Assetz® News - How to Buy to Let or Fly to Let in Bulgaria

How to Buy to Let or Fly to Let in Bulgaria

5th May 2005 |

Bulgaria is an attractive choice for buy-to-let investors, with an abundance of beaches and world renowned ski resorts, combined with a low cost of living. Prices are amongst the lowest in Europe, with both city-centre apartments and holiday homes in beach and ski resorts offering excellent letting potential.

However, investors should be cautious in this immature market, and consider Bulgaria primarily as an option for long-term investment. Don’t be seduced by bargain prices and promises of 100% capital growth in one year. Property prices are growing significantly in the more established areas such as the Black Sea coastline and the major ski resorts, but many of the apparently ‘bargain’ deals citing properties for under €30,000 will be located in the more rural areas and are unlikely to enjoy such high growth rates and certainly not high rental yields. Those wanting to buy these cheaper properties should research the local area carefully and be prepared for a long-term investment, rather than hoping for instant returns.

Properties in the more developed areas such as Sofia will seem more expensive in comparison, but purchasers should consider the bigger picture. Most rural properties will be old and are likely to incur renovation costs – how easy will it be to source reputable skilled workers, negotiate costs and oversee their work? And how easy will it be to rent the property out once renovations are complete? Holidaymakers may venture into rural Bulgaria in the years to come, searching for a new Dordogne, but it is the ski and beach resorts that are attracting vast numbers currently and for the foreseeable future. This will attract more investment and further new developments to these areas, leaving the rural regions lagging behind in a similar way to, for example, France.

Once purchasers have decided on a region and found the property of their choice, they can begin the purchasing process. The first obstacle to consider is the fact that non-Bulgarians cannot own land and buildings together (or indeed more than one property) without setting up a company before they can purchase a property – they will be relieved to hear this only needs to be done once, even if several properties are being purchased. This process can be quite tricky and is likely to cost at least £600 plus annual charges.

It is sensible to instruct a local lawyer who speaks the language and have a UK based solicitor with experience advise you. In Bulgaria, lawyers often represent vendor and purchaser, but they are legally required to be fair. Purchasers should expect to pay a deposit of 10% of the purchase price on presentation of the preliminary contract (bear in mind the English version is not legally binding - it is the Bulgarian version that counts.) The balance of the purchase price is paid once the lawyers have checked the title deeds, along with a combined land tax and notary fee, which is where purchasers should be particularly careful. Tax on purchases is not fixed, meaning investors face the possibility of being stung by unexpected charges – watch out for the ‘tax estimation’ price on the final bill for the property as it is a means of illegally avoiding tax and you may be liable in the future.

With regards to finding tenants, there is a genuine demand for quality rental properties in some areas of Bulgaria. Many developers are claiming they have ten-year contracts with big tour operators like Thomson, offering ten-year rent guarantees of 8% income, but they often offer this guarantee from a shell company that could fold if the rentals do not materialise.

Travel agents and tour operators who are no longer enjoying big mark-ups in Spain are looking for higher profit margins in Bulgaria, which does inspire confidence in the long-term future of the buy-to-let market. Anyone on the High Street can see the substantial number of sun/ski holidays available in Bulgaria today, which are selling well – boding well for future returns for quality locations and developments.