Owners renting out a property for the first time often set the price on feeling. What they need to cover the mortgage, or what seems right for a house they worked hard to build.

Tenants don’t look at it that way. They compare your house or shophouse (ruko) with the other options on the same street and pick whatever makes the most sense for their money.

This guide is for owners of houses and shophouses who want to set a fair rent. High enough to match what the property is worth, and realistic enough that it doesn’t sit empty for long.

Start with comparable properties

A fair rent is set by the market around your property. The first step is to collect comparables.

  • Find three to five similar properties in the same neighbourhood, with similar size and condition.
  • Use several sources, such as online listings, for-rent signs around the area, neighbours, the head of the RT (the neighbourhood unit) and property agents.
  • Separate asking rent from agreed rent. Listed prices are often negotiable, so ask what rent was actually agreed.
  • Note what’s included, such as furniture, air conditioning or dues the owner pays.

For each comparable, write down the rental period, land and building size, number of bedrooms, power capacity, parking, flood history and condition. A simple table is enough.

If truly similar comparables are hard to find, take the closest ones and note each difference: more bedrooms, a bigger plot or a narrower road.

Watch how long a listing stays up as well. A house advertised for months without a taker is probably overpriced, so don’t use it as your benchmark.

State the period clearly

The difference between a monthly and a yearly price is twelvefold. A listing that shows a number without a period confuses tenants, or gets skipped.

Example (illustrative numbers only): Rp 2.5 million a month equals Rp 30 million a year. Without the period, Rp 30 million may be read as a monthly price and your house written off as too expensive.

If you offer both monthly and yearly terms, decide whether paying a year upfront deserves a discount. Money received in advance lowers the risk of arrears and empty months.

Use the same period in the listing, in negotiation and in the lease. That leaves no room for misreading.

What pushes the price up or down

Once comparables give you a range, move your figure according to your property’s strengths and weaknesses:

  • Road access. A house a car can reach is worth more than one down a narrow alley.
  • Parking and a carport. Family tenants often treat these as a must.
  • Flood history. In tidal areas such as Banjarmasin, a house that stays dry in heavy rain and high tide is worth more.
  • Power capacity. A 2,200 VA house suits a tenant running several air conditioners better than a 900 VA one. A power upgrade can be requested from PLN.
  • Water. Reliable mains water from the PDAM (the regional water utility), or a well with clear water, adds value, especially on peat land where water tends to be brown.
  • Furniture. A furnished house can command more, but the furniture wears out and needs replacing.
  • Condition. Fresh paint, a roof that doesn’t leak and clean bathrooms shape the first impression.
  • Neighbourhood security, such as gates, a guard post and street lighting.

Who pays for what also shapes the figure. If the owner covers security dues, garden upkeep or major repairs, the rent can reflect that. Write the split into the lease. A full guide for landlords is in renting out your house safely.

Shophouses are priced on frontage and traffic

A shophouse is rented to do business, so the tenant judges how many potential customers pass by and are willing to stop.

  • Frontage width decides how visible the business is from the road.
  • Vehicle and foot traffic during trading hours, which matters more than rush-hour congestion.
  • Parking for customers’ motorbikes and cars.
  • Position, such as a corner or a spot near a busy junction.
  • Power capacity sufficient for businesses such as a restaurant or a workshop.
  • The number of floors, and whether the upper floor can be lived in or used for storage.

So compare with shophouses on the same stretch of road rather than anywhere in the same district. Two shophouses close together can differ a lot in rent because of a road median, the direction of traffic or where the nearest U-turn is.

Test it against the yield

Once you have a figure, test it against the property’s value. Gross yield is a year’s rent divided by the property’s value, times 100.

Worked example (illustrative numbers only): a house worth Rp 800 million rents for Rp 40 million a year. The gross yield is 40 divided by 800, or 5 percent.

Net yield is more honest. Deduct the final income tax (PPh final) of 10 percent on rent, the Pajak Bumi dan Bangunan (PBB, the annual land and building tax), upkeep and an allowance for empty months. The tax is explained in our guide to tax on rental income.

Continuing the example (illustrative numbers only): PPh of Rp 4 million, PBB and upkeep of, say, Rp 4 million, and one empty month of about Rp 3.3 million. That leaves about Rp 28.7 million, a net yield of about 3.6 percent.

This calculation doesn’t set the rent, because tenants don’t care what your house is worth. It does two jobs. It shows whether the rent justifies the capital tied up in the property. And it helps you decide whether renting out makes more sense than selling.

Count the cost of empty months

One empty month costs about 8 percent of a year’s rent, because a month is a twelfth of the year. Minimum electricity charges, dues and upkeep keep running while the house is empty. A house left empty for long also turns shabby and damp faster, which makes the original rent harder to get.

Worked example (illustrative numbers only): the market rent is Rp 30 million a year. You ask Rp 33 million, 10 percent more. If that price keeps the house empty for two extra months, you lose about Rp 5 million chasing an extra Rp 3 million.

A sitting tenant who pays on time and looks after the house has value too. A new tenant means an empty gap, repainting and your time spent screening applicants.

At renewal, check current comparables again and raise any increase well before the lease ends. A small rise that keeps a good tenant can pay better than a big one that leaves the house empty.

Next steps

  1. Collect three to five comparables and note their rental periods.
  2. Adjust the figure for your property’s strengths and weaknesses.
  3. Work out the gross and net yield, including the 10 percent tax.
  4. Test the price against the cost of one or two empty months.
  5. State the price and its period clearly in the listing and the lease.

For comparison, you can keep an eye on Vorneo’s list of shophouses for rent in Banjarmasin.