Why I Am Looking to Invest in Cambodian Real Estate – Part 2
Once you have decided that Cambodian real estate is something you would like to explore more, the next question is how should you go about it. An important thing to take note of is that many emerging or frontier markets, especially in Asia, are characterized by a rapidly growing number of expats, but with very few housing options available on the market that meets international standards.
Cambodian real estate market
As such, there is a nice little niche in the market for buying up Cambodian local-style apartments in good locations at low prices, and renovating them to an international standard. You can then either rent it out yourself to well-paid expats working for example in the finance or oil & gas sector, or you can put it back on the market and sell it to a different class of customers, be it expats or younger locals seeking western luxuries. In fact, some people are claiming that Cambodia is one of few places where it’s still possible to make a profit flipping apartments in this way.
The obvious benefit of flipping homes in emerging countries like Cambodia is that you take advantage of the extremely low labor cost compared to what you are used to from home. When renovating in order to flip, you need to keep costs down, which can be very hard thing to accomplish in any Western market.
Aiming for the tourists
The option that appears most interesting for me, however, is to buy, renovate, and rent it back to tourists through for example AirBnb. It is well known that short-term rental on AirBnb in many cases can earn you about the double of traditional long-term leases. With that being said, short-term rental also means a bit more work for you as the landlord, and costs related to cleaning and so on.
Renting or buying?
For those not necessarily looking to invest a large amount of money, but rather want an exciting and potentially very profitable business idea, you may also be able to sign a long-term lease with a landlord, and then sublease the same place on AirBnb. Many local landlords value the comfort of a long-term lease and not having to worry about renting the place out. About $300/month should be enough for a newly renovated studio apartment in a good area.
A way to go about this would be to do some simple renovation and upgrade the interior design to make it appear more attractive to Western tourists. For detailed descriptions on how you can make money this way, the book The Airbnb Expert’s Playbook, by Scott Shatford offers some great insights.
Some interesting neighborhoods
If we choose to look at Cambodian real estate specifically, the capital of Phnom Penh has a few neighborhoods that would be more attractive for expats and tourists alike. Some of the areas you might want to take a closer look at as a foreign investor include Riverside, BKK1, and the Russian Market, all close to each other in the central part of the city. These are trendier up-and-coming areas with plenty of bars, western restaurants, and coffee shops, set to appreciate the most as the influx of foreigners continue.
What are the costs?
I have heard about people finding apartments in the trendy Riverside area of Phnom Penh for a mere US$23,000. However, if you want your neighbor to be someone else than a questionable massage parlor, you might need a bit more. $40-50,000 would be a good place to start looking for a place in need of some simple renovation and furnishing, without taking on too much work.
Find a local agent
Next, you would need to find a local real estate agent to help you out. Here, it is very important that you do your own due diligence. There are plenty of agents marketing their services specifically to foreigners, but be prepared to cash out more if you go through one of those. A piece of advice would be to talk with other expats already living in the city you are looking at, for example by looking up expat groups on Facebook.
Ready to take action?
When considering investments and business opportunities in order to help you achieve your goal of becoming financially independent, I cannot overstate how important it is to get into the action mindset. It is easy to read and talk about something, but what separates those who succeed from those who doesn’t is often the ability to actually put ideas into life. Execution and taking action on your own initiative is something most people don’t do much. Most people are simply too used to always being told what to do by others, to ever going through with something for themselves.
In order to be successful in life, you need to start by changing this mindset, and understand that only you are responsible for what happens in your life. Good luck on your way to financial independence.