Boring stuff, - maybe better we do our daily walk to the bank teller to check and see for ourselves if our money is still available behind the counter? 

Just kidding. However, it pays to remember often that our assets need looking after. Property investment beats money in the bank – 99% of the time.

And next, -please forgive me, because today we have only a simplistic look at property investing. Some of you know way more than the average person about profit generating, but some may not have thought ever about making passive income or property values or how they can benefit from the developments here in and around Ubud.

Therefore, as I said above, this is meant as a reminder just not to let the reigns hang loose, and ride on without a definite direction where to go to. Go on, make yourself some money, even when you sleep and understand the process.

In a short report like this, we cannot possibly cover all issues, which come to mind, such as: ’how can foreigners acquire property in Indonesia anyway?’ Be assured, they can and I strongly advise you to check on reputable sources of information and eventually see your established local land agent, in Ubud maybe us,
on 0361 970 888, to discuss your situation, thoughts and the solutions available.

When talking about property investing, which by the way, is still regarded as the safest investment of all times, usually the term ROI (Return on Investment) comes up and also the term ’Yield’. We may be forgiven to think this means probably the same. But no, it doesn’t. Therefore, let’s today look at these terms.
Return, sometimes also "total return", expresses what an investor has actually earned on an investment during some time in the past. It is capital appreciation and also includes money from renting out. In other words, return is retrospective, or backward-looking. It describes what an investment has really earned.
The simple formula looks like this:
ROI = (Gain from Investment - Cost of Investment) / Cost of Investment.
For example, suppose you invested USD 100.000 in property in 2017 and sold it for a total of USD 120.000 this year. To calculate the return on your investment, divide your earnings ($ 120,000 minus $ 20,000 = 20.000) by the investment cost ($ 100,000), for a ROI of $ 20,000/$100,000 or 20%.
Yield, on the other hand, is forward-looking. Furthermore, it measures the income, such as the rental amount, that an investment earns and ignores capital gain. This income is taken into the context of a certain time period and then projected on a years’ period, with the assumption that the rent will continue to be received at the same rate. 
The gross rental yield formula:
RY = Rental Amount / Cost of Investment
For example, you buy a property for USD 100,000 (total cost basis) and based on current market price the annual rent would be $ 8,500. Hence, its annual profit is the rate that it is rented for: 8.5 %
Because of extra expenses, when holding a property, it is good to remember that a high gross rental yield is not the be all and end all. A property may have a high gross rental yield but the rental return may be low when expenses are accounted for. 
For these reasons, I think net yield is a better measure than gross yield when assessing returns. 
Net yield is particularly useful when determining your financial capability as it will give you a truer indication of whether you can afford to invest, what your financial position will be and whether your investment will be self-sustaining. 
To calculate net yield, you’ll need to know or estimate:
*What is the rental occupancy rate for the area and my kind of property? This ranges usually from 65 to 90 %, much depending on marketing the house, how attractive the property is and if it is receiving good referrals.
*Management expenses. A professional Management Company will charge a fixed fee and/or a percentage of the rental income which has been generated.

*Maintenance and staff cost.

*Local contributions to the village or security team (Pecalang).

*Annual land tax ; income tax, if applicable; insurance...
Here’s how to calculate Net yield:
NY = (Annual rental income – Annual expenses) / (Total property costs) x 100 
You see that I haven’t included financing interest or tax. This is because these vary depending on the circumstances of the owner and aren’t directly related to the property itself. They should of course be included in any return on investment calculations. Because foreigners have a hard time (if at all) to get some bank finance in Indonesia, the calculation stays simple.
Keeping a portion of the rental income as reserve for anticipated repairs or improvements does not enter the rental yield calculation, because this is increasing the asset value and would then affect the return (ROI), once the money has been spent.
And finally – for successful property investment:
Focus on income rather than capital growth. The more cash you can actually collect monthly, the better your chances will be of buying another income earner. Focus on the cash and the capital growth will look after itself.

However, - if you are here to enjoy life on the Island of the Gods and your home means the world to you, - enjoy your property and forget about investment planning. After all – this is your one and only life. Do what is right for you and not necessarily what is expected from you by others.

For a meaningful exchange of ideas about what is advisable in your personal circumstances and to clear the mind, by all means, come and see us. It is our specialty to be able to look through the fog and give proper advice, based on our long standing experience, and I am sure you’ll like us. Simply call 0361 970888.

By. Ubud Property