Phnom Penh: How to Recognize Inflated Rental Forecasts – Marketing vs Reality

Phnom Penh: How to Recognize Inflated Rental Forecasts (Marketing vs Reality)

Why Rental Forecasts Are the Biggest Source of Investor Losses

In the apartment and condo market in Phnom Penh, you don't lose on the purchase price, but on incorrect income assumptions.

Most investors lose money not because they paid too much, but because they believed the numbers in the brochure.

Forecasts like:

• "8–10% ROI without effort"
• "constant 90% occupancy"
• "guaranteed rental for 5 years"

sound professional, but are not an investment model. They are a sales tool.

Market context sources:

https://www.realestate.com.kh/

https://www.knightfrank.com.kh/research

https://www.cbre.com/insights

Phnom Penh in 30 Seconds – The Most Important Fact

In Phnom Penh, there is no stable, mass short-term rental market that justifies marketing forecasts of 85–95% occupancy year-round.

What a "Marketing" Rental Forecast Looks Like

A typical sales scheme looks like this:

• rent: 900–1,200 USD / month
• occupancy: 90–95%
• costs: "negligible"
• gross ROI: 8–10%

The problem?

None of these elements are operationally verified.

RED FLAG #1: "Guaranteed Rental"

How It Works in Practice

"Guaranteed rental" in Phnom Penh is typically:

• an internal agreement with an entity related to the developer,
• rent paid from the sales margin, not from the market,
• no real end tenant.

Hidden Cost

If:

• market price of apartment: 100,000 USD
• price with "guarantee": 115,000 USD

then the guarantee was paid upfront.

Effectively:

• real ROI: 4–5%
• after "guarantee" ends, rent drops by 20–30%

Sources:

https://www.globalpropertyguide.com/Asia/Cambodia

https://www.worldbank.org/en/country/cambodia

RED FLAG #2: Fixed Occupancy of 85–95%

Why This Is Unrealistic

Phnom Penh is:

• an office-corporate market,
• relocations, NGOs, temporary contracts,
• low tourist seasonality.

Real market data:

• long-term occupancy: 70–85%
• short-term occupancy: 55–70%

Every 10% less occupancy means:

• –1.0 to –1.3 pp ROI annually

Sources:

https://www.numbeo.com/cost-of-living/in/Phnom-Penh

https://www.cbre.com/insights

RED FLAG #3: No Costs in the Calculation

Most commonly omitted costs:

• management: 10–20% of rent
• maintenance fee: 0.6–1.2 USD/m² / month
• renovation fund: 0.1–0.3 USD/m² / month
• utilities (electricity, water, internet): 70–120 USD / month
• unit refresh: 800–1,500 USD / 2–3 years

If someone shows "net" ROI without these items – it's not net.

Sources:

https://www.realestate.com.kh/

https://www.knightfrank.com.kh/research

RED FLAG #4: Forecasts Without Vacancies

Every property has:

• tenant rotation,
• transition periods,
• renegotiations.

Safe reserve:

• 1–1.5 months vacancy annually

Lack of this reserve = artificially inflated ROI by 1–2 pp.

RED FLAG #5: ROI Calculated from Price "Without Costs"

Typical mistake:

• ROI calculated from apartment price
• without:
• taxes,
• notary fees,
• furnishing (3,000–8,000 USD),
• CAPEX reserve.

Real entry capital is usually 6–10% higher than the purchase price.

Marketing vs Reality – Numerical Example

Marketing Version

• price: 100,000 USD
• rent: 1,000 USD
• occupancy: 95%
• ROI: 11.4%

Operational Version

• real rent: 850 USD
• occupancy: 80%
• total costs: ~30%
• net ROI: 6.2–6.8%

This is a normal, healthy result in Phnom Penh.

The Most Common Myth About Phnom Penh

"If the developer shows a table, it must be true."

Not necessarily.

The market must add up, not Excel.

3 Facts You Must Know – Phnom Penh

Fact 1

Rental guarantee ≠ investment security.

Fact 2

Stable ROI in Phnom Penh is 6–8% net, not 12%.

Fact 3

The simpler the calculation, the closer to the truth.

Investor Checklist – How to Verify Forecasts (5 Points)

1. Is the rent confirmed by real market listings?
2. Does the occupancy account for vacancies?
3. Are costs calculated in full?
4. Is ROI calculated from total entry capital?
5. Does the result still hold after 3 years?

If not – it's not a forecast, it's a sales narrative.

Summary: Numbers Don't Lie, But Marketing Does

In Phnom Penh, a good project doesn't need promises.

It defends itself with:

• demand,
• simple math,
• and rental repeatability.

That's why at Varsovia Estate:

• we reject projects with "magical" ROI,
• we always calculate net, after costs,
• and build strategies on 6–8% stable returns, not brochure fireworks.