Monthly Expense for Property Management in Bali

Owning and managing a rental property can be a lucrative investment, providing a steady stream of passive income. However, the road to profitability is not always smooth and potential landlords need to consider all the costs associated with managing a rental property before diving in head first. Successful property management requires careful planning, organization and a keen eye for detail when it comes to budgeting and financial forecasting.

From property maintenance and repairs to insurance costs and unexpected vacancies, there are a variety of expenses that can quickly eat into potential profits if not properly accounted for. It is vital for property owners to be prepared for the financial responsibilities that come with managing lettings in order to achieve long-term success and profitability. 

That’s why hiring a rental property management company is often the best option to remove unnecessary hassle and business worries. 

Let’s look at the various financial aspects that owners should be aware of when embarking on their journey into property ownership with the help of a rental property management company.

Property Management Company Partnerships

When looking to hire a property manager, understanding the different fee structures available is crucial to making an informed decision. With a good understanding of these structures, property owners can effectively compare the cost of property management and the services offered by different companies, and ultimately choose the option that best suits their needs and financial requirements.

• Guaranteed income model: Under the guaranteed revenue model, property owners benefit from a fixed monthly payment from the property management company, providing a steady stream of passive income even during slow rental periods. The management company assumes all the risks and responsibilities associated with maintaining the property, providing owners with security and predictability in their cash flow. Whilst owners are relieved of maintenance responsibilities, it’s important to note that any excess profits generated by the property are retained by the management company.
• Fixed-rate model: Unlike the guaranteed income model, the fixed rate model requires property owners to pay a predetermined monthly fee to the property manager. This model simplifies accounting and financial planning as the management fee remains a consistent business expense. However, if rental yields fall, owners may need to cover the shortfall, making this structure suitable for those who prefer a hands-on approach to managing their property expenses.
• Commission model: The commission model is a common fee structure where property managers receive a percentage-based commission based on rental income. Unlike previous models, this structure ties the manager’s fee directly to the performance of the property, making it an incentive-based payment system that motivates managers to maximize returns for the property owner.

Understanding these fee structures allows property owners to make an informed choice based on their financial goals, level of involvement in property management and risk tolerance. By thoroughly evaluating these options, owners can select a property management fee structure that optimizes their investment potential and aligns with their overall objectives.

Property Management Costs

Property management costs are highly dependent on the agreement between the parties. Let’s take a look at the main company costs associated with a statistically average rental property using our company as an example. 

Property Maintenance & Staff Expenses

First, it’s worth mentioning that the salaries of the staff we provide and the maintenance of the property are also the responsibility of the owner.

Our managers always keep the condition and upkeep of the property under their personal control and visit the villas regularly. If something needs to be repaired or replaced, the managers will inform the owners about this or that problem and the owners should deal with it, paying attention and money for the various troubleshooting.

Staff salaries account for 7-10% of the cost, depending on the property and the service required (gardener, pool cleaner, cleaning staff and others). 

Taxation 

Consider paying taxes. Remember that these can vary from country to country, depending on the legislation. In Bali, Indonesia, for example, VAT can vary from 10% to 20%.

OTA’s Fees

All owners and management companies use OTA services to increase customer searches and bookings. But not all owners know that there is an additional cost in the form of an extra percentage that the owner has to pay for this service. On average, OTA fees vary between 15 and 23%.

Farsight Property Management Fee

Our commission can vary from 12-15% for marketing services to 20-23% for full property management, depending on the type of partnership chosen. 

We have a completely transparent payment system and always inform our owners of any additional costs. These costs only cover the work of our managers: it is the work of our managers that generates the maximum income for the owners and frees up their time.

To minimize additional costs (such as OTA’s), our management company makes direct sales. Using a contextual marketing strategy and advertising, our clients find us themselves.

Let’s Summarize… 

Well, all in all, investing in a well-maintained rental property in Bali can be a lucrative endeavor, but it is important to carefully consider the expenses involved. That’s why we recommend working with a property management company in Bali to save time and money, as it can manage the various tasks involved in managing a rental property.

It is also important to consider the potential revenue generated from your rental property, which can be maximized with the right marketing strategy and pricing analysis. This is also part of the work of most reputable property management companies. By employing skilled managers, you can save a lot of your own time.

So don’t let hidden costs ruin your rental business and be an aware owner.

Visit our related articles to learn more about Bali property taxation for owners or other financial features!

And if you need help with property management, contact us and let’s work together to make your rental business a success!