EPISODE 27:
Building in Bali: What Every Developer and Investor Needs to Know

00:32
Bali Business Club, we’re here with Eric Steinhiller, speaking the Deutsch, yeah? Yeah, that’s right. And you’ve been in Bali for? Five years. Five years? Yes. Okay, and what brought you this side of the, across Europe, really? To be honest, funny enough, my first flight in my whole life was to Bali. First time you’ve ever been in a plane? First time I’ve ever been in a plane with the family, went to Croatia, Switzerland and stuff like that, but never with the plane. So, directly on COVID or while COVID
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00:59
break out, we decided to try to go to Bali for one month. Your parents and you? No, me and my friends. Basically, back then, we had an office in Germany, overworked as hell and I said like, Eric, we need a break. We have to go to Bali for one month. I was like, okay, I’ve never been outside of Europe properly, let’s go for it. Wow. Yes. And you never came back? I came back after that for two months and then I decided to fully move here. And whereabouts in Germany are you from? Close by Frankfurt.
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01:26
And how did you get into the construction game? What’s your whole story? To be honest, I grew up more or less on the construction side. So, my family’s since over 45 years in business and construction. And I decided at the age of 15 to basically follow these steps. Back then, I had the idea of taking over the company, the construction company from my dad. Basically, I have the engineering background as well, done apprenticeship and then basically starting in the construction, renovating apartments.
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01:52
Back then, we bought apartments from the 80s, renovate them and then sell them again. It was like fix and flip, very fast and very easy. And back then, financing was also not an issue. So, we generated leads over the usual platforms, get already buyers than before, buy then the property, renovate them three to four months and sell them again. So, you had experience on both the renovation side. Yes. And then also the selling side. Yes. So, you know how funnel works, you know how lead generation works.
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02:17
Okay, because that’s super handy to know in Bali. And I presume making decks, renders, you know, those kinds of things. Yes. Because many developers struggle to cross over those two worlds, you know. Yes, because back then, like when I came here the first time five years ago, it was way more easier to basically the villas sold themselves. And right now, you have to put a little bit more effort into it. How much more effort do you think has to go in these days compared to five years ago? I would say a lot.
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02:40
Like a lot of my friends, which I know they’re developing here since seven or eight years, they underestimate how much more effort and how much more skills you need for the sales and the marketing part in order to actually move right now stock and like bigger stock as well. So high amounts of units, developments that are obviously the market’s more saturated. There’s a lot more developments available. Yes. Choice is bigger. So would you say what, like double the amount of effort? Because I think back probably pre-COVID,
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03:06
you could package up something in a sketch up and sell it kind of thing or probably not even, or just a drawing and, you know, sell it. Yeah, that was very similar towards this one. Like my one of my first developments that I’d done, like in the third month of construction basically was sold out. Without even showing anything, just mentioning it to some friends. No, I’ve done the renderings back then basically, but people say like, oh, you’re building. Oh, it’s already like in the third month.
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03:28
Okay, we buy it. So back then was way, way easier because you had like low supply, high demand. Right now, I think the demand is still high, but it’s growing also as well, but the supply doubled or maybe even tripled in the meanwhile. So that’s why you have to put more efforts in order to be seen. And also you have to build the proper quality in order that even agents are not taking you on. And then what was your first project? My first project was back in Tumbak Bayuh. Okay, that’s where I live.
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03:54
Yeah, so once I come back to Bali basically, I decided to sell my company or my shares, what I had back then in Germany. Had enough money to build exactly two villas here. So I went all in. And especially the first build was a nightmare. But I think it was one of my main motivations why I started later on a construction company because you had to teach everything. Yeah, yeah. Concrete pouring, how to do plumbing properly, like all the small things, damp proofing. And it was just a nightmare. I was basically on site.
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04:24
I hired someone else, but I had to teach their workers on how to build properly. And I decided to myself after, luckily I sold out in the third month, but after that, if I do any more construction, I will do it with my own team. So all the efforts that I put in is at least kept and not they go away to the next site and the next client will be very happy, but I have to start from scratch again. I think that’s a really interesting origin story. You know, how and why you started your own business and the gaps that you filled
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04:50
and why and how. And also the mistakes that other people have made, you know, because there’s a lot of small villa owners here who are all developers, developers as such. And I can see the pain and suffering that they go through. Okay, so we’re back with Eric Steinhiller and we’re just discussing, you know, he’s one of the biggest, I mean, we’ll touch on that, actually the developers. I wouldn’t say the biggest, but your reputation is starting to proceed you in the market.
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05:18
You’re doing some great projects. You started with two villas back eight years ago, seven years ago. No, this was five years ago. Five years ago, sorry. In Tumbak Bayuh. And yeah, so why don’t we touch on what are you doing at the moment? What are your companies called? And you know, all that kind of stuff. Yeah, so basically right now, we have basically three different companies. One of them is Bali Prime Construction. So we basically, we’re helping other developers to build a good quality and
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05:44
also to deliver the projects on time. And as you know as well, it was one of the main points why we bring in touch in general was like we building for right now, 10 different developers, close to 90 units at the moment. And the thing is like, and then we have the second company, which is Bali Prime Developments. So we do our own developments as well. So I know the contractor side, I know the developer side, but I start on the contractor side. And then we basically have the advisory. So an advisory, we basically help other
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06:10
people how to buy land, how to legally secure this one, how to operate with how taxes are working here in general. And also basically how to do all the drawings later on with our in-house architecture team. Because we have like one of the biggest real estate groups here with over 650 people inside where we’re teaching people on every three weeks we have like meetups where we help them on how to safely invest in Bali because it’s not that easy as it looks like, as you know as well. And we want to basically avoid that the
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06:38
people doing the same mistakes what we’ve done basically in the community. Okay, tell us a bit about that. I’ve been actually trying to get into that group, but I’m still not in it. Maybe afterwards. And I want to come to the meetups also. Okay, so what is that group? Like how did it come about? Is it buyers that you’re actually supporting or fellow developers or a bit of both? To be honest, it’s a bit of both. Like for the main reason why, how this all started is like I’ve been to back
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07:05
then, it was four years ago to a real estate meetup. And I met a very good friend of mine. He’s like structural engineer from Austria. And I showed him my sites. He showed his sites as well. And I was shocked how bad the quality basically was. And I was like, hey, why you don’t do this, this, this? And he’s like, oh, but my contractor told me we build it this way. There’s no, this material is not available. So I helped him a lot on how to build a better quality. And he helped me back then a lot on like
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07:30
the taxes side, how this one is working, what are the best setups. And we just figured out like, because he already developed longer than me back then, three years longer. And we figured out like this knowledge what we already got because we went through the first project already. A lot of people don’t have to do the same mistakes. So we then decided to do a meetup. We just posted on Nomeo. And on the first meetup, 93 people showed up. And I was like, oh, there’s a big demand towards it.
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07:56
And that’s basically how the community started. And this was like three and a half, almost four years ago. And what are the most common like kind of questions, problems, issues that people experience or that you hear repeatedly in those kinds of groups or meetups? And you need to be diplomatic about this. Otherwise, we’re going to cut it out. To be honest, like, I think the biggest challenge in the Bali market is you ask 10 different people and you usually get nine wrong advisors. And well, I wouldn’t even say wrong.
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08:26
It’s just nobody quite knows and things are changing all the time. So it’s a very dynamic and difficult kind of environment to manage. But it can be very confusing, especially if you come in for the first time, you trust them, maybe one or two guys, maybe they don’t know it better as well. And later on, it turns out that you’ve done a lot of mistakes, which can be very costly, rather on the legal side, rather on the construction side. So I would say the most common questions is like, first of all, how do I find good
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08:55
land and also affordable land? Then things like, oh, what is for how much can I build per square meter? What to look out for in a good contractor? We also done like a checklist on how to check this one. Then how to calculate properly also on the development side, the profit and loss calculation, because I think a lot of developers doing these ones wrong or they don’t even know what they’re doing. And later on, of course, rental as well, how to market this one properly and sales is also an important thing.
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09:27
Yeah, that’s quite a lot. So, okay, well, let’s start at the top. So land, what is your advice? Because land, especially now, you’ve got the LSD stuff, you’ve got the ocean setbacks, you’ve got all agricultural things and zoning things. And I’m sure your advice five years ago to how your advice is now has just changed dramatically. It’s just a different world. You used to buy and then sort out problems. You can’t do that anymore. No, you have to start properly. So what’s the latest advice?
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09:55
Because also I did a podcast exactly like building in Bali, what we’re doing now, I did it two years ago. And yeah, it’s just like being in another country almost. Yes, it’s changing fast. Yeah, fast. So if I was a fresh to Bali, what would you say to me? To be honest, first of all, right now, luckily, we always went for our own developments, always in pink zone. We never touched yellow zone. And right now, yeah, you can see… Even five years ago. Even five years ago. Sorry, that’s wrong.
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10:25
My Tumbak Bayuh one was yellow zone, the first one. Yeah, I’m sure. Yeah, but after that, somehow we always end up we always went for a pink zone. Right now with the yellow zone and new regulations, some things are unclear where it will go, where not. I personally would just advise to go to pink zone to be more safe because easier to get all the permits. You can also build more dense depends on what you want to build, what not. Is there enough pink zone to drive this demand? It’s getting more tricky.
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10:50
Let’s call it this way. But usually if you search for it, you will find it. So this is very, very important. Okay, so why is that? What’s wrong with yellow zone? What’s the issue? No, I personally just like… Our concepts that we do for our own developments, we want to have a higher density, basically what we can build, like a co-efficiency. That’s why we always go for the pink zone ones. So we can build more dense, basically, legally. Because yellow zone is like 30% you can’t
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11:15
build. Depends on the sub-district. There’s always different ones. Pink zone usually between… If you’re closer to the beach, 50% to all the way up to 65%. Okay, so that’s your zoning advice. So pink, if it’s a commercial, more of a commercial thing. Yellow, it’s still possible if you’re looking to just build for yourself and live in it, et cetera, et cetera. Okay, a checklist. Yes. Constructors checklist. Yes. Okay, so talking through that. Is this for somebody who’s managing a
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11:40
contractor or is trying to project manage themselves with some… No, this one is for the initial stage. So let’s say you found your land, you legally… That’s also very important. You’ve done a proper contract also with proper extension terms because I see 90% of people doing it wrong here. Yeah, we’ve done a couple of podcasts on that. How to secure extensions on leases the best way. It’s really worth watching. We’ll put a link up here. Yes. We’ve done it a couple of times.
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12:05
I’d love to hear how you kind of do it. I watch your podcast as well. Okay. So you copied us. Exactly. No, no, we’ve done it. They weren’t done the same way. And actually this one’s very, very important because this one gives you so much more flexibility later on to extend or also to your properly to investors as well. And a lot of people just go for priority extension, which at the end of the day, you know, there’s not really… All right, market extension. Yes. Which is a 90% chance that you get it
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12:30
through. Yeah, yeah, exactly. Yes. Okay. So yeah, land, securing land. Okay. And then you, what the next thing? Yeah. The next thing is then, of course, you, first of all, you have to go, you have to find a contractor. Before that, of course, you have to go to an architect. You have to make the designs first. And we also, especially on the structural engineering side, we see a lot of flaws that people are basically doing and designs are not right. So if we would build it this way, we could have some issues.
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12:57
So it’s very, very important, first of all, that you go for architects and also for structural engineers, first of all, they’re certified, which makes common sense. But most of the time, I see drawings there which are not done from a certified engineer or they’re not… You need a stamp on it and this one has to be signed in order to be compliant. So it’s actually from a structural engineer, not from the grandpa that draws something together. And besides of this one, then of course,
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13:23
once you have this one, you get to go for the BOQ, the bill of quantity, which is very important. The more detailed it is, the better it is because this one is your… You see exactly in the BOQ what will you get and what will you not get. And also very important that you should always ask what a lot of people are doing wrong, why they would go over budget. You should ask your… Usually you should do it from an external quantity surveyor. They list everything down. You should ask, is there something
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13:46
missing? Do we have some additional costs towards it? That’s why people most of the time go over budget because they don’t ask these questions or even more worse, they got the BOQ done from the contractor, which tried to just fit into the budget somehow and later come up with a 20 or 30% additional invoice. That’s standard operating procedure in Bali. It’s like the contractor does it and then it just goes over budget because that’s how he makes his margin at the end. Okay, so what would you put into… Project managers and quantity surveyors,
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14:17
even on a smaller project, I can see it probably getting a little bit expensive. How do you do that on a more of a shoestring kind of budget or do you even try these days? You just buy? No, to be honest for us, it’s like if we’re building for external clients, we have a minimum amount of 1 million US dollars on a construction amount without the land. So you need scale. Yes, everything else. We don’t do small three, four bedroom… Sorry, three, four villas. We don’t do this one anymore.
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14:45
We’re just focusing on the bigger scale ones because it’s where we can help also other developers more. We can dedicate more time towards it and this one just makes more sense for us. But let’s say I would build on a budget. Let’s say people watching here, they want to build their own home. I would highly recommend even if you come from a construction background that you’re still hiring a project manager which have experience. They usually, if it’s a local, a good one costs you around maybe 600 US dollars.
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15:11
If you go for a expat, always make sure they have the right KITAS and everything. Then you look at like 1K to 1.2K US dollars per month. Not full time. So they’ll be balancing a couple of projects. Yeah, they’re coming like two to three times usually per week to your onsite. Because especially if it’s your first build, it’s so much different than how we build in Europe. And also to understand how to communicate, it’s also a different thing. And also what to look out for, what are
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15:36
the common flaws. So I think that’s one of the best invested money you can do. You hire a project manager or quality controller for your project, no matter which size it is because otherwise you don’t know what they’re doing and you don’t know what they’re hiding or problems coming up later on. I’ve heard that actually several times. So that’s great words of advice there. Okay, so then what’s next? So after that, yeah, and then contractors, quantity surveyor if needed,
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16:01
a project manager, what’s next? Yeah, then you basically go into the deal stage together with the contractor. You make sure that your BOQ is completely done. You have a look into what are the timelines. Is it realistic timelines? Because sometimes they tell you, oh, I build you 10 villas in six months and then you figure out it’s taking 18 months, which a lot of people that I know happen to them as well. And time is money, so running out of time is costing you money. Yeah, and it’s to be honest, it’s very
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16:26
easy to check. You just go for S-curve, like a broker’s curve. They break down everything like, okay, in the first week we do the bore piles, for example. Then next week we basically start with the foundation and everything. So it’s like a breakdown. You can also get this one done from your QS as well. So you can tell the contractor, hey, I need this one done in, for example, 12 months or 14 months, depends on how big the project is. Or you can let, or you can, yeah. If you don’t have it from your QS yet, I
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16:52
would ask a contractor to do it because that’s a sign of seeing, first of all, how professional is he? Because most of the contractors, they never heard about it. They don’t do it. Because you need an extra QS hired in order to keep this one up. Like we have like four QSs just to do weekly progress reports for our clients. It’s an extra budget, extra budget point. It needs it, yeah. Yes, and especially if you’re an external PM or for you, if you look at the progress report later on, even if you
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17:18
have no idea, you can scroll down and see basically, okay, progress planned versus actual progress. And then you know, okay, is my project ahead of schedule? Is it behind schedule or is it on track? And especially on structural stage, it’s usually always ahead of planned. And usually it slows down later on towards the finishing stage. So things like external, like rainy season right now has been brutal. How do you account for that? How do you plan for it? How do you put space in? What do you at all?
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17:48
Or do you just manage the client’s expectations and just say, no, no, no, no. You have to plan it before. Like especially for, I know rainy season is a, to a certain point, it’s unexpected. You cannot control the weather, not yet, unfortunately. So you have to plan this one in. You have to plan in that you have two or three weeks potential delay. So you make sure that you can do in this time, basically to seal fabrication, you can prepare before. And even if you have two or three days or
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18:12
four days, sometimes even with this rainy weather week, delays that you still enough ahead of schedule. So what are we trying in the rainy season, especially on the structural part, because it’s the only thing where the delay basically happens is that we try to keep up 10 to 15% ahead of schedule. So even if we have delays, so it’s raining one week, we still don’t lose progress or going behind the actual planned schedule. So that’s the way how we keep it up. Okay. Anything else on that, on that checklist
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18:37
that you, you know, did you have that you want to run through? Yeah, basically like, first of all, BOQ is important on your side and contractor, what kind of project did they already done? What is the track record? Let them show you units that they build in the same budget range. Because what I’m seeing a lot is like, you want to build for 300k and they show you a villa for 2 million. Expectation here, delivery here. So there’s a big gap on where you can be very, very unhappy. So always make sure and ask, hey, for how
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19:05
much per square meter did you build this one? And is it comparable to mine? Yes or no? Because otherwise you have a, the expectation gap is too big and you will be 100% unhappy. I think, yeah, if you want to share that checklist or anything, we’ll put the detail. Yeah, sure. We can, we can put the link inside. Okay. So your own projects currently, I know you’ve got several on the go at the moment. Yeah. What kind of thing are you focusing on? I presume it’s like apartments, quite commercially costed or priced.
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19:35
Tell me where you’re at with that whole thing and where is Bali fitting within what you’re doing at the moment? Yeah. So first of all, on the projects that we are basically doing, it’s like there’s two different sides. One side, our own developments and the other side, what we’re doing for our external clients. So right now we do all the range from basically smaller boutique resorts with like eight to 10 villas all the way up to basically building 88 units in one go in an apartments complex.
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20:02
That’s for clients, yeah? Yes. And which company is that with? This one is Bali Prime Construction. Bali Prime Construction. Yes. And then there’s another one, which? Yes, it’s Bali Prime Development. In Seseh, you’ve got a big build that you’re doing. Yes. These ones are 88 units as well. 88 units, okay. And that’s Axora, yeah? Yeah, exactly. That’s done under the brand name Axora, which we’re building right now as well. Prime location, 250 meters away from the beach.
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20:27
So there’s a big range of basically different projects that we’re doing. We also do commercial builds, like smaller malls and all the way up to basically like apartment complexes. And where’s the sweet spot in Bali at the moment? Where do you see it moving or where do you see it going back to? And also where in Bali do you see this shift happening most? You mean like regarding the demand? Well, demand and also, but like there’s a lot of projects coming into the market that are quite specific.
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20:54
A couple of years ago, it was like smallish Mediterranean villas were everywhere. Now it seems to be a little more apartment focused, multi-level kind of thing. Where do you see the changes that have happened the last couple of years? And where do you see it going? Yeah, I think it’s right now, the biggest change in the last years was people heavily focusing on the apartments part because it’s fitting towards like a bigger client avatar. The people can afford these apartments because it’s not 300, 400K.
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21:21
It’s more like maybe 100K, maybe 60K depends on the apartments. But I’ve seen at the same time that the demand for more bigger and spacious and more luxurious villas coming at the same time. So we have two different sub-markets. One is like the affordable ones, which is coming with the apartments or covered with apartments. And the other part is basically with people who have money, maybe coming from Australia or from Europe when they want to have a certain luxury. They want to have three, four, five
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21:47
bedrooms, but a big garden. And as we know as well, land price are more expensive here. But I think it’s shifting towards like both of these sub-markets and more and more, at least what I see from our inquiries is getting more in the luxury market at the same time. Okay, so let’s touch on that. So how has the buyer profile shifted in Bali in the last couple of years? Is it more price pointed? Is it becoming more luxury? Has the avatar got more, you know, the buyer avatar, the buyer profile, whatever
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22:13
you want to call it. Do they have more budget? And where are they also looking to buy? And is it purely investment or is a lot more built to, you know, buy to live, really? Yeah, I think I would answer the question with there’s everything is in there. So there we have lower budget clients. We have high net worth individuals who are searching for basically plots. We have different areas. That’s not right or wrong. It’s just about how do you tailor your development towards the target group that
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22:41
you want to have? For example, if you want to go for smaller apartments, price range from 60 to 100K, for example, this one is very affordable. Could be also purchased by, for example, fly-in fly-out workers from Australia. But yeah, this one can be done in Seseh, for example, can be done in maybe even Kedungu as well. So it’s always like how I do it. I always have, I developed a product or a development towards the client avatar or maybe also the potential leads that are already having. So let’s say I have 50 leads, which are
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23:10
having 100 to 120K USD, for example, to invest. I see like, OK, how can I fit the product towards them? What kind of needs do they have? And then do it this way, because what I saw a lot and on the development and also on the construction side as well, people doing a design, they maybe have the fundings to, let’s say they build eight villas. They have enough funding to build four of them. And they think, oh, once I started with the construction, I can easily sell them out. But later on, they figure out that they
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23:35
don’t have a product market fit. So they’re building these units. They put all the money, all the liquidity inside there and later figure out the market don’t even want this one. That’s why we as well, it’s like we’re mainly focusing on the off-plan sales so we can adjust these things in the drawings. We can talk together with our clients what they would like to have inside there. And then we tailor the product towards it. Not that we customize everything. That would be too much work.
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24:00
But you can bring certain feedback and certain things in and bring the people with you on a journey, which is very powerful. I hear off-plan market. I was talking to Tom from Real Estate Indonesia (REID) you know, it’s the data. I think off-plan was like, what was it? 70, 30 or something. And I mean, it’s a substantial and it’s getting more, you know. Do you think there’s obviously a demand for off-plan? Otherwise, people wouldn’t be doing it. But do you think it’s a trend that’s
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24:27
going to stick around? Do you see it changing? You know, it’s obviously far more prevalent in Bali. But do you think it’s going to stick around? And is it effective? I mean, you say it is because you can change. You understand your market better. You get feedback, you change. You get feedback, you change. But you know, a lot of projects come online. They stay there. They don’t sell. And this just becomes a failed project. 100%. I think people still have a perception of that off-plan is very easy to do in Bali.
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24:55
But it comes down right now also with all the different agencies that you have. They only list you once you have a track record and already done developments before. Because what we saw as well as like two years ago, even one year ago, we have all these different off-market properties flooding the market. A lot of people buying these ones. But how many of them are also put the money down? But how many of them actually executed? Because it’s so, as I mentioned before, with my first build, it’s very hard.
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25:21
And I had a construction background to basically also execute these things. What to look out for, how to budget these things right. And that’s why we’re seeing also more and more basically unfinished villas right now being sold before they’re even being finished. So that’s why agencies also look way more for it because they had a lot of clients burned for this one. A lot of legal problems and other things as well. So I think off-plan will still stick around. But as we see already right now, the
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25:48
agencies who offer these ones, they’re way more, how to say this, critical with it, which is absolutely right. They want to see, did you already done developments in this range? What is your track record? Where are you coming from? They do more background checks than before. Well, I mean, there’s just so much more of opportunities to get burned if you’re buying off-plan. You know, you can sell three units, you know, buy the land and then just nothing ever happens. You never get your money back.
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26:13
So yeah, it’s a high risk move. So I think reputation is everything, whereas Europe or Cape Town, et cetera, there’s a very stringent legal process with escrow, et cetera, to buy off-plan property. So I think in Bali, it is developer slash agent kind of governed where it’s built on reputation and credibility. And there’s a due diligence that goes into it with the notaries, et cetera. Do you think that should be tightened up and changed? Do you think it should be fast, stringent legislation?
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26:45
Or do you think it will be self-regulated going forward into the future? The thing is in general, like for example, things like an escrow account, we have all these instruments here, but the most of the time, developers really don’t want to use it, don’t know that it’s existing. And the same for the investors as well. So I think one of the biggest things that have to happen is like to educate the investors as well, how to safely invest in Bali as well, how to not get burned. Because if you get burned by an external
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27:09
developer, you talk to your friends, families, you post something on social media, this one has a bad reputation for the whole Bali market, which affects all of us at the end of the day. Bad news travels 10 times faster than good news. Yes, so I think, yeah, legally, they have to be more a tightened process as well. If you’re a developer and you focus on your investors as well, you have this, like for example, we have an escrow account. So the money only get released, for example, for a certain progress on a
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27:38
construction or for a certain stage or key handover. So we have this, the instruments are existing. Is that an Indonesian registered escrow? Yes. Because I know a lot of developers do it offshore. Yes. And you also have to be very careful, like I would say 90% of all the escrow accounts from the notary, that’s actually their private bank account. So you have to be. Notary and escrow go weirdly interchangeable here. Yeah, so the real escrow account, for example, OCBC have this one, BCA, Permata Bank should have it as well.
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28:07
We mainly use OCBC for these ones. You need two proper signages in order to release the money. So from the notary’s side and also from the side of the buyer later on, in order to release the funds. Yeah, I mean, that’s a proper note. For the most people that listen to this one, I think like, of course it’s normal, but not here in Bali. Why don’t you touch on a couple of the projects you’re doing? It’ll be interesting to know what you’re selling at the moment so people can look.
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28:31
And then also, what kind of sets you apart from everybody else in the market? I mean, I know you’ve got the whole German engineering side to you and you’re far more precision focused and European standards, et cetera. And so why don’t you touch on that? And then also, you know, that’s very much so you’re coming, you must have come into an environment that is culturally extremely different to what you’re, you know, it must be a little bit like oil and water. So I can imagine your blood pressure is
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29:00
quite high sometimes. How do you manage those expectations and so you don’t explode into a puddle of stress, you know? Yes, so first of all, the projects that we’re currently doing, it’s like we’re focusing, especially in the Seseh area, more on like the developments for expats. For example, we have like Piece of Paradise, which already sold out. This one’s on 19 units. And the approach for this one was. Why Seseh? Seseh is for me, like you have Pererenan where we are right now here as well, and
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29:31
you have very, very high property, like a land price as well. After that comes Pantai Lima, which is a little bit more tricky. You have a lot of green zones and everything in here. And after that, the next one after Pererenan is basically Seseh. Oh, so you’re just following the coast. No, we also do developments in Uluwatu and also, for example, Candidasa as well. But for the expat’s focus, we had to look basically, and also we asked in our real estate community what they want to have. And I personally feel like we have a lot
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29:57
of like short-term rentals here, but properly developed properties for basically expats. We have a co-working space inside there, a cafe so you can order to your apartment or townhouse basically also beverages. But we just asked ourselves what have to be included in there that we would personally like to stay inside there. And that’s what we’ve done on a smaller scale. We basically piece of paradise and the whole development was sold out in like two and a half months. Also off-plan everything.
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30:24
Which this one will be delivered in another two months from now, will be finished. And then we have one minute from there, basically Segara, which 88 units, where we took it on a completely different level. So we ask ourselves, okay, what did we done right in Piece of Paradise? And how can we improve it even more on for Segara? And since we have the plot size is bigger, we have more units, like what can we put inside there? So we would like a full spec on co-working space inside there. We have podcast studios, a golf simulator,
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30:51
studios, a golf simulator, laundry, everyone laundry, everyone who stayed here knows what, especially with your white shirt, if you put it in a not in a cheaper. Becomes yellow. Yes. So we put like eco-friendly laundry inside there, which will be picked up from a room delivered again. Mini market as well. It’s facilities focused and price pointed. Facility, price point, and location. The perfect three, you know, to make something sell out. And especially in the Segara development, theres like
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31:20
penthouses that we have, they’re 112 square meter. They already, we just have one left and we’re not officially launched yet. They started back then at 149,000 all the way up to 220.000 US dollars, which is very good at the pricing. And then we have the studios, which are 35 square meters, starting at like 69.000 US dollars. And now the most people will think, “Oh Erik, that’s way too cheap, that it will be absolutely shit quality.” But the thing is, since we have our in-house construction company, we can still deliver a
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31:47
good quality without cutting the corners too much, which most people cannot do. people cannot do okay so you control Okay. So you control everything in-house, which then gives you more margin, which you then offset to the buyer. Yes. We have construction, we have furniture, we do windows, we do all in-house. That’s interesting. Because yeah, I mean, 69,000 is a great deal. Usually I would tell you run away if you hear that price is because usually it will be absolutely shit quality. But yeah, we would shoot ourselves like on a
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32:14
contractor side reputation, also from developer side reputation, which shoot ourselves in the leg, if we do it not good quality. And you’re here for the long term. So it’s something that you and also think you personally would struggle to deliver something shit quality. No, why would I do this one? Because if I look at the long term run, let’s say we should deliver shit quality, nobody would buy next development from us. Exactly. Or nobody would hire us as a contractor anymore, because quality is not good.
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32:38
So this would be way more downside than upside for me. For sure. And every development of yours becomes your showroom. Yeah, exactly. So whatever you do, you have to do it well. Yeah. And for me, the approach is I want to be proud at the end of the day. And if I bring potential clients inside, they want to do developments, I want to have the wow factor. And if I don’t have this one, I’m not satisfied. Anything else on your own developments you want to touch on? Yeah, like we have this very similar
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33:04
approach, but on a smaller scale with townhouses in Umalas, sorry, not Umalas, in Ungasan in Uluwatu. Okay. Yeah. And then we do like a kind of eco-resort right now in Candidasa. Candidasa I heard is starting to, you know, a lot of Dutch guys doing some developments there. They build their own small village there. There’s a Synergy in Virgin Oasis. I know another guy’s doing something. Yes. Then we have Candidasa Hills. Candidasa Hills. It’s the same guys from Synergy. And I had another guy come in here.
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33:29
I actually met him yesterday. David, he’s building a project there. Wundernik? Yeah, Wundernik. They’re building like close to the beachfront. We’re in touch with them. Small little world , yeah. Bali is a small village at the end of the day. That’s why reputation is also so important. Because if you don’t build a good quality, or if you do something wrong here, that’s what spread very fast. Yeah, absolutely. Yeah. Yeah, I’m actually going to go up to Candidasa next week.
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33:52
I haven’t been in years. Have a good look. It’s beautiful up there. Yes, it is. So where would you say the hotspots, because Bali is all about hotspots. Yes. And if you don’t get the hotspot wave correct, and the upswing and capital appreciation, the whole thing, you know, and you get stuck in Kuta for 10 years, it’s not a great buy. Where would you say to focus? First of all, you have to look into, like, do I have, can I generate traffic? Yes or no? Because you can also do a development in
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34:18
Munduk or whatever it is, where you can bring people towards it, where you have, for example, Munduk cabin is a great example for this one. It’s like where you can also make good money if you can generate the traffic towards it. In general, like, if I don’t, if you don’t have following, you don’t know how to generate traffic. What do you mean by traffic? Are you talking about footfall? Are you talking about, like, web traffic or? No, I mean, like, web traffic. Oh, okay. So eyeballs, leads.
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34:42
Yes, exactly. Yes. So if, like, if we look besides of these ones, of course, you have, Seseh is very good right now, but Seseh is, like, I would say 70 or 80% of all the good plots are already sold. So even on our road where we are right now, like, all the plots, all good plots already gone. Then what I personally really like, and we also do a couple of developments there for, or building a couple of developments for clients of us is in Kedungu. I personally think that Kedungu have a very good potential going towards it.
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35:15
We have more and more expats, especially long-term expats already going there, because also way cheaper at the moment. There’s a great school there now also, which is nearly capacity. So it’s, you know, good for families. And the infrastructure is also slowly building there, because before you always had the issues, you want to stay close to Canggu, Pererenan, or whatever it is, because you never had the infrastructure. But now Kedungu starting to already have more infrastructure. Cafes, you can go there.
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35:37
Gym is open up as well, already open up. So I think Kedungu is very good. Then, of course, we have Uluwatu as well, or close to Bingin, and we have Suluban, for example, which is also very good. Then Nyang Nyang. What do you think about the Bukit in the long term? What do you think is going to happen there? I think it will be highly dense developed. The traffic and water, what do you think is going to happen with that? That’s the biggest challenge right now. Because you see all the water trucks pacing
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36:01
by in a speed, like, and a lot of accidents happen there as well. It’s like the biggest challenge. It’s dangerous, yeah. It’s really dangerous there. And they tried to fix it with the PDAM, basically, with all the water tanks, what they had. The problem is that you don’t, through a lot of developments, you don’t have access to. And if you have access to it, it’s very, very expensive. I mean, it’s a mountain really. So right now, like, the only solution that you can have, like, you can before you can
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36:22
do a well, but well, very hard to get the permits, very expensive to drill, because you had to go down hundreds of meters. So the only proper solution that you have, as well as right now, the water tanks. But I mean, there’s big, big developments going on down there. Yeah Bukit is, I mean, I love it, but it’s a little bit tricky. I think it’ll start to get a little bit creaky in like four, five or six years. The thing, the main limitation that you have are the roads at the moment, because these
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36:48
roads cannot take much more on. It’s hell going down to Uluwatu. I really like Uluwatu, but if I go down there to the projects, like I always ask myself, like how much more traffic can take And imagine one road is like, there’s accidents, it’s closed. It’s out for days. So yeah, Uluwatu, Bukit. I mean, it’s great. Anything West Coast did you see or North? Any inside information that you have? Just not touch on the Airport, Metro, because I’m not so sure about that anymore.
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37:18
That’s always a 50, 50 chance, or maybe even less. No, to be honest, like what we look at right now is like Candiddasa as well. I think Candidasa is quite nice, but you know, you have to know how to generate traffic, like eyeballs towards it. Otherwise it could be a little bit more tricky, but I really like what’s going on. The developments already going on there. There also will be soon a hospital. Once you’re going there, I’m not sure if you already started or just put up the banners
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37:43
and then just leave it there. But yeah, I think like, there’s very nice spots where you can go to Lovina is also also nice but for development side right But for development side right now, we more stick like mainly focusing Seseh, Uluwatu and then one or two like signature projects in more outside of the main center. So 31st of March, you know, this whole thing. Nobody seems to quite know, we did touch on it earlier, but like this whole shifting legislative slash enforcement environment in
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38:15
Bali, how are you finding it? How are you seeing the shifts changing or the environment changing short term rentals? What do you think is going to happen there? What do you think is going to happen to long term? How is it going to affect the Bali market? Is it at all going to affect the Bali market? And what do you see happening? I think at the current stage with the enforcement that we’re having, as we talked before about this one a little bit like the management companies already figured out a
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38:43
legal way how to basically, you still can rent your property towards it. So how does that work? So you have a villa and then you just get a local management company to your short term letting? Exactly. With the right KBLIs and then you can then they able basically to rent this one out there. And you think that’ll change? You think it will be the underlying asset that needs the right KBLI at any point? Maybe at one point they will enforce it more. I think right now with all the villas that we have on the market, they don’t have the
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39:09
capacity to enforce it. I think so at the moment. So you see nothing really shifting on the 31st of March? There will be more enforcement, especially on all the green zone builds basically, which are still rented out right now. I’m pretty sure they will somehow disappear from the market. So you think Airbnb, so you think they’re going to delist on the 31st, a bunch? Depends on what type. It’s like, I don’t know, what is it, 60%, 50%, 40%? Nobody quite knows that don’t have a
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correct… Yeah, to be honest, like based on the conversation that I had with other villa management companies, they don’t seem concerned at all. And they mentioned 400, 500 villas plus. They said like there’s a work, like they already found a workaround for it and it’s not affecting too much as the most people thought at the beginning. I remember when it comes out, everybody, I get messages, oh, it’s very good. 50% of all our competitors will be Disappearing. Will be will be disappearing and i said
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39:58
And I said like, it’s the same like with the moratorium, what we had before, where everybody thought, oh, we cannot get a license anymore. Like one year or two years ago, everybody’s texting like, “Oh, Erik, can I still do my development and everything?” So there’s always this news coming out and people are very, very shocked about it. I think like they lose their whole investment. But most of the time, the government also want that you still can continue it, but they want to enforce it more, which is right.
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40:20
So developers who actually develop by the book and by all the regulations, because there’s a lot of regulations here in Bali, they will basically benefit from it. So word of advice, if you’re going to start it, do it right 100% upfront, so you don’t have to deal with any of these dramas down the line. Okay, well, what about zoning? And what about this agricultural land? And have you seen any issues directly on those kinds of things at the moment? What I saw that the government changed a lot
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of like pink zoning back to green zoning, but this will not happen here. It’s more like more like one to one half hours away from here. So they changed like an 18 hectare plot into like from all pink zone into like two hectares actually usable pink zone. The rest of the screens are LSD protected. So you see, you see this kind of changes, but the most of the time, like in these areas in Seseh and Co, you don’t have these kind of changes, more like more further out in order to protect more what’s not built yet.
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41:16
And so it’s not too dense later on. I heard Tabanan has a little bit of issues with that. Any advice that you can give? If you’re watching this one, and you basically thinking about, oh, it’s super “Oh it’s super easy to start developing here in Bali.” The most of people, their perception is it’s super easy, and it’s super easy to sell later on. So a lot of people starting into this journey, and later figuring out how hard it actually is. So the most important things is what you
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41:40
should do on your checklist. First of all, it’s like, can you sell the units? Yes or no? Or maybe you have to funding for yourself. But after that, the trickiest part is actually to find the right contractor. Because we run like a survey in our real estate community. For one development, how much contractors do you think you need in order to finish the project in average? Oh, good question. I would say half a dozen. So it was actually, it was like between two and three contractors in average that you
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42:08
need to finish one development. And keep in mind in this real estate community, they’re not like big, big developers, but they’re like four villas, five villas, sometimes two villas. So in average, you need like you start with one guy, then the most of the time the issue is they’re running behind schedule, they don’t have enough workers on site. Then quality matters coming up. And usually on the finishing stage, you switch between one and two contractors. Oh, the actual main project.
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42:33
Oh, I just thought you meant like subcontractors. No, no, no, like the whole contractor. Oh, okay. So you’re saying two to three usually on a project from start? Yes, yes. Oh, wow, that’s crazy. Okay, I didn’t know that. Oh, wow. So they would get fired and then find a new contractor? Yes. And this one usually costs you a lot of delays. Oh, for sure. A lot of money, penalties potentially for investors as well. To be honest, it’s very hard to find a good contractor because you have a lot of
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42:57
contractors here, but most of the time, like if they take on smaller projects, the quality and whether they’re newly established and maybe they build a good quality or they got burned before in other bigger projects, but it’s very hard to find a good and reliable contractor here in general. So that’s one of the things I would recommend to look out or to watch out for one of the most things. Pay a little bit more on that side also. But also taking over a project is almost impossible because they’ll just keep
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43:24
playing. Not impossible, but there’s a bit of a blame game. You know, well, there was a contract before and then nobody wants to take accountability for where the project is. 100%, yeah. And you have to make sure. And also, you have to also analyze basically also on the payment structure later on for the contractor. Like usually people sometimes they do like 30, 40% upfront payment and then like the contractor halfway through is gone, which is also a common thing. Dissapears. I’m pretty sure you heard this one a lot as well.
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43:50
So it’s always important to do like maybe once per month payments together with your project manager, quality controller, who actually can verify it. First of all, is this the actual progress that was made? And also, is it properly executed? Because otherwise you’re paying, paying, paying. And once you find out the issue and you already overpaid 20 or 30%, you will never see this money again. Guaranteed. It’s gone. Yes. That’s good words of advice. Any other wise words of wisdom before we
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close this off? One more thing is like, especially with off-plan sales is expectation versus actually delivery. So most of the time, like developers, you show the renderings expectation somewhere here, budget and delivery somewhere here. So very important for people who want to invest into it, ask for all the material breakdown. So you know exactly what will you get and what will you not get. Because I think like most of the time, developers don’t even know what kind of materials they use in the renderings.
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44:44
And they put like Italian marble inside and later figure out, oh, it’s a 60K apartment or whatever it is. And then go for cheaper other materials. And I can see it all the time. Just renderers, they just kind of make things up. Oh, it’s wood, but then it’s not wood or whatever. Yeah, it’s vinyl or whatever it is. So it’s very important to make sure that you have to, in the contract, also put down which kind of materials they’re using in the finishes. Because otherwise what will happen the most
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45:11
of the time, they go over budget. They already overspent on the structure, on the MEP. And then they have less budget left on the finishes. So that’s the only way where to save money. So instead of the full wood of like a proper wood floor, you put like vinyl inside. Or instead of solid wood, you go for HPL and all these other things where you can save some money. And the difference is astounding. The kind of difference the finishes and those kinds of things make to a place. Yeah, and it’s also like one of the most
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45:40
important things I would say you have to do on the developer side and also on the contractor side is expectation management. So your expectation with the renderings are here. But if your budget is here, you have a big gap where you can be disappointed. So one of the most important things for me or for our company as well is like to set the expectations that we at least deliver it where you expect it to or over deliver it. And how can you do this one? It’s quite easy. Like for the contractor side, you do, for
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46:04
example, for the materials, 70% of all people in the world are visual learners. So they don’t understand if I show you a rendering, how it actually looked like, what kind of texture we had. So we put like smaller packages together with the actual finishing material. So you understand what will you get and what will you not get. And the same on the developer side, because the better you manage the expectations from the buyers, the more happy are they later on and also it’s a long-term customer value.
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46:27
Most of the people which invested with us, they also bought in the next development another unit as well. So it’s all about like the expectation management is super, super important. Transparency, clarity. Communication is one of the biggest or challenging parts, which most people have with the contractor. No updates, no daily updates, no weekly updates, no progress reports. And then you basically, you have to hire someone or you have to go onsite every day. I have so many people losing their hair
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46:56
because they have to become the project manager and be every day onsite. I’m pretty sure you know the stories as So yeah, that’s the biggest advice or things that you should look out for. We’ll hit some rapid fire questions when we come back. Okay, welcome back here with Erik. We’re just gonna finish off some rapid fire questions. 60 seconds, you’ll get to answer a maximum amount of questions with really short answers. So yes, no, pass, kind of thing. Yeah, it’s a short game.
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47:26
We like to. Let’s see how I perform. Yeah, let’s go, okay. Do investors focus too much on projected ROI? Yes, and the problem is the most of the time, the ROI, which is projected, it’s not really backed up by numbers. And they should do their own research with AirDNA or REID, for example, in order to verify if the investment even makes sense. Is cashflow more important than appreciation? Yes, 100%. Does Bali test your patience as a developer? Yes, 100%. Does German discipline help? Yes, of course, especially for the
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47:54
expectation as well, but you have to adjust it to the Bali market. You cannot expect the same what we have in Germany. Do developers sometimes know a project will be difficult from day one? Yes, of course, especially if it’s your first one, 100%, that will be very difficult for them. Is building a team harder than building projects? No, you need a good team in order to execute the projects properly. Do bad neighbors sometimes ruin great projects? Yeah, there will be some issues the most of the time.
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48:18
Do you find it easier to stay healthy in Bali or in Europe? Definitely Bali. You can outsource everything. You have a private chef who can cook it for you. It’s way more easier, even if I don’t look like this. Thank you. I will put your links below to your two companies. If you’re looking for a contractor, this is definitely one of the top three options or number one option you should be looking at in Bali. Definitely knows what he’s doing. Yeah, I think that’s about it. And I’ll put your links in the description.
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48:51
Yes. Thanks, guys.