Dateline: Phnom Penh, Cambodia
Most people reading an article about offshore investments probably know that it’s not an easy thing to do. Investing in a country where you may be unfamiliar with the local culture, language, and regulations can seem daunting to anyone who hasn’t done it before.
I’m not talking about buying a mutual fund that invests in “emerging markets” (as if countries like Brazil and Russia are “emerging”). I mean venturing into countries such as Cambodia and Georgia, being on the ground, and finding undervalued assets that are outside the scope of the Blackrocks and Vanguards of the world.
It looks difficult and, more often than not, is.
But that’s precisely why you should begin investing internationally. The fact that most people are afraid to go outside their comfort zone means greater opportunities and higher returns for those of us who aren’t as intimidated.
Now, I may not be the world’s most successful investor (that title arguably belongs to Warren Buffett), and I’m certainly not the richest — but I do consider myself good at what I do. The past decade has led to me buying stocks and real estate everywhere from Thailand to Mongolia to Cambodia. In the process, I’ve made a pretty penny for both myself and others whose assets I manage.
The part that makes all of this more unique is that I only just turned 25 years old. Not more than a week after I became a legal adult, I packed my bags and moved to emerging Asia. I’ve never looked back since.
Out of the deals I’ve made so far, two, in particular, stand out. I’m not writing about them to blow my own horn, but to serve as examples for those wanting to invest internationally who still haven’t — for whatever reason.
Condominium in Thailand
I’ve had a strange fascination with finance and investment since I was 12 years old. Instead of “playing”, my weekends were more often spent following the Hang Seng Index. Not long after, I had saved up a few thousand dollars and opened a brokerage account under my parents’ name.
During the 2008 recession, I did pretty well with some well-timed short positions. I’m not straight out of “The Big Short”, and I didn’t get rich off of it, but I did well enough to afford my first piece of international real estate.
It was also my first dealing with Southeast Asian bureaucracy. Thailand isn’t the most difficult country in the region to buy real estate. But there are regulations that need to be followed which can burn you if you’re not paying attention. For example, the money used to buy property has to be transferred in foreign currency and converted to Thai Baht inside Thailand – not by a bank in your home country.
Funny enough, my bank in the US was what caused a problem. Not Thai bureaucracy.
I tried to make my last payment on the condo through Chase Bank. A few days later, I was told that the wire transfer was rejected and my bank account was arbitrarily closed. The only explanation ever given was that my transaction looked “suspicious”, despite the fact that I was buying from one of the largest property developers in Asia.
Long story short, Chase held onto $25,000 of my money for close to a month, making my final payment late and incurring fees. Everything worked out in the end, but the point is that the type of “scary bureaucracy” which often makes people fear investing abroad may be more prevalent in your home country.
Property Fund in Cambodia
Fast forward about six years and I had properly internationalized my assets. After buying a second condo in Thailand, opening nearly a dozen bank and brokerage accounts around the world, applying for residency in Georgia, growing my portfolio, and helping countless friends and clients with their own assets, it was time to invest abroad on a larger scale.
Cambodia is one of the fastest-growing countries in the world. Because of rapid urbanization, an influx of well-paid expats, impressive GDP growth, a forward-thinking government and too many other factors to list, I decided that the nation’s capital of Phnom Penh was the perfect place to start a property fund.
But Cambodia is far more difficult for investors than Thailand, even though its foreign investment laws are more relaxed. Having to file a tax return every month is just the beginning. The hard parts are finding a network of competent people you can trust and getting the logistics in order.
If you want to buy furniture in Thailand or Malaysia, for example, all it takes is a trip to IKEA. Things are more complicated in Cambodia. Finding a place to source furniture from — let alone finding contractors to do more difficult things like kitchen remodeling — requires a ton of effort.
After about a year of fundraising and getting a competent “team” together on the ground, things are going well. We only just began our operations four months ago, but have closed on our first two apartments with a third expected in a few weeks.
Looking at the rental market in Phnom Penh, apartments similar to ours are being rented out at a price which would allow us to gross over 20% yields on what we’ve already paid. The potential for capital appreciation is immense.
Not only that, but our properties have the type of location where one could easily imagine a skyscraper or a large mall being built in 10 years. Being bought out by a large developer for a premium later down the road is a very real possibility.
We just started a few months ago and I don’t want to speculate over exact numbers. But I imagine myself and our investors being very happy in a few years. The best offshore investments require effort and sometimes a bit of courage.