Investor’s Perspective on Property Management

Managing Director David Murphy catches up with IPS client Simon Vallegra. Simon met with IPS-Cambodia some three years ago to get a feel for the Phnom Penh property scene. Simon and wife Natalie have purchased two properties with IPS and have also engaged IPS to provide the ongoing management of the investments.

1. What attracted you to invest in property in Cambodia?

SV:  It all started by coincidence. We stopped by Phnom Penh for few hours on our way to Angkor Wat and we had a good impression of the city; we decided to return a second time for a vacation and were charmed by Phnom Penh’s colonial atmosphere; there is no other capital city in Southeast Asia which has retained to the same style and charm. At that time, we were looking for a property investment in Southeast Asia and thought it would be worthwhile looking into Phnom Penh. We were after good return on investment but also after a property we would enjoy owning and, possibly, some day, living. We wanted something charming and unique. The decision of investing in Phnom Penh has proven successful so far; we own two properties we love, which are providing good return on the investment.

2. How did you research the Cambodian property market?

SV:  We scheduled appointments with a few agencies we sourced through the internet; then we travelled to Phnom Penh for face-to-face meetings; a couple of agencies were very eager to show us properties and within a couple of hours attempting to close us on either property A or B. When we met with IPS-Cambodia, the managing director welcomed us in person and, as a first thing, mentioned we would have to invest time in going through the opportunities but also the risks of Cambodian property investment; it took few minutes to us to conclude: “those are the guys we want to do business with”.

3. How did you find the sale process? Was there anything in the sale process that really stood out for you?

SV: We felt that the people at IPS understood the concerns crossing our minds with regard to risks associated to property investment in Cambodia, and found the right way to guide us through the emotions. Should they have had less patience in educating us and guiding us through the specifics of property investment in Cambodia, we would have likely walked away; we would have likewise walked away should we have had, at any steps of the process, doubts we could trust their advice. In the end, the purchase was an act of trust: the IPS team gave us confidence we could trust their advice, and we have never regretted the decision of trusting them so far.

4. Your properties are owned under soft title, how were you able to secure your investment and how does this work ongoing?

SV: Every foreign investor in the Cambodian property market, should make efforts to understand the difference between “soft” and “hard” title as well as the options available in term of ownership; with exceptions limited to tasteless units in newly-built condos, foreign investors cannot own properties in Cambodia, in the sense of freehold title ownership; however there are contractual options to ensure the investment is secured and investors can enjoy properties as materially theirs. IPS advised us on how to contractually structure a deal providing a reasonable degree of security and we have never felt our investment at risk. Do not waste your time with agencies not explaining you the options and the risks associated with foreign ownership; this is at the foundation of property investment in Cambodia and you shall have a full understanding of it.

5. The properties were purchased as an investment, how have the returns stacked up?

SV:  "We have been consistently enjoying rental yields at 2-plus times the return we would be getting in more mature property markets in Southeast Asia, with much lower capital investment required.”

6. You have used IPS as both Sale Agent and Managing Agent for the properties how have you found the experience and would you recommend them?

SV: We live oversea, we know nothing about Cambodia and have no relationships in place in Cambodia; we need a partner we can trust and IPS have demonstrated their trustworthiness over the number of years we have been working with them. We would definitely recommend IPS – both in sales agent and in managing agent capacity – to prospective investors in Cambodia. Add the guys at IPS are nice guys indeed! We enjoy stopping by for a hi all the times we are in town, even when we have no business to address.

7. Any advice you would like to give to prospective Cambodian Property Investors?

SV: Ensure you understand the risks associated with Cambodian property investment, invest in properties which are unique and can drive long-term capital appreciation, and, ultimately, do not try to figure out Cambodia yourself, rely instead on an expert partner you can trust. Our experience is that having IPS as our business partner has been a great move for us, we are experiencing very strong returns on our investments with a minimum of risk.