to eight per cent in USD, on an asset in a growth market, is a decent return. It is simply not the number on the brochure, and the gap between the two is where the disappointment lives.