Put in your own equity first, then use staged capital to finish — not pre-sales. Your equity buys the land, secures the permits and covers roughly 30–40% of total cost. Secured development and completion capital then funds the rest in stages, against checked progress, and is sized to sit well inside the finished value — typically under about 65% of it. Information only.
Print edition in revision — the full argument is below.
Why “12% a year” rarely survives
A villa advertised at a 12% yield quotes rent against price, before costs. Take off the booking platforms, on-site staff, utilities and upkeep, hospitality tax and management, and the number roughly halves — on the worked example below it lands near 5.8%. Most foreign-held villas are also leasehold, so part of every payment is the buyer’s own capital returning before the land reverts. And a “guaranteed” return in the first years is usually funded from the sale price itself. See gross versus net yield and guaranteed returns. Illustrative — not financial advice.
But the demand is real
None of this is a case against Bali. Record arrivals, hotels near 74% occupancy, top-tier product raising rates at half occupancy, and new demand — families near international schools, patients near the Sanur health zone, long-stay residents — that books months ahead and returns in low season. The wave of easy money that pays for speculative pre-sales comes and goes; the underlying demand is structural. Information only.
Pre-sales evaporate; equity becomes non-negotiable
The pre-sell-then-build model works only while easy money is abundant. As a market matures, pre-sales slow at exactly the moment they are needed, and the developer must fund and deliver the building before it can really be sold. Three things become essential: real equity, first in; capital that completes the build rather than assuming sales; and a product a real tenant or buyer wants. See what happens when pre-sales slow.
How a fundable capital stack works
The order is the discipline. Equity goes first: it buys the land, secures the permits and covers enough of the build that the owner has real exposure — around 30–40% of total cost, land included. Only then does secured development and completion capital fund the remaining 60–70%, drawn in stages against checked progress, and only where the finished value supports it: the total capital provided should sit comfortably inside the gross development value (GDV), typically under about 65% of it.
The test, in one sentence: is there enough equity in first, and does the finished value cover the capital provided with room to spare? See the four layers of project funding.
A worked example: three villas near Cemagi
| Cost stack | USD |
|---|---|
| Land (8 are, 28-year leasehold) | 300,000 |
| Construction (3 × 160 m² at 1,200/m²) | 576,000 |
| Pool and landscape | 130,000 |
| FF&E (9 bedrooms at 12,000) | 108,000 |
| Soft costs (design, permits, project management) | 69,000 |
| Contingency (10% of build) | 58,000 |
| Cost of capital during build | 130,000 |
| Total development cost | ~1.37M |
| Capital stack | USD | Share |
|---|---|---|
| Owner equity | 548,000 | 40% of cost |
| Development and completion capital | 823,000 | 60% of cost |
| Gross development value (3 × 580,000) | 1.74M | |
| Capital provided as a share of GDV | ~47% |
Completed value sits about 27% above total cost, and the capital provided is about 47% of that value — comfortably inside the ~65% guide. Every figure is an illustrative model, not an offer, a projection or a description of any specific investment. Illustrative — not financial advice.
The playbook
- Price the land off the room rate. See What Pink Land Should Really Cost.
- Own the land and the permit before spending or selling.
- Bring 30–40% equity, land included — enough that the build is not hostage to the next deposit.
- Fund the build with staged, secured capital, not hoped-for sales, sized well inside finished value.
- Underwrite net, not gross, and decide upfront whether you are building to sell or to hold.
- Build the real product — well built, professionally run, longer-term formats survive the turn.
Sources: Horwath HTL / C9 Hotelworks 2026; HotStats; JLL; Bali area price guides, 2025–26. Worked example is an illustrative model. The print edition of this paper is being revised. General market commentary — information only; not financial, investment or legal advice.
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