Ep 4: Priced out of Bondi, bought big in Bali

A Bondi girl through and through, Rose realised she couldn’t afford to buy the dream in Sydney so she found it in Bali, instead. Now the owner of three luxury villas, Rose is one of a growing wave of Aussies using rent-vesting to stay in the market without giving up their lifestyle

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If you haven't been to Bali, you're not Australian, right? Welcome to these four walls. Podcasts that talk to real buyers and experts about the hardest, weirdest, and most surprising parts of buying and owning a home in Australia. We'll help you figure out what's going on in the world of property and what to do next. Hi, everybody. This is Dimitri and welcome back to these four walls. This week, we're looking at the rise of rent-vesting, and we've got the amazing Rose Kelly, a travel expert and presenter. Rose lives in Bondi, but after being priced out of buying in her beloved suburb she decided to get creative, getting more bang for her buck and actually buying a villa in Bali. So we're very keen to hear all about it but before we get there we've got our listener letter it comes from Eliza in Perth. I've lived in Scarborough for years and I love it but I'm still nowhere near being able to afford to buy anything here. Now every time I go to an inspection I leave feeling totally defeated. Is it insane to think I want to buy something overseas instead? I still want to own something I love, but I don't want to give up the lifestyle I have in the place I rent. Rose, welcome. It's fantastic to have you here. Thank you for coming in. I need to find out about this journey of yours to buy in Bali. I've heard of some friends of mine have taken some pretty unorthodox approaches to investing in property. No one's ever bought overseas, though. So please share. Well, there are a few of us little unicorns out there. I can tell you. But you're right. It's a pretty scary exercise. anything overseas just immediately sort of sounds and feels risky. I guess that's why a lot of people don't do it, but there are a few of us out there who have done it and who have lived to tell the tale and we now, you know, I've learned through my own personal experience of what to and what not to do. I now sit here brilliant passive incomes, great investments. And they afford me the lifestyle that I want in my life today. I'm a single mum. I live in Bondi, as you mentioned. I have two beautiful girls in high school. And so I choose to live in Sydney. As you pointed out, I don't want to buy in Sydney. I have done that. I've bought and sold in Bronti. And I just think I'm getting a better value for my dollar by owning and investing properties overseas and then choosing to rent in Bondi. Amazing. Yeah. Where do you even start? I mean, entering into a property purchase next door with all of the risks and potential pitfalls and due diligence and making sure you don't make a big mistake, that's daunting enough. Yeah. How do you even begin a process like this? Look, I mean, it's a humbling experience. I had to realise really quickly that I can't be the expert at everything that is required to be a homeowner or a property investor overseas, so that meant I had to outsource. I had to have people at my disposal who were experts in the field and I needed to know that those were the right people I could trust. So there was a lot of speaking to people I know, a lot of expats based in Bali. I did a lot of due diligence in researching how to purchase And I really quickly understood that the entire system in Bali is very different to that in Australia. So it was, it was really starting from scratch. I knew a fair bit about the Aussie buying and selling landscape. But I really had to, yeah, just, That's an assumption. Start from the beginning. Like, for example, most people know that you don't really buy the land in Bali. You buy the lease hold on the property. So essentially, you own the dwelling on the land. But Barley's very big on holding on to that land ownership for traditional custodial purposes. Right. And I support that. I think it's a wonderful thing that Barley does. Absolutely. So it's just common now that you would say, I own a place in Barley. But what that means is you own the dwelling. And the bricks and mortar, yeah. And you own a lease hold, which is generally speaking about 25 years to start, With the option to extend, and that's one of the loopholes where people can get caught out, is around the extension of a lace hold. But yeah, that's getting into more of the detail. You mentioned that you bought and sold properly in Bronti before this. So this wasn't you taking your first steps into high-money ship or anything like that. If you sort of reflect on your decision to invest overseas, what would you say was the really dominant, motivating factor? Was it a financial decision? Was it about growing wealth? How did you approach that? Well, I had a really gorgeous apartment in Bronti. I decided to sell that when the market was a good time to sell. And I did quite well out of that. I then really looked into what was available to reinvest in Australia. And I'm not just talking Sydney. I looked right up the coast. I looked at a bunch of hotspots, country towns, coastal towns that were growing and good for investment opportunities. I was prepared to develop a property and I bid on half a dozen. Legitimately did my research, you know, went to the auctions and I think like so many Aussies at the moment, I was just appalled. At how hard it was and how disheartening it was, putting my best foot forward, I had good money to spend and I was just outpriced for something that at the end of the day, I didn't actually see the value in. So I just really thought, okay, I'm going to think outside the square. I actually didn't put all of my money into one investment overseas. I split it up a little bit. So I went with one developer, but I bought three different villas in different locations. And kind of, you know, place my bets a little bit. One was a large villa and the other two was small lure. Okay. And the idea was to own them but lease them out as holiday rentals so I could live off that passive investment and they would still be gaining in value over time. I bought in an area that I knew was about to really gain in popularity especially with expats, you know, there was a new international school about to be built in this area and the area I'm speaking about is down south of Bali around Ulawatu. A lot of Aussies know Bali very well, so I'll just, you know, talk casually about that. If you haven't been to Bali, you're not Australian, right? Or get there very soon. And so Ulawatu I knew was kind of the next area that was about to grow Chenggu Seminyak already overdone. It was about like, you know, knowing the areas and doing a bit of research, which was fun, you know, exploring around Bali and just chatting to everybody I knew over there, you know, where would you want to live? And then really just working out what sort of development would be a crowd-plaser, you know, because you don't just buy something unique and quirky, that you love, you want to buy something that will really appeal to a larger audience of international holiday makers. There's mostly like an obvious question, but given your background in travel and being a travel writer, have you ever thought about how much that might have benefited you or how much has influenced your decision and barley over anywhere else? Well, I mean, again, I think just like it most Aussies, I've grown up going to barley for holidays. I have owned properties in Vanuatu, for example. We owned a property there which was exquisitely beautiful. It had its own, you know, coral reef of the back doorstep, but as a holiday destination, the return on investment very, very low. There were issues with flights for Aussies getting there and back. It wasn't as well known and not as much to do in Vanuatu as say Bali. So as an investment, beautiful, but not necessarily smart. And so Bali really appealed to me knowing that it would take something catastrophic for the market to drop out of Bali anytime soon. And even if challenges were to come up another the COVID or any global incident. Barley has a wonderful ability to bounce back and Aussies have a wonderful ability to support the underdogs. So, it's a fairly safe environment in terms of that economic security. Yeah, absolutely. Yeah, interesting. Yeah, you're point about paying for buck. I mean, ABS just released data was early this week or last at the median house price now, nationalies, a million dollars, median, nationally, not just sitting anymore. That is sad but not surprising. Yeah, it's crazy. It really is. I mean, I've grown up with this number in my head, the 80% of us Aussies won't be able to pay off a mortgage in our lifetime. That's always been in the back of my mind and I don't want to pass on a debt to my daughters. I want to enjoy owning something today that I can holiday in with them, you know, when they're young and they still want to hang out with me. And we can have these beautiful memories. We can use that property as a holiday destination whenever we choose to. And it's bringing in an income and gaining value at the same time. Like, that's what I want to pass on. I want my kids to witness that it is possible to own something and to enjoy it and to pass it on, you know, as a positive investment. Absolutely, absolutely. If you don't mind, I'd love to go a little bit deeper on the mechanics of this. I find it absolutely fascinating. So naturally, I think you're probably relatively well placed given your background and the fact that you knew so many expats overseas. How much realistically do you think how much of that really, really helped? And if you had no one overseas, if you were starting fresh, what would you tell our audience about where to begin? I mean, I knew people, but that didn't mean that I had their foot in the door. Yeah, okay. I still, I feel like I went in fresh. Yeah. And so I made, you know, a bunch of sort of learners you go mistakes. Can I hear about some? If you don't mind? Yeah, yeah, okay, my favorite story. In the process of buying, you kind of have to set up things like a slightly different visa and so in doing that, there's a bit of a process involved and it means that I had to go into Bali to get a particular stamp in my passport to, you know, officiate the change in visa. When I went through customs, the border security gave me the wrong stamp. And so in I went, only to be told that I had been given the wrong stamp and the only way to solve that was to immediately get back on a plane to exit Bali to go anywhere, not necessarily back to Australia, just anywhere. The cheapest one that I could get that was closest that left in the next two hours was Singapore. So I had to get on a plane, go to Singapore, get off that plane, turn around, jump on a plane, back into Bali and come back through customs. I mean, it's kind of Bali in a nutshell, and I don't want that story to scare people off. Of course not, no. It didn't happen to anybody. Even at the time I was laughing about it. I mean, it took a day out of my schedule, but it made a good story and a really good, you know, learning curve that I can now advise anyone else who's trying to do it. I'm like, just be careful of that stamp. This is the stamp you're looking for. Unless you really have a desire to go to Singapore for a day. No. Yeah. But I mean, that's the difference. You wouldn't see that happen in Sydney, right? You just wouldn't. So you need to go into it, But bearing in mind, this is, you know, this is Bali, Laura unto itself. If you expect things to be really by the book and straightforward, then this might not be for you. You really do need to have a little bit of a sense of humor and that sort of island time mentality about it. Yeah, go with the flow. But that's also what I love about Bali, you know. They've got a good sense of humor. They laugh with everything. Well, that's what makes it so popular right to begin with. Nothing rattles on there, yeah. Yeah, like get off the plane and you immediately just exhale. The rules are out the window, and, So when it comes to stamping passports, those are in the window. Yeah, you want that stamp. But yeah, there's a certain flow. I mean, there's a reason why Bali is actually known as the island of the gods. People are just kind. People go out of their way to be helpful. Bali's known for that. So I'm sure that that has definitely run true in this journey, buying property overseas. You get through customs, you've got the right passport stamp this time. How many of these villas did you go and visit yourself? I'm imagining all of them. Well, the funny thing is I actually bought off the plan. It's another level of risk to meet you. Like, I had not physically seen the development, but what I had done was research the developer and their previous developments, and I had stayed at one of their previous projects in another area in Bali, in Changgu. So I had personally stayed there. I knew their product was very high and I knew that they had a previous level of quality. And I did all the sort of interviews with the main developer. And I had a lawyer in Australia that was overlooking the contracts at the same time. You're ready for a bigger place. You've bedrooms, bathrooms, car spaces, set your expectations, and then lower them, and still just get the same four properties. If you're ready for something new, Aussie's property search has thousands of listings, including off-market, suburb guides and personalized property reports. Aussie, everything you need to find, buy, and own. Lending group distribution proprietary limited Australian credit at License 246-786. There's always going to be some kind of risk or loophole that an Aussie lawyer is not a professional in international or Indonesian law. And all the Indonesian contracts are written in Bahasha, like an Indonesian. So sometimes you have to have it translated. Yeah, the call. Or you get both version. Google Lens, scan it with your phone. That won't work in this case, yeah. Yeah, yeah. Google Translate doesn't have the answer for everything. So there is, as I said, there's a little bit of risk, there's a little bit of trust, bit of faith, a little bit of prayer. A lot of faith. A lot of faith. Yeah, a lot of faith. But to pay off, like, I mean, can I just say, the upside is that if you can do this and see it through to the point where I'm now gratefully sitting, my return on investment is four-year, complete return on investment and my occupancy as a holiday rental in the main time is 95%. I was about to ask. I was about to ask. Well, it's it's some a year round even in the wet season it's beautiful. Aussies just want to be in Bali and Bali has become a bit more of a hotspot for Americans, French, Russians, like Chinese, the market is huge, so it's not just Aussies who are, you know, craving that relaxed, laid-back lifestyle. Talk to me about turnaround time, I mean, I'm sure there was probably an extended period of time when the ID first came into your head and then was flying around for a bit landed. You took it seriously, but actually committing and getting serious about this to settling and commencing build and getting the keys and then your first holiday is coming on. How long did this take? The build process was less than a year and I came in at the start of the build. I think in total about a year and then my process has continued since then. And so as I said, three villas were the initial project. I've now sold two of the smaller ones, doubled my money within 18 months. And with that, I've now reinvested for another larger villa in the similar area with a different developer. So I wouldn't have done that if I didn't have some confidence in the process and in the area and that this was something that has been a very successful project. Right, okay. And again, sorry to get so detailed, but I'm fascinated by so obviously, people pay in local currency to stay. How much of this do you manage versus how much of it is managed overseas? That's a really great question. A lot of people want to know, okay, so here, if you have an Airbnb, some people treat that as their full-time job. I still have a day job. So I didn't have the time or the know-how to really dedicate, it's a full-time gig. So I have a management team in Bali. I pay 20% of the booking fee to this team that does all the bookings. They do all the back-end side of things. So they have the pool cleaner, the gardener, the driver, there's a butler. It's as big or as small as you want it to be. They can organise the rest of it. That sounds pretty awesome, right? Yeah, it But it does mean that if I had tried to do that myself, there's no way. But I do want an absolutely five star experience for guests who stay there. So I outsourced. Again, I didn't just go and find anyone to do that. I relied on the recommended teams of people from the developers and their several projects. So I didn't try to do all that myself. Yeah, I did my research. and then I put a little bit of faith in it and a good chunk of 20%, but they, That's not insignificant. It's not insignificant. It's pretty standard as a going rate for villas in Bali. And they earn their keep and then some. Can imagine, yeah. I mean, that's the product that you've got. Mm-hmm. Yeah, you can't really, You can't half-ass that bit, can you? No, that's right. I mean, that's great. you've got four walls, but it's what you do with it that makes it, you know, either win or lose in value in the end. Yeah. I'm interested to know, on the bus this morning on the way to work, we're in the middle of a build at the moment, we're building a place, my wife and I. She's actually the builder. I'm just, I just go to the site and live. She sounds awesome. A move stuff around the renown then for you. You get in the way. Yeah. So naturally I'm embedded in all these various different Facebook groups, reading questions from people that are buying from developers, and hey, this one's advertised as starting at $400,000. If you've built with these guys before for a similar product, what does it really cost you? The comments are always like, mate, it's at least double. It should be illegal to advertise this thing at 50% what you're really going to pay. So you're going to probably see where I'm going. Yeah. How close were you to that upfront number that you quoted? 100% bang on. Really? On the dollar. That's amazing. the dollar. They even included all the internal furnishings, which I got to select from. I loved doing part of the styling myself. And yeah, absolutely to the dollar. I don't think everyone has that experience. So I'm not going to say that standard. Fair enough. Maybe I was lucky. Whereas in Bali, it's very different, obviously. Well, no, no, it can be the same, but my personal experience was that everything that was estimated was bang on, that, yeah, there were no hidden costs at the end. And have you connected with others that have done something similar or the same thing? Look, I'm going to let out the biggest secret here. For anyone who wants to avoid the biggest way you fail with a barley investment, You think that you're all good to go when you sign the dotted line, it's X amount and you've got your 25-year lease. What some people get caught out in is in that lease period. So if you don't get your longest lease possible at that starting price, when you go to extend the lease down the track, which is where the value in your property really truly lives, for when you go to sell and your next buyer says, yeah, great, I'm happy to buy that. The property looks great, but how long can I own it for? You may find that the traditional land owner suddenly says, well, actually, that leasehold has doubled. So if you want to extend, you're going to be paying twice the price just to keep owning it or to extend your ownership. Wow. So your resale value suddenly bottoms out, that's the catch. So if you're going in and you're looking at holding onto the value for resale, you might live happily for five years and go, yeah, this is the dream. And then all of a sudden, you need to sell or you want to extend your portfolio. You can't sell because no one wants to buy something that has less than 10 years on it and the extension price is double what you originally paid. So my advice is get the longest possible lease to start with an extension option at that original purchase price. That's where you maintain your value. That's the single most powerful piece of advice I could give anyone. So just like it's fun and funny just how, just like how 30-year mortgages here have become as common as anything. It sounds like it's the same, but very different in Bali. Same time period. Same time period. Very different time outcome. Yeah. Yeah. Wow. And 30 years, sorry, 25 to 30 years is typical. Do you see any normally go longer than that? I've just been given an option to extend for another 30. I hope I'm still alive in 30. I know my kids will enjoy it in 30. But then again, And I don't think I'll be owning this same property in 30 years because it's, you know, it's in Bali. It gets in monsternal periods, it's under blistering hate throughout the year. These buildings deteriorate a lot faster. Five different rates. Then they do in Australia, right? I mean, we've got our own weather challenges here, but, you know, also the standard of building over there, the materials that are used. I hope to flip in, you know, in the next couple of years, probably. but I want to time it with the peak for the area as it's about to boom. And then, you know, and then have a little bit of fun discovering the next boom. It's just, it's such a different set of considerations, isn't it? I just, that's what I keep thinking about. Because it's almost considered a truism here, like, by land, by a place, but really just trying by land and you can't lose over a long enough time. I mean, over a long enough time horizon, sure. But over the average sort of time horizon, and that place is going to appreciate and appreciate and appreciate. But it's really just like the different set of facts I see. It's almost the opposite, isn't it? It's like, yeah, in Australia, you buy something, you sit on it, and you just stick it out for years and years and then hand it on. No, you need to really think of things as seasonal five-year time frames in Bali. Yeah, just be smart about it. don't invest emotionally. What would you say was the single or top couple of surprising things that you found out along the way that really challenged any assumptions that you had going in? Surprising things. I guess I was surprised at how important the management of the property would be after the build. That in itself is so important for the overall value of the property, maintaining a five-star rating. Even understanding how the management team goes about marketing in different countries, you know, for us it's all about Airbnb or stays. In every other country in Russia, in China, in France, they've got their own versions of those apps and accommodation sites. And so, you know, one Aussie version doesn't translate round the globe. So, you know, it's something as simple as that, like direct marketing for different countries. Yeah. There's no way I could have known that, right? So having the right team over there that you continue to pay and respect and trust, that's that's vital for the ongoing value of your property. I'm going success, I suppose, yeah. And is that come specifically that component? Is that come out of the fee that you pay? Or are there other aspects of that that are over and above? So that's, you know, on a monthly basis that comes out of the booking fee. And again, you know, over there, I've got bookkeepers who do all of that for me. I trust in them and they do a phenomenal job problem we communicate really regularly. Yeah, I guess as well, you know, you do need to understand that you've still got to play by the rules in Indonesia, and that means paying your tax. But here's another little tip. If you are going to invest over there, you want to get a particular visa that considers you as an investor. And that means you establish yourself as a business, you have a local bank account, and that way you qualify for 10% tax as opposed to a higher tax as a foreigner, right? So there's a lot to learn as you go. I didn't discover that until two years after I owned my first villa and then went, oh, why didn't anyone tell me that? Like, well, why didn't I ask? So I now know that and that's something I'm very happy to pass on. This has been absolutely fascinating, genuinely so intrigued by this story and by what you've been able to share. Thank you so much for that. If people want to reach you or find out more about you and what you do and what you're up to, where can they find you? Rose Kelly on Instagram or Bali Lux Buyers Agency and I'll just be so happy to chat with anyone who's keen to know more. Fantastic, it's been so good chatting with you, thank you so much. Thank you so much to meet you. Thank you. These four walls is brought to you by Aussie. Like and subscribe on YouTube, to spotify an Apple Podcast for new episodes every fortnight. For more information, see the show notes to this episode or visit osy.com.au. The information provided during this podcast is for general information purposes only. Osy does not provide financial or investment advice. The information in this podcast does not take account of your objectives, financial circumstances or needs.