Investing in Property for Mixed Couples

[ukcouple]

A typical situation.

A husband and wife are living in Indonesia.. he's a foreigner and she's Indonesian.

They have some spare cash (well.. the husband does). The wife has her eyes on a great investment property which she wants to buy to renovate and sell or rent out.

The husband agrees that the property would be a great investment. (for the wife anyway.)

If this was the UK or the US it would be a no-brainer. But this is Indonesia and the husband, being a foreigner has no property rights. The wife would have sole ownership and the right to sell, rent and dispose of the proceeds from the investment however she wants.

That's my understanding of the situation.

So the question is, does the husband have any legal way to protect his stake in the investment and have a claim to the proceeds of a sale or rental.?

Or can it just be considered as a gift to his wife and hope they never get divorced.?

 

[centurion]

The husband and wife should have a pre-nup or post-nup agreement.

Husband loans money to wife, with details in the contract what the money is for and how the proceeds would be split afterward. There would be a tax on interest here.

As an extra layer of protection on the property, a mortgage in favor of the husband can be added above the loan, however, the mortgage has some administrative and notarial costs.

 

[ukcouple]

Hmm.. and thanks for the reply.

For all the time I've been on this and that forum I've never seen such a solution as you suggest.

Needs time to digest, the practicalities of such a proposal etc.

 

[fastpitch17]

I know of almost the exact thing since it happend to someone I know only a few months ago. Courtship with his visits off and on. Sold everything he had and moved here a year prior to pandemic restrictions being put in place. Short live together, conversion of course followed by marriage. Lots of clues that he was going to lose big time in the end but little head wasn't listening nor was big head. Just going to be great.

First he bought her a car and he a motor. Then furniture that could only come from Informa. Then came the buying of income property connected to a house they could fix up and live in. The thought of income property sounded good to him since he was going to have no income until 7 years when his gov retirement money would start up.

After marriage he went from his sosbud to kitas, spouse sponsored. She told him she couldn't understand what immigration needed so she asked for 10 juta. The amount immigration said they required to get the paperwork completed. He paid even though I was screaming at him to not do that. He paid. Next immigration asked for 5 juta to send his paperwork to get signed by the appropriate offices and that would save him a trip to Jakarta. This time he followed my advise and gave them nothing. They ended up sending everything out for no cost.

Time for the property purchase. She had a house and sold to her uncle. That plus his contribution would pay for the next one. She found the house she wanted. A "friend" was selling. She went for it and then needed to pay. She still needed 200 juta which he supplied. Then, when the work had started she needed another 300 juta. Evidently, according to her, he uncle hadn't paid her yet. He gave her the cash. Remodeling ends up with a 2 story house. One room up, one room down. More like hotel rooms. She put her sons to take over the bottom room as living quarters. The couple get the upper room which is primarily a bedroom with bath. In the old carport, garage, lower oart of the house, 3 kos were added. The income property with a shared bath for 2 and a private bath for one. He has 500 juta invested in a house that may be valued here at 300 juta. She gets upset, sells the car. Cash went???. Month later begs for a car so she can take her kids to school. No school because if covid. He buys her one.

He finally says he can not spend any more money. Income property is only bringing in a little over 2 juta a month since his wife hired a housekeeper and allows her to stay in one of them. After he says no more spending she overnight turns into a monster. Starts hitting him for no reason. Yells at him and calls him names in front of everyone. Tells people she is putting him on the streets and he can become a begger. She ripped out part of the cctv because he copied one time she took a broom handle to him. He called police and a lawyer. Both came with prices. He finally got out on the second Ausie relief flights in September with the last of his cash.

You would think he learned a lesson but ih no. Spent 3 days in Bali before heading back to OZ. He met a nice girl who spent the days and nights with him and now he is saving money to come back when he can. He is also still married and now trying to convince his partner from hell to continue to sponsor his 2nd kitas so he can stay or come and go from Indonesia with a merp. Some people just never learn. He is actually planning that eventually he has a kitap.

 

[lifelongexpat]

There's just one born every minute....

 

[Balifrog]

I know of almost the exact thing since it happend to someone I know only a few months ago. Courtship with his visits off and on. Sold everything he had and moved here a year prior to pandemic restrictions being put in place. Short live together, conversion of course followed by marriage. Lots of clues that he was going to lose big time in the end but little head wasn't listening nor was big head. Just going to be great.

First he bought her a car and he a motor. Then furniture that could only come from Informa. Then came the buying of income property connected to a house they could fix up and live in. The thought of income property sounded good to him since he was going to have no income until 7 years when his gov retirement money would start up.

After marriage he went from his sosbud to kitas, spouse sponsored. She told him she couldn't understand what immigration needed so she asked for 10 juta. The amount immigration said they required to get the paperwork completed. He paid even though I was screaming at him to not do that. He paid. Next immigration asked for 5 juta to send his paperwork to get signed by the appropriate offices and that would save him a trip to Jakarta. This time he followed my advise and gave them nothing. They ended up sending everything out for no cost.

Time for the property purchase. She had a house and sold to her uncle. That plus his contribution would pay for the next one. She found the house she wanted. A "friend" was selling. She went for it and then needed to pay. She still needed 200 juta which he supplied. Then, when the work had started she needed another 300 juta. Evidently, according to her, he uncle hadn't paid her yet. He gave her the cash. Remodeling ends up with a 2 story house. One room up, one room down. More like hotel rooms. She put her sons to take over the bottom room as living quarters. The couple get the upper room which is primarily a bedroom with bath. In the old carport, garage, lower oart of the house, 3 kos were added. The income property with a shared bath for 2 and a private bath for one. He has 500 juta invested in a house that may be valued here at 300 juta. She gets upset, sells the car. Cash went???. Month later begs for a car so she can take her kids to school. No school because if covid. He buys her one.

He finally says he can not spend any more money. Income property is only bringing in a little over 2 juta a month since his wife hired a housekeeper and allows her to stay in one of them. After he says no more spending she overnight turns into a monster. Starts hitting him for no reason. Yells at him and calls him names in front of everyone. Tells people she is putting him on the streets and he can become a begger. She ripped out part of the cctv because he copied one time she took a broom handle to him. He called police and a lawyer. Both came with prices. He finally got out on the second Ausie relief flights in September with the last of his cash.

You would think he learned a lesson but ih no. Spent 3 days in Bali before heading back to OZ. He met a nice girl who spent the days and nights with him and now he is saving money to come back when he can. He is also still married and now trying to convince his partner from hell to continue to sponsor his 2nd kitas so he can stay or come and go from Indonesia with a merp. Some people just never learn. He is actually planning that eventually he has a kitap.

Madness, to put it very diplomatically.....

But not surprising. Seen the same in Thailand, Vietnam, Philipines....

 

[Will_M]

I’d never invest anything here. Too risky and the houses are (for the most part) extremely poor quality builds. Buy property in your home country and rent that out. Lebih aman.

 

[Helpful Herbert]

Or can it just be considered as a gift to his wife and hope they never get divorced.?

Exactly this.

One small practical step the husband can take if he suspects there may be a divorce one day is to hold\store the physical SHM certificate himself. It is pretty hard to sell land without having the certificate. Of course the husband cannot sell it either, but at least it stops it being sold and then it can one day be passed to the children.

I have seen this even done between Indonesians (eg siblings), as a way of indicating that the person in whose name the property is, is not the one who paid.

Or for example after an inheritance the property is put in the name of one sibling but physically held by another sibling just in case the first one feels tempted to sell or mortgage without asking permission from the others.

But at the end of the day there is no real way to 'protect the investment' in that sense that you would get your money back.

 

[Helpful Herbert]

The husband and wife should have a pre-nup or post-nup agreement.

Husband loans money to wife, with details in the contract what the money is for and how the proceeds would be split afterward. There would be a tax on interest here.

As an extra layer of protection on the property, a mortgage in favor of the husband can be added above the loan, however, the mortgage has some administrative and notarial costs.

Just my opinion but trying to do this very expensive and bureaucratic solution is a clear indication that the husband does not trust the wife and it's more likely to end badly. I can just imagine the arguments that this would cause and the resentment that would build up.

As a rough guide, don't put more than 50% of your net wealth into land held in the spouse's name, and then if there is a divorce one day it is just like handing over what you would have to hand over in a Western divorce settlement anyway. Look at buying her land as a "divorce prepayment" as one of my friends put it. And if everything works out fine, then everyone's happy.

 

[Balifrog]

I’d never invest anything here. Too risky and the houses are (for the most part) extremely poor quality builds. Buy property in your home country and rent that out. Lebih aman.

Agreed.

Personally buying at my age (68) would be simply stupid IMO.
Missus has her own house in Java, long before we met, and a pretty nice one.

My only "investment" here was a motorcycle for her last year.
Oh yes, and my KITAP....

In Thailand, many moons ago I bought a (not expensive) house in BKK, having 3 kids that needed lodging whatever the situation between mom and dad would evolve to.
Money written off the day I bought it.

Kids have lived in it for over 10 years, one still does, so it was worth it.
I dont care what happens to it later, if the kids are lucky and the ex has not double mortgaged it, they may one day get some money out of it.....

My part I spend it over 8 y in HKG's nightlife

 

[atlantis]

As a rough guide, don't put more than 50% of your net wealth into land held in the spouse's name, and then if there is a divorce one day it is just like handing over what you would have to hand over in a Western divorce settlement anyway. Look at buying her land as a "divorce prepayment" as one of my friends put it. And if everything works out fine, then everyone's happy.

Pretty much what I did. Half of our assets in lands on my wife's name and the other half in depositos and bank accounts under my name.
This situation greatly motivates to be a good and fair husband. I've stopped looking around me and have been faithful to my wife since the day I married her and invested in Indonesia. 18 years and still on honeymoon with a clear sky above us.

 

[Ruserious]

I'm curious about what property is a good rental investment at the moment. From what I see the purchase prices are high and rental rates currently very low. The only possible exception seems to be if you can have 20 or more kost in one property.

Also be aware that building quality is very very bad here and there are a lot of repair costs.

 

[macvert]

partner from hell

 

[Hawk256]

From what I see the purchase prices are high and rental rates currently very low.

That's been my observation as well. Unless you find a unicorn the return on investment is just too slow.

 

[Anfooshi]

Has anyone considered putting the land in the Indonesian's name and the house in the foreigner's name with an agreement to use the land for x amount of years?

 

[fastpitch17]

We decided since we moved here that with our ages, there was very little sense in buying a house for us at all. For the past 10 years we have paid an average of 23 juta per year. I am now 70, my wife is 68 in a couple months. So far we have spent around 230 juta towards rent. Our houses we rent are in the 700 to 800 juta price range so we are looking at hitting that in about 30 years total. Renting seems the cheaper route to take. We do jave the constant pressure from family to buy but we figure that is because we have no one here to leave property to when we are gone.

Same goes for cars. It is cheaper for us to use Go/Grab cars than to buy one. Plus, I don't have to drive, buy fuel, or maintain an auto. Same people say we should buy a car.

We based everything on our ages. If we were younger we would have probably thought different. By renting we also kept our freedom to just up and move to a different city/area if we felt like it. If we would have stayed in Jakarta those rental cost would have been much higher but then again, so are house prices.

 

[Balifrog]

We decided since we moved here that with our ages, there was very little sense in buying a house for us at all. For the past 10 years we have paid an average of 23 juta per year. I am now 70, my wife is 68 in a couple months. So far we have spent around 230 juta towards rent. Our houses we rent are in the 700 to 800 juta price range so we are looking at hitting that in about 30 years total. Renting seems the cheaper route to take. We do jave the constant pressure from family to buy but we figure that is because we have no one here to leave property to when we are gone.

Same goes for cars. It is cheaper for us to use Go/Grab cars than to buy one. Plus, I don't have to drive, buy fuel, or maintain an auto. Same people say we should buy a car.

We based everything on our ages. If we were younger we would have probably thought different. By renting we also kept our freedom to just up and move to a different city/area if we felt like it. If we would have stayed in Jakarta those rental cost would have been much higher but then again, so are house prices.

Agreed.
68 / 51 here.
Rent much higher, but still within what I budgeted (rent shall not exceed 25% of monthly budget). Note I say "budget", not "income"
No car, no motorcycle, we use Grab and GoJek. Very easy and cheap, and as you say no hassle of ownership. Besides that I can relax have my 3 or 4 glasses of wine.
In the Missus jungle village, I did build a small addition to the house, so I can have some peace and quiet to read and relax. Build by the family, cost very low, one can't even speak about "investment".

 

[Will_M]

34/26 here.

Agree with all of the above. Currently my house is provided for by the company. Even if I were to leave the company, I would never to buy here. Limited planning laws, poor quality builds make it very questionable over renting.

In terms of a passive income or “flip” property it makes it even more risky (borderline stupid, imho) as an expat. Ive seen 4m/5m properties in Bandung need extensive renovation just after a year or two. Most of the “original” kota baru parahyangan properties are empty and for rent. Two properties in KBP that I looked at, had severe foundation issues. These were 5-6m properties. 90% of the podomoro park properties are sold as “investments” so there is an abundance of cheap rental potential as well below 4% house value on an annual basis. At least in Bandung.

As an expat I put all my surplus money into tax efficient investments in the Isle of Man and Jersey. I do pay a hefty fee for my FA but the returns have been very decent. Eventually I’ll split between stock market and real estate (50:50) and use both investments as passive income.

 

[Balifrog]

Currently my house is provided for by the company

Hahaha, makes me realize that I have been lodged by my company for many years overseas. Lodging, travel expenses, medical insurance, visa expenses, etc.. came a bit as a shock when I retired, as I have to pay it all myself now !

As an expat I put all my surplus money into tax efficient investments in the Isle of Man and Jersey.

Same, but in the region and directly managed by me.

Old age approaching, I have blown quiet a bit of it on "fun" the last 10 years before retiring, but seeing the "new world" now I was bloody right to enjoy them days.

 

[Helpful Herbert]

In my area of South Jakarta, the price of a house is equivalent to about 45 years rental (for example a house of 7.5M can achieve around 165jt per year (IF a tenant can be found). However despite this huge disconnect between rental and purchase prices, we decided to buy, just because of the stress involved in having to move every few years when a landlord wants the house back, and the feeling of not having your own place. If I survive 45 years to get my value for money I'll be quite happy .