Thinking about buying apartments and then rent them - good idea?

Dear Glendave

I  introduce myself quickly i am olivier the founder of rooftop real estate, but i write you under the  hat of ko-op.org wich is an organisation dedicated to welcome foreigner we are a small group of volunteers,  we are not agents, we do not take commissions, therefore we can advise you about few different options. I will not go into the details here but yes its a lot more profitable to buy than renting, considering the market is just re-modelling itself, and today averages prices are quiet high compare to the quality of product - services if we consider the regional standard ( malaysia, thailand ), an other issue is there is a big demand but which hardly meet the offer in term of price or if terms of  standards. But yes your right if you can afford to buy its perfect timing, both  apartment and condos are good solutions, they have their advantages and some inconvenient. You will need 15 to 18 years to reach your ROI buying a condo, but re-selling before will generate a very comfortable profit, apartments are cheaper but more tricky, they offer also a very high return on investment like the lands. hope it helps dont hesitate to contact me if i can help. welcome in Cambodia
olivier

My two cents. A recently build/renovated apartment in PP seems like a good investment long term but I am less convinced If you plan to rent it out (and use the rent to pay of the loan I suppose?). With all the high rises popping up in Phnom Penh I am wondering who is going to rent all these apartments, so competition might be fierce...

Just to say, the very first place I rented in BKK1 (decent two bed room apartment - mid 2013) dropped its price with $300, still available for rent now. Same with the new DeCastle in BKK1. Quite a few apartments that were bought by people and still up for rent.

I guess it all depends on where in PP you plan to buy the apartments/condos and what rental price you plan to ask.

good luck!

Moderated by : Priscilla
Reason : No free ads here please + register in the business directory

thanks for your advice , we are planning  to buy and rent 2 (condos) or if not enough money condo and an apartment,we have cash to pay out right. is there to many apartments there ,for rent , so we may have aproblem , trying to rent them out.my husband is retired, and have a pension.we have to large dogs and thinking to rent a house, so we can live  with our dogs in Sihanouk ville we are thinking of buying in pp.is it ok . in sihanouk ville ,can we get rent if we have 2 dogs, or would it be better to find a good home for them in our own country ,australia?

Hello Glendave,

you should buy a house in PP if you have money. As you are a foreigner you can buy house from first floor in  Cambodia. you will gain much from buying house in PP.

my aunt have a house  near Kandal Market, PP & not so far from river side, I think it good condition for you and your family with your dog, those house is on the second, third & fourth floor without roof 4 x 20 m is very nice. she growth lemon tree and many vegetable on the top roof.

my aunt want to sale her house because she want to live with her daughter in USA soon. 

you are welcome for contact me if you interest via my email dane.hor@gmail.com

[Moderated by Kenjee 
  Reason No free publicity on the forum please register your services in the Business directory ]

For those who are advertising real estate here please be informed that advertising of any kind is not allowed on this section of the forum.
Could you please post a free ad in the housing section of the forum where it will get much more exposure to those who are looking and it will remain current there too.
Thank you.

glendave, when it comes to renting out you might find it tough going as has been indicated. I have heard that it's a total renter's market at the moment and most find it tough to find new tenants.

There is a glut of condo's in high rises that is being offered at - imho - inflated prices. How will these look in a few years? I'd stay well clear of them.

Do check around but I would personally bury this idea of finding tenants easily.

Just my two cents. 

Real estate seems like a good investment right now in Cambodia, as the prices have been soaring in recent years.  But, in regards to this, many people feel that a market correction is imminent and that there is currently a 'bubble' in Cambodian Real Estate. 

I am not sure what you are referring to when you make the distinction between apartment and Condo.  Condo's are generally apartments that have ownership rights, and condo fee's are paid to service common areas and grounds.  You cannot technically own an apartment, unless it is in a Condominium Legal Structure. 

The nice thing for you, from an ownership perspective is that if you own a condominium, you can rest assured that the property is maintained, whereas otherwise, if you owned a duplex or multifamily unit, you would need to arrange property management services to make sure these necessities are attended to. 

The condo market in Phnom Penh is geared to outside buyers, specifically Asian investors, and there are plenty of well heeled people picking these up in speculation.  It is my belief that the valuation is too high, in spite of the fact that there are many projects that are not sold out and there is in fact an over supply for this product compared to demand. 

I doubt the developers really care, these kinds of projects are built long term by fantastically wealthy individuals that do not need to find quick returns.  Often, it seems in Cambodia that landlord/owners would rather let a place sit empty for years, than to drop the price at all. 

It there is any civil unrest, then you will see a drop in values for sure, as people want out, and to take their money with them.  You could very well find yourself of the same mindset.  Your investment strategy is not bad, but it could prove disastrous considering al the variables. 

If I was you, and I had investment capital, I would choose another country altogether, or even another investment vehicle that can show you consistently decent and risk free returns.  If you are still fixated on real estate, you can purchase that kind of investment just about anywhere, and in any western country, you can find reliable property management, good tenants, stable banks and rates, and good rents. 

Why buy investment real estate in Cambodia?  I wouldn't.  But short term, I do think you could actually build and sell for much better gains.  It seems that the costs to build are much less than the actual market values.  If it was me, I would do that instead. 

Just my two cents.

WAJH wrote:

But short term, I do think you could actually build and sell for much better gains.  It seems that the costs to build are much less than the actual market values.  If it was me, I would do that instead. 

Just my two cents.

+ 1


(ignoring the fact that we might now get into this discussion of foreigners not being able to do this)

I agree with two cents.  You can rent a decent apt. for $300. a month. in PP
I also came to the conclusion that it would be a better investment to buy a lot and build.  Building costs seem to be cheap. Look at the rental market cost, and then look at the condo market values, and look at the return you would  receive.. As has been said above, the stability of Cambodia is questionable.
Gary

Sure, like most people anywhere, they don't know how to build a house, but they hire people who do know how.  Even after paying them a project management fee, or even if they were to purchase for a set fee, they can have what they want.  (I'm speaking from a builder and land developer Bias)

Seems to me that the rental returns vs: the investment are poor in Cambodia.  The only ones who are killing it are the people who have already owned for 10 years or more.  Also, the others doing well are builder owners.  For the simple fact that their investment is much lower, so their margins are higher.   

~"there are no problems, just solutions"

Here's a real life example: (A gorgeous) 2 BR House on 700+ m2 land in beautiful surroundings, total cost $36K - you could probably do this for even less but depending on the area the land may cost you more. (Disclaimer: this is not in PP). Now rents for $360 - $380.

Even in the West you are hard pressed to find such a return.

Of course, you do have the risk of a tenant moving out on short notice and the place not being rented + commission to real estate co. (half a month's rent per 6 month contract) and having to freshen it up down the road but still. And while you own it, land values keep going up.

WAJH wrote:

Often, it seems in Cambodia that landlord/owners would rather let a place sit empty for years, than to drop the price at all.

Not only that, but also it seems that the price goes up the longer the place sits empty, possibly to make up for years of lost income.....

So renting out at the lower end of the scale could possibly be quite easy. I've seen condos advertised for as low as 20000 USD (at some marketing event at Aeon). Renting out at 250, you'd break even after 3 years already.

Renting out on a weekly basis (for tourists or business travelers for example) seems also to be a gap here in the city.

If I had the money and energy for such an endeavor, I'd investigate in one of these two directions.

"Renting out on a weekly basis (for tourists or business travelers for example) seems also to be a gap here in the city."

Just keep in mind that airbnb and Homeaway offers will gain more popularity, especially in PP in the future. I always try to keep this phenomenon called "saturation point" in mind. Don't want to end up like Bangkok/Thailand where they have never heard of this, apparently (well, neither have the condo tower builders in PP).

I would take a look at apt. for sale for $20,000.  That sounds like a price from 4 years ago. Maybe a good deal.
I rented a very nice apt. near Naga world for $300 a month.  Probably a good deal.  I think location is a big factor in
determining value in PP.

I did take a good look. That's why I discarded the idea to get one for the family pretty early in the process. 

gary1938 wrote:

I would take a look at apt. for sale for $20,000.  .

Where do you find such a price for something that isn't tiny/only fit to be torn down/in a bad building/out in the boonies in 2015?

I am not a fan the "railroad style" that most apartments and houses in Cambodia have due to a standard land plot being 10 x 30m: A front room with decent lighting and ceiling height, the mezzanine bed room/level that leads to a low ceiling height for the corridor leading to kitchen and bathroom in back.

When it comes to real estate, you should try to get the "sexiest" piece available. Don't get a "dog" just because it's cheap, you'll regret it down the road.

JanKrohn wrote:

So renting out at the lower end of the scale could possibly be quite easy. I've seen condos advertised for as low as 20000 USD (at some marketing event at Aeon). Renting out at 250, you'd break even after 3 years already..

The condo for $20K is by Borey 999.  The quality is very questionable.  The owner of the company is on trial  for ordering a hit on another business man.

The quality condo for 1 room in the city geared for other Asian investors costs $90K or more.

Here are some facts, projections, and risks to consider.

- Cambodia's GPD has been increasing by 7%+ for more than 10 year on average.

- Cambodia's GPD is expected to grow by 7%+ for 2015 and 2016, according to Asian Development Bank.
http://www.phnompenhpost.com/business/a … rowth-2015

- More than 50% of the Cambodian population is younger than 24 years old.

Cambodia Age structure:
0-14 years: 31.6% (male 2,460,659/female 2,423,619)
15-24 years: 20.5% (male 1,565,135/female 1,596,099)
http://www.indexmundi.com/cambodia/demo … ofile.html

- The minimum salary was $100 last year and was raised to $126 this year. 
=> That is 26% increase.
http://www.fibre2fashion.com/news/appar … _id=169809

- The workers are asking for $177 for next year.  The chance they get it is small.  But somewhere between $140 to $150 is likely.
=> That will be 11% (for $140) to %19 (for $150) increase.
http://www.voacambodia.com/content/unio … 90940.html

- The mortgage rate is 8-9%. The saving rate from local Cambodia banks is 3-4%, I think.  The return for 1 year CD from micro loan bank is almost 8%, which I am sure. Business loan can go up to 20%.  All of these indicate an economy that is growing, which is consistent with the past GPD growth and prediction.  The cost of capital is high because the return from business/investment is much higher and there are not enough capital.  For the US, Europe and far eastern Asian countries, the saving rate is very low; some is much less than 1%, because the GPD growth is very low.

So here is the trend I see.

Cambodia is a country with a very young population.  Its GDP and salary have increased for many years and, excluding external shocks, e.g. last financial crisis, they will continue to increase for many years to come. 

When salary increases, cost of everything increases, including real estate, particularly for a country with such a higher percentage of younger population who will need housing.  It is a global trend that most work are near major cities, attracting a larger portion of the population who will need housing. So the real estate prices in big cities will increase much more than the those in the rural areas.  Phnom Penh is the capital and its prices will increase the most, on average.

I understand there are many projects/houses/condos/apartments that are not good investment because of their cost vs return.  But those are specific projects.  The investments in specific industry/areas/projects may outpace the average GDP. The four pillars of the GDP growth in Cambodia is tourism, agriculture, garment industry, and real estate (a recent addition).  As long as other pillars hold, real estate will hold.  Then the real estate will return very very well.

Thus, in general, if you do your due diligence and buy a decent property at a good market/transaction price (not the asking price), then in a few years the return for that property will be very good, excluding any major events.

Just my 2 cent.