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Calculate the ROI of potential villas for sale in Berawa. It can help you determine your lowest price for yearly or holiday rentals. Learn more from this post.

Berawa contains a mix of villas for sale to various markets. For those that are relatively new to property investment, we’ll share with you an easy way to determine prices and calculate your return on investment (ROI) using examples from our Berawa villa listing.

What is ROI?

ROI is one of the ways that can help you to determine the minimum price (rate) you can set so that it breaks even after a certain number of years operating. This is crucial if you are buying leasehold properties.

Examples of ROI calculation for Berawa villas, with a few assumptions

In this simplistic set of examples, we’ll make a few assumptions:

1.      Property maintenance will cost half the monthly rate, every year.

This the average cost that increases the more expensive the property is. Also, tax and permit costs are excluded.

1. Our price ceiling is determined by the market.

This ensures that we do not overprice the property.

1. Property is not managed by a manager.

We will assume that you take full responsibility of the management.

To calculate ROI, we divide the net annual income by the total amount of money invested in the beginning, which is at least the purchase price of the property.

ROI = (net annual income) / (purchase price)

Rumah Kelly is a freehold property that costs Rp 2,255,000,000 without furniture. This 2-bedroom 2-story villa is located in a suburban area, but the area is popular for foreigners to live and stay. An estimated valuation of this property suggests that tenants are willing to rent it for Rp 85,000,000 annually. Property maintenance is maximum Rp 3.5 million.

ROI = (Rp 85,000,000 - Rp 3,500,000) / Rp 2,255,000,000 = 3.61%

This implies that it takes 28 years for the net annual income to breakeven, and of course, the ROI would skyrocket if you include the property’s sale. For Rumah Kelly, furnishing the property would increase the ROI to at least twice the value.

Rumah Torres is a fully furnished leasehold property that costs Rp 835,000,000 with lease up to 10 years. This gives us a target ROI of at least 10% since we must break even before the property is returned to the owner to avoid loss.

Estimated valuation for this property suggests that tenants are willing to rent it annually for Rp 84,000,000. Property cost is Rp 3.5 million according to our assumption.

ROI = (Rp 84,000,000 - Rp 3,500,000) / Rp 835,000,000 = 9.6%

The ROI for yearly rentals in Rumah Torres in this case is below the target ROI of 10%.

To optimize the ROI, we need to market the property for higher-paying markets. Another solution is to turn it into a holiday rental with higher monthly revenue. It seems that Rumah Torrest is more ideal for holiday rentals while Rumah Kelly is ideal for families living long-term in Bali.

Fortunately, with our helpful agents at Bali Coconut Living, you don’t have to make risky speculations about the type of rental business you should create. Simply consult our property managers and sales to help you decide which property is the best for you.