Jakarta is one of the best places to start your property rentals. While there are uncertainties in the housing market in Indonesia, Jakarta’s rental yields remain moderately good. To maximize the potential of this market, it is crucial to have a solid understanding of the best practices for starting property rentals in Jakarta.
1. Starting a PT PMA for property rentals in Jakarta
The first step in starting a rental business is establishing a company, particularly a PT PMA. A PT PMA is a limited liability company with foreign ownership, and this is the only way for foreigners to engage in the real estate business in Jakarta. Foreigners can use a PT PMA to legally own freehold property through a Hak Guna Bangunan (HGB) land title. Another option is to purchase a leasehold property through a PT PMA. The PT PMA safeguards the investment of foreigners, enabling them to generate rental income and even providing them with the option to obtain a stay residence permit called Investor KITAS.
How much does it cost to set up a PT PMA?
Establishing a PT PMA in Jakarta is cheaper as it costs between IDR 20 million ($1,220) to IDR 28 million ($1,708). You can email us at hello@ownpropertyabroad.com to receive a quote for your PT PMA establishment.
2. Dealing with taxes
Another thing that you have to be aware of is the taxes involved when starting a rental business.
Land and building tax
Pajak Bumi dan Bangunan (PBB) is a state tax on land and buildings. Payment of the PBB grants individuals or entities the right to control and own the ground at a rate of 0.01% or 0.3%. However, Jakarta extends relief for payment of PBB to private houses worth below IDR 2 billion ($122,000). You can also get discounts if you pay PBB earlier in the year.
Rental Income Tax
The rental income tax is an annual tax where Indonesian tax residents, including both Indonesian nationals and foreigners, are subject to a 10% rental income tax. In comparison, non-tax residents pay a higher rate of 20%. However, in the absence of a Double Tax Agreement (DTA) between Indonesia and the non-resident’s home country, the default withholding tax rate of 20% applies.
Corporate Income Tax
In addition to the rental income tax paid by foreign individuals, PT PMA companies are also subject to corporate income tax levied at a fixed rate of 25%.
Personal Income Tax
Those living in Jakarta who earn income must also pay a personal income tax based on their earnings. The rate varies between 5% and 35%, depending on the income bracket.
3. Hiring cleaners and security
To increase your chances of receiving positive reviews and attracting repeat guests, it’s crucial to provide high customer service and ensure your property is clean and well-maintained. One way to achieve this is by hiring a maid or housekeeper who can regularly clean the villa, manage the utilities, and assist guests during check-in and check-out.
Additionally, installing security cameras or hiring a security guard to monitor the property at night can enhance its security and provide guests with a sense of safety.
4. Marketing your property
Marketing your property through Airbnb and Booking.com can effectively reach a large audience of potential guests. These platforms allow you to showcase your property’s unique features and amenities through photos, descriptions, and reviews. When listing your property, you must be as detailed as possible about its location, size, and any additional services or amenities you offer.
You can also go through the traditional route through word of mouth. Collaborating with local travel agencies and tour operators helps make marketing your property more accessible.
5. Maintenance
While a successful launch is important in the rental business, focusing on ongoing maintenance is essential to sustain that success. Regular upkeep and repairs ensure the property remains in top condition and help attract and retain guests.
Property management companies offer various services to help owners maintain their rental properties. They can handle routine maintenance tasks such as cleaning, repairs, and regular inspections, ensuring the property stays in top condition. In addition, property management companies can help with tenant screening, rent collection, and lease renewal to ensure that the property remains occupied and generates consistent rental income.
Need help starting property rental in Jakarta?
Ready to start property rentals in Jakarta? Leave your name and email below, and our expert team will guide you through every step of the process. From understanding the legal requirements and finding the perfect property to managing your rentals, we offer comprehensive support tailored to your needs. Ensure a smooth and successful rental business with our personalized assistance. You can also email us directly at hello@ownpropertyabroad.com for more detailed help. Start your property rental journey in Jakarta today!
Frequently Asked Questions (FAQs)
What is the rental yield in Jakarta?
The average rental yield in Jakarta is 5%. It could go from as low as 1.5% to as high as 10.8%.
How much is the rent in Jakarta?
Monthly rental in Jakarta depends on several factors, such as size, location, and amenities offered. A studio averages IDR 8.8 million ($537) monthly, while a two-bedroom averages IDR 23.2 million ($1,415).
Can a foreigner rent a house in Indonesia?
Foreigners can rent a house in Indonesia. Many foreigners choose to rent a house over buying one, as this option is easier due to fewer regulations and rules that hinder foreigners from leasing real estate.
