More investors are choosing to buy real estate in Asia. Population growth and urbanization rates are generally far higher in Asian cities than in the west. As a result, centrally located properties will see strong appreciation over the long term.
But the best investments often require a bit of extra work. That’s true whether you’re a day-trader or a property flipper.
For anyone purchasing real estate in Asia, the path to greater profit often means buying a “fixer-upper” – an apartment, house, or condo in need of renovation. You’d buy the property at a low price and then either resell or rent it once it’s renovated.
This probably means you’ll need to hire a contractor to organize construction workers and finish the renovation.
Now, I should preface things by saying I don’t think coming to Asia and investing in property yourself is a good idea if you’re a newcomer. Let alone doing renovation work and hiring contractors in Asia.
Contractors are hard enough to deal with in our home countries, right? Trust me, it’s worse in places like Cambodia or even Thailand. Most people are better off with passive investments like a managed fund or ETF.
With that said, investors seeking consistent returns in the 10%+ range might want to know how it can be done in Asia. The precise details vary based on the country and city, but here’s what’s usually involved.
Choosing Contractors in Asia
Anyone who’s ever hired a contractor knows how difficult they can be. Long delays, overcharging, and plain old ineptitude are common throughout the world. It doesn’t get any easier in countries such as Vietnam or the Philippines.
Quite frankly, there’s enough scammers in places like Hanoi and Bangkok even when you’re not dealing with professions known for ripping people off.
I recommend getting a referral from someone. Don’t just search Google for “contractors in Thailand” and hire the first person who pops up. There’s a better chance you’re hiring a good worker when someone else can vouch for them.
Also, you don’t have to already know someone who hires contractors in Asia to get a referral. Just ask for a recommendation on local forums or Facebook groups.
Southeast Asia’s monsoon season can expose cracks and leaks which you may have been unaware of.
Be Safe, Pay Attention
Here’s a list of several things to do when dealing with contractors in Asia. Some of them are common sense, but others are less obvious.
- Don’t give them your key. People can and will steal things from you. You’re also risking the chance of someone making a copy and coming back later.
- Paint the walls and install flooring after the furniture is moved in. Otherwise, your new interior will be bumped into and scratched by heavy objects. Remember to cover the furniture before any work.
- Get everything in writing. Make sure the timeframe, costs, and work to be done are all specified in a contract and agreed to by both parties. There shouldn’t be any room for confusion.
- Electrical work should be managed with care. Make sure the circuits and wiring can handle the electrical needs of the property.
- Don’t necessarily take contractors for their word. Get a second opinion if they’re recommending work which seems a bit too difficult and/or costly.
- Pay in installments and don’t give contractors all the money upfront. Giving them 50% when the contract is signed and 50% upon completion of work is reasonable.
- Make sure the bathrooms and outer walls are properly waterproofed. This is important especially in Southeast Asia. Water leakage may not show itself until monsoon season.
- Don’t be afraid to negotiate. It’s normal and contractors in Asia often expect to bargain when quoting you a price.
Should You Cut Costs?
Less regulated markets such as Cambodia and Vietnam present ample opportunities to save costs. However, there’s good and bad ways to minimize the money you spend on a project and maximize returns.
Using cheap materials and cutting corners aren’t the right solutions. People wanting to buy the property from you in the future will likely know the difference. Tenants will just end up damaging your investment and it’ll fall into disrepair.
Instead, try sourcing your own subcontractors and materials if you want to save money. It’s time intensive and far more difficult compared to just hiring a general contractor. But it’s also safer and more consistent.
Does all of this sound too difficult? In that case, you might want to look into REITs or managed property funds. They charge fees, but will save you the time and effort of doing everything yourself.
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