I’ve been traveling and investing internationally since before I started The Wandering Investor. Back in 2018 I went to Cambodia to explore the real estate market. I quickly realized it was in full bubble mode and turned this exploration trip into a nice tourism trip.
I was right. The market crashed in 2019 and has since then been in the doldrums
I came back in January for a full month of meeting with agents, developers, lawyers, bankers, investors, business people, etc.
My opinion has changed. Pessimism locally is at its maximum and it is a buyer’s market. Some projects are attractively priced with decent prospects for capital gains. The only issue is that net rental yields are not fantastic.
I see Phnom Penh real estate as a good option for a few types of people:
- Crypto investors. You can easily invest millions in local real estate using crypto, no questions asked.
- People who want to live in Cambodia. There are multiple ways to get residency but generally speaking people just pay for easy long term business visas.
- People who value privacy. You can invest in Cambodia, and collect your rent in non-CRS bank accounts. Non-CRS means non automatic bank account information sharing with your country of tax residency (except for US people).
- People who want exposure to a market with strong demographics and booming infrastructure development, which is the opposite of what can be observed in the West.
- People who want to invest in emerging markets but still want their investments to be USD denominated. You can pay anywhere in USD in Cambodia.
In this video with Untac, who helped a close friend of mine with a few investments in Phnom Penh, we discuss the market and go through three case studies:
- An affordable off-plan development with amazing amenities such as a 40 meter long rooftop swimming pool
- A financial product where you effectively lend to a large local developer at 10% per year, partially asset backed
- A distress sale on the secondary market that can be negotiated 25% down
I wrote a whole article on the real estate market in Phnom Penh. It is definitely the most detailed article that exists out there and covers the macro landscape, the market itself, maps of the infrastructure development, the various neighborhoods, taxes in Cambodia and which legal structures to use when purchasing real estate as well as the types of title deeds that exist in Cambodia.
This should be behind a paywall, really 😊
I am making my first purchases in Cambodia
Last week I signed and thumbprinted close to 300 hundred pages for a few deals and then sent the package to my lawyer using Fedex. The closings are tomorrow. I’ll be up on Zoom for this. Hopefully all goes well.
I like Cambodia. There are many opportunities, but it is a market fraught with risk. Just tread carefully and get good advice.
Feel free to get in touch with Untac my realtor in Phnom Penh and Siem Reap. He can help you in English, Khmer, and even German.
To a World of Opportunities,
The Wandering Investor.
Services in Cambodia:
Articles on Cambodia:
- Investing in Phnom Penh Real Estate: Investor Guide 2025
- Capital rotation into emerging markets. Why?
If you want to read more such articles on other real estate markets in the world, go to the bottom of my International Real Estate Services page.
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Transcript of “Phnom Penh Real Estate in Cambodia ROI Breakdown & Rental Yield Case Studies”
LADISLAS MAURICE: Hello, everyone. Ladislas Maurice of The Wandering Investor. Today, I’m in Phnom Penh, in Cambodia, and we’re going to have a look at the real estate market here, and to try to understand if it’s interesting or not, and for whom. I’ve spent the past month in Cambodia going around to various cities, having a look at the real estate markets in these various cities. And it’s not the first time I do this. I first came here in 2018, before I even started The Wandering Investor, and I spent a month here in Cambodia for my own personal portfolio. And back then, it was just a crazy bubble.
I remember, after three days of just analyzing the market on the ground, I decided to turn my month trip into a vacation because I knew there was just nothing to be done in Cambodia. And yeah, I wasn’t wrong.
Cambodia economy and real estate market overview
LADISLAS MAURICE: The market crashed in 2019, and ever since, it’s been going down. It would appear that the descent is slowing down, but the market is still not doing great, which is impacting the economy. The economy is doing generally fine, but the internal economy, internal consumption is quite weak, mostly due to this property market crash. Construction is down a lot.
But on the other hand, tourism is going to exceed its pre-COVID numbers, and there is a lot of manufacturing that is moving to Cambodia. A lot of Chinese companies that want to avoid issues with the US, they’re setting up bases here, manufacturing plants. Also, because Cambodia has some of Southeast Asia’s youngest population. The population is a lot younger here in Cambodia than it is in Thailand, which is aging really quickly, and even younger than Vietnam as well.
We’re going to go meet Untac, my realtor here. He’s helped a friend of mine make a few investments here in Phnom Penh. We’re going to have a look at three different products. One is a new development which is very affordable per square meter. I mean, the prices are fair, and the design is a little wild. We’ll go see this. It’s quite interesting. We’ll also go check out a luxury development that offers some structured financial products, which could be interesting for some people, at least it’s interesting to see what’s out there in the market. And then we’ll have a look at the secondary market, where there are fire sales taking place, as well as bank repos. And we’ll be doing all of the numbers for all of these investments.
Apartment development in Phnom Penh
LADISLAS MAURICE: All right, so now I shall jump into a tuk-tuk, and let’s go meet Untac. Hey, Untac, how are you?
UNTAC: Good. Good morning. How are you?
LADISLAS MAURICE: Good. Tell us about this crazy project.
UNTAC: Well, if you look at this, the whole building, one thing that stood out is the amenity on the top, you see a massive pool of 40 meters and a big gym on the sky. It’s amazing. And one great thing about this project is the price, the affordability. We’re looking at around $1,600 per square meter net. This is really attractive.
LADISLAS MAURICE: About $150 per square foot. And you said also four-year payment plan, but we’ll discuss this.
UNTAC: Yeah.
LADISLAS MAURICE: But I think what’s interesting here is, I’ll ask the cameraman to come over, when Untac first showed me this development, I thought these were just kind of fake 3D renders, or poor-quality 3D renders, but then we went to see the showroom, and this building will actually look like this. [laughs] Let’s go check out the showroom, because I haven’t seen any design like this anywhere else in the world. And then we’ll do all the numbers, all that in detail. Let’s go.
Phnom Penh apartment tour
LADISLAS MAURICE: All right, so look, the first time I saw this, I felt like I was being visually assaulted.
UNTAC: [laughs]
LADISLAS MAURICE: I still don’t know if the assault felt good or not, I’m still trying to figure it out. It was definitely some sort of assault. I think I might enjoy it. I think I might enjoy it. But this is– What’s up with the bathroom? Is this a Cambodian thing or is this just a weird thing?
UNTAC: It’s not. It’s even Cambodian this is a very intimate thing. You can see that everywhere you can see through, yeah. But apparently, it’s a very trendy thing.
LADISLAS MAURICE: Yeah, you don’t see this in America.
UNTAC: People like it, yeah.
LADISLAS MAURICE: You don’t see this in America. Okay, cool. What’s really interesting about this here is the payment plan. Can you take us through it?
Phnom Penh apartment payment plan
UNTAC: Yeah, absolutely. One of the very interesting things about this project is the payment plan. For this particular unit, we’re looking at just under $60,000. The first payment is 20% down, so we’re looking at around $12,000, and then we pay 1% over a period of 40 to 45 month. And then we pay the rest, 35% or 40%, toward the end. And for young Cambodian who don’t have that last payment of the 35%, 40%, you can go to the bank at this point because the project is already complete and you can potentially get a loan.
Overview of Russian Market in Phnom Penh
LADISLAS MAURICE: Cool. So great payment terms. I mean, the building is visually unique and the amenities are really nice. Tell us about the neighborhood, Russian Market.
UNTAC: Russian Market, to me, I would say that a tier two or it’s a B. BKK1, currently, is the prime area where all the business and stuff are, although it’s a bit more expensive. For expat who live here in the long term, they might looking at something that are a bit cheaper. Russian Market is a perfect location because there’s small cafes, small street markets, and very walkable neighborhood. And that’s the area where I’m currently living. It’s a really nice neighborhood.
LADISLAS MAURICE: I wrote a whole article on the real estate market in Phnom Penh, the neighborhoods that are interesting, the neighborhoods you should avoid, where all the infrastructure is being developed, because the government’s building a whole bunch of bridges, and highways, and airports. I mean, there’s a lot going on in Phnom Penh. There’s a link below to the article. You say expats, but it’s not, I mean, this building will not get filled with expats.
UNTAC: Yeah. Actually, this project, the local respond this project are significant. I think this project it’s already over 60% Cambodian buy into this already.
LADISLAS MAURICE: So local market?
UNTAC: Yeah.
LADISLAS MAURICE: Cool. Tell us a little bit about the rental yields. Let’s do the numbers. The price point is, after the discount, you said about $60,000.
UNTAC: Yeah. Just under, yeah.
LADISLAS MAURICE: I buy this, I pay over four years, then I have some closing costs, roughly, how much?
UNTAC: Closing costs, we’re looking at around $3,000, let’s say, all of that.
LADISLAS MAURICE: Cool. And this changes a lot because there’s a stamp duty tax, but this year, you don’t have to pay it. But because you can only register later, it’s hard to tell, so we’re just going with 5% but it’s maybe you’ll have to pay, maybe you won’t. It’s hard to tell.
UNTAC: Yeah, and then the government keep pushing it, so we don’t have to enforce that now.
LADISLAS MAURICE: What if I wanted this exact furniture package and look-and-feel, how much would I have to pay?
UNTAC: We’re looking at roughly $5,000 for this particular unit.
LADISLAS MAURICE: Okay, so all in, after four years, roughly, $6,000 to $8,000. How much of rental income could I expect on a monthly basis from this?
UNTAC: I’ll say, very conservatively, $450 to $550 per month.
LADISLAS MAURICE: Okay, so let’s use $450 in the numbers. What about the occupancy rates? Because there’s oversupply in the market of condos for rent. It’s not necessarily easy to find tenants. What would be your estimate in terms of the occupancy rate?
UNTAC: I’ll say 70%, 80% occupancy rate, around there.
LADISLAS MAURICE: And I think that’s fair, because the reality is, construction has cratered in Phnom Penh, so by the time this building gets inaugurated, in four years’ time, there won’t be that much new product on the market anymore. I’m pretty sure that people will flock to the latest new tower, and for at least a few years, the occupancy rate will be better. In the meantime, there’s still urbanization going on, it’s really strong here in Cambodia.
Urbanization and occupancy rates in Cambodia
LADISLAS MAURICE: Can you tell us a little bit about urbanization?
UNTAC: Yeah.
LADISLAS MAURICE: And we’ll continue with the numbers, but yeah, I think this is important. Because I think there will be demand for affordable luxury products in the long run here in the city.
UNTAC: Yeah. One of the main reasons that a lot of international investors invest here in Phnom Penh and Cambodia in particular, because the urbanization rate here are still really low. We’re looking at around 22%, 24% compared to Thailand, it’s already over 50%. Looking at trends alone, people are going to keep moving to the city like Phnom Penh and many other cities around Cambodia. Because of that, like you said earlier, it’s a bit oversupply, I agree and not agree at the same time, because if you’re growing at the same rate of urbanization as Thailand, we’re going to be under supply in the next, I don’t know, five years. If you’re looking short term, yes, right now, it’s oversupply, but if you’re looking a bit longer, middle term and long term, I think it’s still a lot of room to grow here.
LADISLAS MAURICE: There are all these developers that came into the market, because we went to see a number of developments together, and you see these products, and the layouts of the apartments are weird, the amenities are weird. There’s just there was no studies were done. And then people buy these things and then wonder why they can’t rent them out. This building, generally speaking, the layouts make sense. Sure, there’s oversupply in a lot of segments, but in other segments, it’s actually fine. You really need to choose the right building, and it comes down to the building and the right neighborhood. And if you play your cards right, you can actually get some pretty decent occupancy rates.
But yeah, some buildings are 60%, 70% empty, and others, you go ask, “Do you have anything to rent?” And it’ll be a big tower, and they’ll just say, “We have two units.” It really depends. Just running and saying, “Oh, there’s oversupply, oversupply,” yes, but no. [laughs] You know?
UNTAC: Yeah, at the same time, depending on the neighborhood, depending on the project, really.
Apartment ROI calculation in Phnom Penh
LADISLAS MAURICE: Cool. All right, so I’m renting this out for $450 a month. What’s the HOA, the service charges, roughly?
UNTAC: The management fee, we’re looking at around $1 per square meter. In this particular unit, we’re looking at around $50, say, give or take. And then for the agent who find the client for you, usually they take one month out of whatever one-year contract that you are renting.
LADISLAS MAURICE: Okay, so 75% of a month, if we’re running with an assumption of 75% occupancy. Then there’s property management. If you choose to have a property manager, a little bit of money for maintenance, etc. Property tax would be how much here?
UNTAC: The property tax here, it’s very low. It’s 0.1%, and it would be less than $100 per year.
LADISLAS MAURICE: Yeah. When you do all of the numbers, you end up with a net yield of about 3.5% in four years’ time from now. Look, I think these numbers are pretty conservative. I would definitely expect to be making more from it if I were to buy this. Also, I would expect capital gains. Why? One, because supply is going to decrease over the years, we’re seeing less construction starts. And two, when you compare with the market, because we went to see a lot of different products, a lot of different buildings, and generally speaking, when you do the ROI numbers, you end up at between 1.5% and 2% net after all expenses, using the same formula. Here, this one, it’s more like 3.5%. So something has to get right, and I think it’s rather going to be capital gains as the construction advances.
Developer risk in Phnom Penh
LADISLAS MAURICE: But we’re looking at a project that’s priced attractively, that has a four-year payment plan, in a city with a lot of unfinished buildings and developers that are going bankrupt, so there’s inherent developer risk. What makes you comfortable regarding this specific developer?
UNTAC: If you check the background of the developer, these are their eighth project. Their one, two, three, four, and five already complete, and the six and seven has been selling like cupcake, because the same reason as this project, is the payment plan and the affordability, and they accept crypto. This some of the really interesting plan for this project.
LADISLAS MAURICE: Yeah. Six is almost complete, seven they’re building. This is number eight, and this is pre-construction.
UNTAC: Yeah, this is pre-construction.
LADISLAS MAURICE: Look, a lot of Westerners will say, “Oh, ask my lawyer to do the due diligence on the developer, ask for the balance sheet.” I mean, sure, you can do that, and probably it says the developer doesn’t have any bank loans. But people need to understand that when you invest in Chinese developments, the loans aren’t necessarily visible in the books, because there’s a lot of Chinese shadow lending going on, so you never really know. Ultimately, that’s what it comes down to. You never really know. You just have to look at the track record. The track record, good, is here. This is generally how you minimize your risk in markets like this, it’s just things operate differently here.
UNTAC: Yeah, I totally agree with that.
LADISLAS MAURICE: And crypto, you can pay all of this using crypto. If you’re buying normally, payment plan using crypto, then you can easily open a non-CRS bank account, which means no information-sharing as things stand with other governments. From a privacy point of view, investing in Cambodia also makes a lot of sense for people that have privacy concerns. Cool. Okay, so this is the case for this apartment. Again, we went to a lot of different developments, and this is the one that we found is definitely the best in terms of opportunity. Now we’re going to go check out a luxury building, and there, it’s some weird, odd financial instrument, but that somehow makes sense, and where the returns are quite interesting. And then we’ll check out the secondary market.
UNTAC: Yeah, let’s go and check it out.
LADISLAS MAURICE: All right, let’s go.
Luxury development tour in Phnom Penh
UNTAC: Hello, hello.
CHLOE: Hello.
UNTAC: How are you?
CHLOE: Nice to see you.
LADISLAS MAURICE: How are you doing, Chloe?
CHLOE: I’m good. All right, let me walk you through the overall development. First, at the base, we get four floors of commercial centers. In the basement, we get two floor 400 parking space. And then here, you get the residential tower and the office tower. At the top of the office tower, you will get an IHG Vignette Hotel, 50 suites, most of them with private pool, and then two floors of private club.
LADISLAS MAURICE: To contextualize, this is the most luxurious tower being built in Phnom Penh right now.
CHLOE: This is the most luxurious tower now, there is no competitor in both the segment for the office tower and the residential. The residential tower will be the lowest density per square meter. You get only big units with a lot of space, and every floor you only have three to four neighbors. And for the office tower, it will be the only the gold Grade A SDG-compliant office tower where you can own. There is actually one other lead Gold Tower, but you cannot own anything in it.
UNTAC: Yeah. The residential side you say it’s a prime, prime area. How is that compared to Bangkok for this project?
CHLOE: Here we are on Norodom Boulevard, so this is our Champs-Élysées, very French, but [laughs] and we are, like, 500 meters from the Independence Monument, so you are really in the prime location, plus you’re in the heart of the whole city. You’re very near to the National Museum, to the Royal Palace, like, this city center, like, sometimes, city extend one direction or another, but the city center of Phnom Penh will always be this part.
Price of luxury real estate in Phnom Penh
UNTAC: What price per square meter are we looking at for this?
CHLOE: You’re $3,000 to $4,000 per square meter. If you compare to Bangkok, it’s less than half, for the equivalent in terms of location and level of quality.
UNTAC: Yeah.
LADISLAS MAURICE: Yeah. In the big scheme of things, if you look at the kind of markets all over the world, $3,500 per square meter for prime, prime, prime Grade A. I mean, this is essentially Singapore-level building, correct?
UNTAC: Singapore grade.
LADISLAS MAURICE: Because here you need to understand, there are many different grades of build quality. The one that we saw right before was medium. It wasn’t low, it was medium, maybe medium, a bit better than medium. This is high end. And then you go to other buildings, most notably my Airbnb right now, which I didn’t know when I booked. It looks great but then you enter, and then it’s just the whole my apartment smells like a gutter. [laughs] These things happen when you deal with, like, really cheap Chinese developers. So, yeah, this, I assume, would not smell like gutter, right?
CHLOE: No. [laughs] It’s a whole another level. And it’s very consistent in every part, like, all elevator are assisted by AI, you get an average waiting time of 45 second, because there is nothing less bothering than waiting for an elevator. And this is the kind of thing that ensure quality. You can say that you have qualities, but there is, like, actually technical fact about the material used and the tech that is used that is actually a good guarantee.
Luxury rental market in Phnom Penh
LADISLAS MAURICE: I don’t know what the rental yields would be here. Is there a rental market for this?
CHLOE: There is definitely a rental market. In the last years, I get many times this question, like, oh, no, people work from home, blah, blah, blah. Here, you are also in another level. This will be a landmark. On my cards, my Visa card, there is the skyline of Phnom Penh. There is the Royal Palace, there is an Independence Monument, and there is a Vattanac Tower. I can bet that, in a few years, when this is out, this will be a landmark for us.
LADISLAS MAURICE: Get your Visa card?
CHLOE: Yes, [laughs] we’ll get a new Visa card with it. No, the thing is that there will be always a need for an office. I think the market trend is clear, there is less need of office in general, but you will want to have an office on Norodom. And we can see from the tenant that bought we get tenants that have both for themselves, floor or units, and that will be their flagship, so their flagship office, their head office. They will be here.
LADISLAS MAURICE: I mean, the vacancy rates are extremely high in the office market right now in Phnom Penh, and there is a few Grade A, not as nice, but there’s still a few Grade A buildings being built here, so isn’t there the risk of oversupply?
CHLOE: I don’t think there is a risk of oversupply. We allocated few floors with fixed return. We offer, for five years, a return of 8% net, which is net of common fees area and net of tax in Cambodia. It’s really the return that you’re going to have, there is no small deduction that no one likes. You get 8% fixed for this first five years. It’s paid quarterly. And the good side of it is that, as an investor, you will see where the market goes, because five years after the opening of the tower, you don’t have the up and down, and the fixing, and the installation. It’s a smooth sailing, so you will know exactly how much you will earn and how much you can expect to earn.
At the end of the five years, you have a buyback option, or you can keep your unit. This is a strata title, so it’s full ownership. You can keep owning it, you can put it to rent, use it for your own rules. It’s yours, you can choose what to do with it. But you have this buyback option at 110%.
LADISLAS MAURICE: Of the initial purchase price?
CHLOE: Yes.
LADISLAS MAURICE: Okay.
UNTAC: Okay, say, if I got to buy the office space without the guaranteed buyback, would that be cheaper than?
CHLOE: It’s actually the same price.
UNTAC: The same price.
CHLOE: No, we don’t inflate the price to offer the guaranteed return.
UNTAC: Because we see this a lot in the market where they do this, okay.
CHLOE: Yeah. The fact that there is only eight floors in guaranteed rental is also a good guarantee.
LADISLAS MAURICE: So only eight floors like this?
CHLOE: Only eight floors. There’s 44 floors, only eight floors offered the special offer.
LADISLAS MAURICE: Okay, which reduces developer risk in many ways, in the sense that if they did this on the whole building, and then the market didn’t do too well, and then there’s a guaranteed buyback at 110%, [laughs] I mean, the developer would go bankrupt pretty quickly, so just on the eighth floor. So you’re limiting this. Okay.
UNTAC: Our agency are focusing on the residential side. We specialize on that, we’re not specialized on the commercial side. But looking at this and see how Chloe presented, it looked to me like it’s a financial product. The number look interesting.
LADISLAS MAURICE: Yeah, I mean, essentially, as long as the developer doesn’t go bust, it’s an easy 10% a year for five years. Essentially, that’s what it comes down to. And then there’s potential upside, for sure, at these prices, it’s not outrageous in the big scheme of things. You have limited downside with all these guarantees, you just need to make sure the developer, I mean, you just need to make sure Chloe doesn’t run away with the money, essentially.
UNTAC: [laughs]
CHLOE: [laughs] I won’t, though it’s tempting. Let’s just state it like that. [laughs]
UNTAC: [laughs]
CHLOE: No, and you, you definitely have a capital gain potential way bigger than the 10%. We talked about the location, but this tower is going to be iconic also because of the structure. I’m really happy that this tower is like this in Cambodia, because it’s very innovative. Outside of all the AI and technology used, the design itself, you see this, it’s sky village, and there is six in total all around the tower. Look, there is a lot of greenery, and there is common space for everyone, which is very interesting because all of us, one time in our life, at least, I’ve been in an office tower where you have to go down 40 floors or 70 floors to finally go outside.
These are actually community knots, so you can connect with people that are not in your office, that are not your colleagues, by a sense, and that is a great quality in a person in an office tower. [laughs] Everyone can go feel like they are all four to six floor away from each other. You have this community knot, you can connect with people. And this is what people are expecting now in an office tower, which means that this office tower will not grow old as quickly as many office towers. As an investor, this is very interesting. Your investing will gain value, you’re in a prime location, and you have a tower that stand out and that doesn’t going to grow old that quickly.
LADISLAS MAURICE: Okay, cool. All right, I think the investment thesis is clear for this, and it’ll be on your debit card, so–
CHLOE: [laughs]
UNTAC: [laughs]
LADISLAS MAURICE: it’s really important. Okay, fantastic. Thank you, Chloe.
CHLOE: Thank you so much for coming.
UNTAC: Thank you so much for showing us around.
LADISLAS MAURICE: And now, Untac, you’re going to take us to check out secondary market?
UNTAC: Yeah.
LADISLAS MAURICE: All right, fantastic. Let’s go.
UNTAC: Let’s go.
LADISLAS MAURICE: Yeah, so there’s a slight delay with the secondary market viewing, so we decided to go for a nice burger together with the cameraman. Look, Asian food is good, but once in a while, nothing beats getting some proper American grub.
Secondary real estate market in Phnom Penh
UNTAC: It’s interesting how, if you look here, in the middle of Phnom Penh in BKK1, we have these chickens, and look like a little countryside in the middle of Phnom Penh. And this is, we’re talking around $5 million worth of–
LADISLAS MAURICE: Of land.
UNTAC: of land here.
LADISLAS MAURICE: Yeah, that’s crazy. It’s about how much per square meter, roughly, for land in this neighborhood?
UNTAC: Between $7,000 and, say, $9,000 per square meter here, land.
LADISLAS MAURICE: Wow.
UNTAC: Yeah.
LADISLAS MAURICE: Okay, so this man living in this very modest house with his chickens, and his old dogs, and his motorcycle is worth $5 million.
UNTAC: Yeah.
LADISLAS MAURICE: All right. Humble man. Humble man.
UNTAC: Very humble man. Very nice, you can really see anything like this in the middle of Phnom Penh.
LADISLAS MAURICE: Cool. It’s in this building, right?
UNTAC: Yeah. This is the project we were going to go and check out. Potentially, it’s a fire sale. It’s an urgent sale, so you could potentially get 15% or even more.
LADISLAS MAURICE: Okay. Yeah, I think people need to understand here in Cambodia, everything is very negotiable. There is a culture, in a lot of Asian countries, of being able to negotiate quite a lot for real estate, much more so than in Western countries. This building is a little old, no?
UNTAC: Yes. The completion, it’s over 10 years, I believe.
LADISLAS MAURICE: Okay.
UNTAC: Yes.
LADISLAS MAURICE: All right. Again, important to understand, we’re in very new countries where there’s a lot of new construction, and a building that is 10 years old is considered to be old. I’m looking at my European followers here, [laughs] particularly, you need to really take into account the age of a building when you invest in new markets like this, because the depreciation goes a lot faster than in Europe. Americans will be more familiar with this, but for Europeans, it’s a bit more of a novel concept.
UNTAC: Yeah. As you walk through this project, you will see that the maintenance actually not too bad comparing how old the building is.
LADISLAS MAURICE: Yeah. We did the viewing yesterday, because we were looking at a bunch of apartments, etc., and we found that this one is a decent example, and it’s a fire sale. The maintenance is quite good, which is not always the case. Actually, most cases, the maintenance is quite bad.
UNTAC: Yeah. For example, the place you stay at.
LADISLAS MAURICE: Yeah.
UNTAC: [laughs]
LADISLAS MAURICE: Yeah, the place I stay at, yeah. How are you?
AGENT: Nice to see you again.
Second hand apartment tour in BKK, Phnom Penh
LADISLAS MAURICE: Good to see you. Cool. What’s the price point?
AGENT: The price is $165,000, so per square meter is about $1,875.
LADISLAS MAURICE: Net square meters or gross?
AGENT: Net area.
LADISLAS MAURICE: Net area, okay. Really important.
UNTAC: Obviously, if we observe the place, it’s been vacant for a while. And because of that, I think, potentially, for the price, we could push for 15% or even more than the asking price.
LADISLAS MAURICE: Yeah, very, very negotiable. When I see something like this, negotiable. Okay, so we’re seeing it’s starting to look a little old. It hasn’t seen a renovation since the owners essentially bought it 12 years ago. The maintenance of the building is good. The location is AAA. I think this is important, when we compare with the first one with the crazy design, the location of this one is better. Price per square meter, after discount, it’ll be maybe this a little cheaper, but it would need a renovation. What would be your approach in terms of the renovation? What would you do?
UNTAC: This unit, let’s say, if we can come in and aggressively ask for 20% or, like, 20% or even more, and if you can get that discount, basically, use that money for renovation to A grade materials and redone. And that would bump the rental price up.
LADISLAS MAURICE: Okay. Essentially, $165,000 is the price as is.
UNTAC: Yes.
LADISLAS MAURICE: You negotiate hard, and then you put the discount that you get, you just put that into doing a total renovation. And then you end up for a relatively similar price to the first one, a bit more expensive per square meter, you end up with a much better location, but a bit of an older building. And here, you need the money up front. There you have four years to pay.
UNTAC: Yeah, that’s a great way to put it. This one, you need all capital upfront.
Buy real estate with crypto in Cambodia
LADISLAS MAURICE: Yeah, okay. You can also pay with crypto, right?
UNTAC: Yes.
LADISLAS MAURICE: Here, essentially, the way it works is you can do crypto through peer-to-peer. Or, you just go to the Chinese dudes. Last week, I went to a Chinese exchange, just out of intellectual curiosity. I went there. I asked the guy, “Hey, I have half a million USDT. I’d like to exchange it into physical cash USD. What’s your fee, and how long do you need to gather the cash?” He said, before any sort of negotiation, “1%, three hours.” All right, so you can just go and then walk away with a duffel bag of $495,000 after the fee. And then you can just go buy any real estate here in Cambodia.
You could operate this way if you wanted to, to buy something like this, and then you can get a local bank account, non-CRS, so no information-sharing, no automatic information-sharing, and then collect your rental income this way. You do property management as well, correct?
AGENT: Yeah.
LADISLAS MAURICE: What is the occupancy rate in this building?
AGENT: In this building, we can say more than 80% occupied.
LADISLAS MAURICE: Yeah, we can confirm, we were walking around the whole building yesterday, and it’s busy.
UNTAC: Yeah.
LADISLAS MAURICE: Again, everything is very building-dependent in Phnom Penh. Go to the building next door and the occupancy rate might be just 35%, so this building has a decent reputation. Cool. And the amenities?
AGENT: Amenity, we have swimming pool, we have gym, we have sauna, and kid pool. We have [mat 31:27] as well.
LADISLAS MAURICE: Okay, cool. Fantastic. Great. What Untac and I are going to do, we’re going to sit down and we’re going to do all the ROI numbers in terms of rental income, etc., and then compare it with the other proposition so that we can see off plan, and then we can see secondary market as well. How often do you come across, both of you, because you’re both agents, how often do you come across fire sales and bank repos?
UNTAC: For me, personally, I come across this quite often, but generally speaking, they will say 10% to 20% below market price. But once in a while, you get things down more. You can get up to 30%, even 40%, but this kind of deal, it’s come on the markets within hours and it’s gone. If you’re looking to get something like this, you need to have cash ready, or have crypto ready. Three hours, get that cash and get it done.
Buying real estate remotely in Cambodia
LADISLAS MAURICE: Yeah. And important to note, you can buy remotely, entirely remotely in Cambodia.
UNTAC: Yes.
LADISLAS MAURICE: I don’t know how safe it is long-term, but at least to buy, it’s pretty safe. You can buy remotely with a notary public with a video call, and do everything this way, so you don’t need to deal with notarizations back home, apostilles, none of that. You just do a video purchase. I’d be a bit more worried about video sales, especially with AI. [laughs] You know? But with video purchases, I’d be less worried.
UNTAC: Yeah, just to add on that, so we can do the video call purchasing, but still, the papers and stuff will send through DHS, the real paper stuff, so the real paper will need to travel, in that sense.
BKK1 Phnom Penh apartment rental yield calculation
LADISLAS MAURICE: Okay, cool. All right, good to know. I understand. We’re going to go through the numbers now. Untac and I were discussing, and you had some thoughts you wanted to share on this, on the renovation here?
UNTAC: Yeah, absolutely. As we walk through, we’ve been discussing and talking with this particular unit, if, say, in the scenario that we push for 20% discount, at first, we’re thinking maybe reserve 20% to really make it look great, basically, do all the touch up, potentially change all the furnitures and stuff to an A grade, A+ grade. But then we were, like, that’s probably didn’t make sense, because the building, it’s quite old already and stuff. I think, potentially, if we can push for 20% or even 25%, we just put 10% on the renovation, a little touch up and make up, and then just keep the other cash, and then just rent it on a lower yield.
LADISLAS MAURICE: Yeah, I think that makes sense. You don’t want to have a unit that’s completely new, like, latest everything in a building that’s a little old, especially because it’s not a historical building. It’s just more reasonable to have a nice unit in a nice building rather than a fantastic unit and just a nice building that’s starting to become a little– It’s more reasonable. Cool. Let’s say, we can negotiate it down 25%, which is not impossible in this market. I know it sounds insane, but it’s not impossible in this market. We put $10,000 back into furniture, touch ups. Closing costs are approximate, again, because they’re changing the laws and the regulations, and right now, no one really knows, [laughs] so we’ll just put $4,000, it’s a fair estimate. What do you think the monthly rent would be once we put $10,000 back into this unit?
UNTAC: Conservatively, I would put it anywhere between $900 to $1,000, conservatively.
LADISLAS MAURICE: All right, let’s go with $900. Now what would be your estimated occupancy rate?
UNTAC: 70%, 80%.
LADISLAS MAURICE: Cool. The guy said 80% occupancy. The building’s quite full, but yeah, let’s stick to 70%. And again, important in this market, there’s generally higher occupancy for one-bedrooms than for studios and two-bedrooms, so remember that. And then, yeah, same numbers for property management, finding tenants, service charges for the building, etc. Property tax, $150 a year, a bit of maintenance. Essentially, an investor would get 2% net yield, net-net after all expenses, after negotiating a 25% discount and putting $10k back into this unit. Is this typical of this market?
UNTAC: Yes, it is typical. And if you compare, if you buy something like this, you won’t expect appreciation to go as much as pre-construction, where potentially the appreciation rate could be a lot higher, because this is probably a bit outdated, in a sense.
LADISLAS MAURICE: It’s an interesting market in the sense that [laughs] the market’s not doing good. There are fire sales happening. And even the fire sales are not as interesting as some of the new builds. Like the one we saw, the first one, the one that was very visually loud, we were getting to 3.5% net yield, which is a lot more. We have four years to pay it. Here, it’s all up front. Sure, there’s developer risk, but then you’ll have a new unit. It just makes more sense to go for the primary market here with the right developers, because if you go for the wrong developer, then you’ll lose all of your capital. Did you find better deals on the secondary market as well than this?
UNTAC: Yeah, I would say it’s really come out, like, in the case of one of the project that we’ve been looking at before you arrive, that was 40% below market value, and that something that potentially could be good for the cash flow and rental yield, but stuff like that, you need to be cash ready if you want to get into this.
LADISLAS MAURICE: Yeah, yeah, we were communicating before I came to Cambodia, and then you sent me this listing. It was really cheap, but then three days later it was sold. These deals do happen, and again, you can do it remotely.
Real estate transaction activity in Phnom Penh
LADISLAS MAURICE: Look, I think this is a pretty decent overview of the market here. Look, it’s pretty slow. It’s absolutely a buyer’s market. People are very negative but, at the same time, prices aren’t crashing, because when you look at the Cambodian middle and upper class, all they do is invest in real estate, so there’s an inherent support in the market. Sure, there are bank repos and things happening here and there, but, like, the only asset class, literally, that people are investing in in Cambodia is land, it’s homes, it’s condos. That’s it. There’s just a natural limit to the downside in terms of how low this market can go.
And it’s a trend that you see in a lot of Asia, particularly here, because there the financial markets are so undeveloped. People just need to understand, us as Westerners, we’re often very heavily focused on cash flow. In this part of the world, cash flow is less important for investors and it’s more about capital gains.
UNTAC: Appreciation, yeah.
LADISLAS MAURICE: Again, the first one was quite interesting because it had both cash flow, good credit terms, a gentrifying neighborhood, it had a good potential for capital appreciation. And the second one that we saw, I mean, you and I have, we don’t really know much about the office space. We were told, “Hey, it’s going to be the best office space.” And it’s like, I don’t know. But just the financial aspect of it with a buyback guarantee, and the rental guarantee was quite interesting. That’s, personally, the only way I would play that, because trying to predict office space stuff, like, the market two, three years from now in Cambodia, I mean, that’s just a whole different ball game.
UNTAC: Yeah.
How to contact Untac and read Phnom Penh real estate market report
LADISLAS MAURICE: Cool. Fantastic. Look, I wrote a whole article on the real estate market here in Phnom Penh, the neighborhoods to look into, the neighborhoods to avoid, some things you should know about how to buy real estate, because you can buy in your own name, you can use a trust. There’s a whole bunch of different structures. You have to be careful, some of them are quite dangerous, but they’re still being pitched to foreigners. That’s all there in detail. And Untac, you can help foreign investors with all their investment objectives here, and in Siem Reap, correct?
UNTAC: Yeah.
LADISLAS MAURICE: Cool. Fantastic. There’s a link below, and you can get in touch with Untac. Untac, thank you very much.
UNTAC: Thank you so much. Have a great time here.
