Overseas Property Investment: Our Top FAQs Answered!

When it comes to investing overseas, our investors have hundreds of questions. These range from everything about the best areas to invest and then the security of their investment, with risks that come with investing overseas as opposed to Australian property investment. 

We asked Mark Reed, GPFG International Sales Manager, and our sales team for the most frequently asked questions and put them together in this guide. 

“When it comes to investing overseas, the questions that investors have, or should have, can often be answered thoroughly with proper due diligence,” says Mark. “This is paramount when we choose to work in certain areas or with our partner developers.” 

If you have any questions about overseas investment, see our list below or get in touch or book a call with our team.

Property Investment Overseas FAQ’s 

1. How can foreigners own property in Bali, given Indonesia’s ownership laws?

Direct foreign ownership of land is restricted in Indonesia, but you can purchase long-term leasehold agreements, which are typically 25-30 years with options for extensions. This method is particularly popular among foreigners because it’s a straightforward way to invest here. GPFG navigates these legal frameworks with the help of our in-house legal experts, ensuring secure and compliant property investments for our clients.

2. How is it property investment if it’s leasehold? 

While you may not own the land outright forever, leasehold allows you to purchase the rights to a property for a significant period, typically up to 30 years and often extendable. This arrangement enables you to capitalise on property appreciation, generate rental income, and enjoy personal use of the property during the lease term. 

“Questions around ownership laws, without a doubt, are amongst the most common we receive,” says Reed. “Some investors are hesitant because they are used to freehold ownership with an asset and capital appreciation. Leasehold investing is actually very straightforward. Given that leasehold ownership is available for prime investment areas, investors are seeing incredible returns without paying freehold prices.” 

3. Buying property in Bali, how different is it to buying in my home country? (and in most cases for us, that’s Australia) 

For Australians investing in Bali, significant differences include the legal ownership structures, tax implications, market dynamics, and the nature of investment returns. For instance, did you know there’s no Stamp Duty here? 

The first difference is the difference in the ownership laws. In Bali, most property available to foreigners is offered on a leasehold basis, unlike the property ownership commonly experienced in Australia. This means you’re purchasing the right to use the land for a predetermined period, usually between 25 to 30 years, with an option to extend. Prices for leasehold properties in Bali are much lower than the average price of homes or units in Australia. This is a more accessible entry point into the property investment market.

There are also a number of costs associated with buying property in Australia, which don’t exist or are significantly less when buying property overseas, especially in Bali. These include Stamp Duty, Mortgage Registration, Building & Pest Inspection, Land Transfer Registration Fees, Lenders Mortgage Insurance (LMI), Bank Valuation Fees, Land Tax, Capital Gains Tax, and GST (Bali has VAT).

Also, the return on investment in Bali is often realised through higher rental yields driven by the robust tourist industry rather than the long-term capital growth more typical in Australian markets. This difference is crucial for property investors to understand, as it influences both the strategy and the expectations from their investment.

To address these differences and simplify the investment process, we assembled a team of Australian professionals, including property specialists, mortgage brokers, financial advisors, and tax and legal experts. 

“This team brings Australian standards and practices to the Bali property market, ensuring that the buying process is familiar and secure for foreign investors,” says Reed. “All guidance from our team of experts in property investment, tax, and accounting can be accessed by all GPFG clients.”

Read more: As Seen In AFR! – GPFG: “A trailblazer in the realm of overseas property investment solutions”

4. Is Bali safe for property investment?

Bali remains a robust market for property investment, benefiting from Indonesia’s stable political climate and growing economy. We also closely monitor geopolitical and economic trends, ensuring investments are placed in secure environments and mitigating risks for our clients.

Read More: Who’s Banking on Bali?

Also in the news: Apple Developer Academy expands to Bali

5. With the current boom in property development, can I still find profitable investment opportunities in Bali?

Yes, even amidst a property development boom, the key to success lies in conducting thorough due diligence and partnering with experienced, reputable developers. Before investing, it’s crucial to assess the market conditions, understand the legal and regulatory landscape, and evaluate the financial health and track record of the developers. Experienced professionals ensure you invest in projects with high potential for appreciation and rental yields. 

“This is definitely one of our most asked questions because investors are being overwhelmed with ads and see the level of development on the ground here and all over the island,” explains Reed. “What I can tell you is that we only work with experienced developers and hospitality brands who have years of experience and a history of satisfied investors. They are not just building in areas that are ‘up and coming’ or where there is available land. They have done the due diligence, they understand the market, and they know where the market will be stable and profitable for decades to come. 

“Simply put, where there is the highest tourism demand, that is where the highest profitable returns are.” 

6. What tax obligations will I face in Indonesia and my home country from owning property in Bali?

As an Australian owning property in Bali, you’ll face tax obligations in both Indonesia and Australia. In Indonesia, property owners are subject to taxes such as Land and Building Tax (Pajak Bumi dan Bangunan) annually. If you rent out your property, you’ll also need to pay income tax on the rental earnings. Your local taxes are typically covered in the management and operational fees. It should be stated in your management agreement that your property management team will take care of the administration and paying of taxes.  

In Australia, any income generated from your Bali property must be reported, and you’ll be taxed on this foreign income. When rental earnings are transferred to you in Australia, Indonesia will withhold 20% of your earnings. Additionally, under the Indonesia-Australia non-double taxation treaty, tax paid in Indonesia is credited against any tax owed in Australia, ensuring that the same income is not taxed twice. 

Download PDF: Double Taxation Avoidance Agreement between Indonesia and Australia

To ensure compliance and optimise your tax situation, consulting with a tax advisor experienced in international property investment is recommended. They can provide guidance on specific regulations, double taxation agreements, and tax planning strategies.

7. How will I manage my property in Bali?

Remote management can be challenging, especially for a location like Bali, where the tropical climate can require additional maintenance and with heavy tourist traffic, you want to maximise short-term rentals, which needs fast turnover and organisation. You need trusted local, professional property management to ensure proper care of your investment property, as well as honest communication, which gives you peace of mind. For this reason, we only work with experienced and professional property managers and world-renowned hotel operators, so it is a “hassle-free” or “hands-free” investment, where all duties or tasks are managed, including achieving high occupancy levels, and you collect passive income from rentals or bookings. 

Read more: It’s a Suite Life! 11 Reasons Why Hotel Rooms Should Be Your Next Investment.

8. What are the operational and management costs for my Balinese property?

Leasehold contracts are different to management contracts, and you will need both.

Management contracts include all the fees for operation and management as well as clauses that address maintenance and refurbishments. 

Operational and management fees and renovation costs, generally – by rule of thumb – will be around 40-50% of gross revenue. 

9. How do I check the credibility and track record of developers in Bali?

GPFG conducts thorough due diligence on developers, partnering only with those who have a solid history of successful projects. This vetting process includes examining past developments, financial stability, and client testimonials to ensure reliability and quality.

“If you want to know anything about our partner developers, please just ask. When it comes to clients doing their own research on the developers and wanting to know who they are trusting with their investment, we are more than happy to provide that information,” explains Reed. 

10. How can I ensure the construction quality of my property meets my expectations?

You can monitor the construction quality by doing due diligence to know your developer, contractor, and builder, to have assurance of their experience, completed projects, and understanding of the Bali building materials, climate, and maintenance requirements. 

Ask for construction updates and for monthly meetings with your developers. 

At GPFG, we exclusively partner with developers known for their construction practices and adherence to international standards, in addition to our alignment with world-class hotel operators. These developers have a proven track record that guarantees that the construction quality meets, if not exceeds, global benchmarks. 

We provide regular Construction Updates throughout the build process. Investors are consistently informed of the progress and any developments regarding your property. This allows us to address any issues immediately, ensuring that the final product aligns with your expectations and our high standards.

11. What financing options are available to foreigners wanting to invest in Bali?

Financing for foreigners who are buying in Bali isn’t possible. However, at GPFG, our mortgage brokers expertly navigate financing options in Australia to purchase properties overseas, taking advantage of high returns and cash flow. We explore options like equity release, allowing investors to use equity from existing properties, and investments through SMSFs, which offer Australians the flexibility to use their superannuation for property investments. These methods provide financial flexibility and potential tax benefits, helping Australians tap into Bali’s vibrant property market while ensuring compliance with Indonesian laws. GPFG streamlines the process, aligning financial strategies with long-term investment goals.

12. How do I know I am buying in a location with high nightly room rates and high occupancy?

This question goes back to knowing your developer, their experience in the market, and the due diligence they have done to identify the prime locations in Bali, with careful analysis of the market trends, tourism and hospitality data, and local insights. 

“This is why we have carefully selected the developers and hotel brands as our partners,” says Reed. “We have a systematic approach with about 30 touch points, or criteria, that our developers must meet. Paramount in that is how they can ensure our investors’ returns, by comprehensive data and forecasts.”  

Read more: Property Investment in Bali: Why 2024 is the Best Time EVER to Buy in Bali.

Overseas Property Investment with GPFG

We understand the influx of information can be overwhelming. However, GPFG only collaborates with well-established developers and renowned hospitality brands. These partners have a proven track record and deep market knowledge, ensuring they choose locations not just based on current trends but on long-term stability and profitability. Their expertise in selecting the right projects guarantees our investors’ success.

By partnering with GPFG, you gain the advantage of expert guidance and a strategic approach, ensuring your investment is well-placed to yield substantial returns for years to come.

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