TO BUY OR NOT TO BUY

by Jon White

If you're buying to rent you are advised to look for all year round potential

As Serbia celebrated a modern day miracle, here in Bulgaria we can at least derive some solace from the fact that the property market is nowhere near as erratic as the voting in May's Eurovision Song Contest!

If you're thinking of investing in Bulgarian property, then you should first establish whether you're investing for capital appreciation, rental income or an amicable marriage of both. This decision will steer you to the most suitable type of investment.

If capital appreciation is all that matters to you, then consider what level of risk you are prepared to accept. Over the last two to three years those who have bought unregulated land, and then organised the regulation of it (for building) have been able to reap a tidy profit. But many who go down this road do so for short term gains, typically with a view to regulating and selling the land within 12-18 months.

You can reduce the risk by purchasing unregulated land that is close to a town or village, in other words, close to regulated land - giving it a greater chance of being successfully regulated. Another avenue is to seek recommendations from experts who regulate land for a living. You can ask your Bulgarian lawyer for advice about people providing this service.

Whether the plot is in a desirable location or not is more a question of judgement. You can survey the area to spot any burgeoning development projects or scan Internet forums on Bulgarian real estate to see where people are buying property.

Land investments do not have to be limited to unregulated land. You can also seek out regulated plots of land that would attract individuals or property developers, ensuring that there is access to electricity/water nearby.

As a more serious, but adventurous investor, you may consider joining a consortium to take on a development project. This would typically consist of the development land, a building project produced by an architect and the necessary permission. Your investment money would go towards the construction - and your profit taken from a share of property sales. You can find such projects by talking to estate agents or independent property consultancy firms.

When investing for income, you're obviously seeking the highest possible return on your investment. The quickest and simplest way of calculating rental yield is to look at the gross yield:

Gross yield = Monthly rental income * 12 (months) * 100 Purchase price

The gross yield is represented as a percentage, and for property rentals you really want to be aiming for a yield of at least 10 percent or higher. For example, the Lozenets district of Sofia is a desirable and popular rental location among expats. If you were to purchase an average apartment there for 1,400 euros per square metre, with two bedrooms and 70 square metres in total - and get a monthly rental income of 1,000 euros - that would equate to a gross yield of over 12 percent, making it an attractive proposition.

When buying to rent in Sofia, districts such as Lozenets, Ivan Vazov (near the South Park), Iztok and the Doctor's Garden all attract the best rental income. As you view properties in this area, quick application of the gross rental yield formula above will give you an indication of the property's investment potential. To be really successful, you need to know about the rental income for a particular district as well as the current level of demand. A trip to a company specialising in property lettings would help and many estate agents also have a lettings division offering advice. (More information about rental prices in different areas of the country is available in the second edition of Buying a property in Bulgaria from HowTo Books, due for release soon).

Looking for that perfect mix inevitably draws your attention to property and, in particular, apartments, which continue to dominate the foreign buyers' market. One place to watch is Veliko Tarnovo - where apartment prices start from as little as 400 euros per square metre. This area shows particular promise thanks to the development in the city, increased employment, improvements in infrastructure and the fact that it's Bulgaria's cultural centre of tourism. In the peak tourist season there are often few rooms available, hence demand for accommodation is likely to rise - making short term rental a viable opportunity.

It's worth scrutinising the office lettings market. As more companies seek out quality office accommodation, the opportunity for good rental income is there. In Varna, office rental peaks at between 10-12 euros per square metre, while in Sofia prime rental income is between 15-22 euros per square metre. Anticipated growth in Bulgaria's business sector and the demand for central office space is likely to provide investors with a healthy capital appreciation, and a sustainable rental income in the country's more densely populated trade regions.

Some of the best capital appreciation still comes from the resale of select land plots across the country, with greater profit when you buy and regulate land. If you're looking for the most reliable lettings income, then you should seek out year-round rental income, ideally targeting company-lets for longer term income. But make sure you research the local areas most sought after by foreigners.

To recap: due to the excellent value for money in Veliko Tarnovo, and the huge investment in this region over recent years, this is definitely one to watch. Finally, with the demand for quality office space rising, there is a good opportunity to combine the capital appreciation of office space with a healthy rental income - particularly when rental of up to 22 euros per square metre is possible in Sofia's prime regions.

  • COMMENTING RULES

    Commenting on www.vagabond.bg

    Vagabond Media Ltd requires you to submit a valid email to comment on www.vagabond.bg to secure that you are not a bot or a spammer. Learn more on how the company manages your personal information on our Privacy Policy. By filling the comment form you declare that you will not use www.vagabond.bg for the purpose of violating the laws of the Republic of Bulgaria. When commenting on www.vagabond.bg please observe some simple rules. You must avoid sexually explicit language and racist, vulgar, religiously intolerant or obscene comments aiming to insult Vagabond Media Ltd, other companies, countries, nationalities, confessions or authors of postings and/or other comments. Do not post spam. Write in English. Unsolicited commercial messages, obscene postings and personal attacks will be removed without notice. The comments will be moderated and may take some time to appear on www.vagabond.bg.

Add new comment

The content of this field is kept private and will not be shown publicly.

Restricted HTML

  • Allowed HTML tags: <a href hreflang> <em> <strong> <cite> <blockquote cite> <code> <ul type> <ol start type> <li> <dl> <dt> <dd> <h2 id> <h3 id> <h4 id> <h5 id> <h6 id>
  • Lines and paragraphs break automatically.
  • Web page addresses and email addresses turn into links automatically.

Discover More

MATTER OF NUMBERS
Six months after the Covid-19 pandemic forced the world into lockdowns and uncertainties, a fuller picture of its effect on the world economy is beginning to emerge. Bulgaria fared not too bad, according to recent statistical data.

BORISOV'S FIASCO
Nowhere is the abyss between what Boyko Borisov's GERB says it is doing and what it in fact does so obvious than in the economy of what firmly remains the EU's poorest state.

WHITHER GOEST THE ECONOMY?
From bad to worse? According to a poll by Alpha Research published at the end of 2011, the majority of Bulgarians consider 2011 to have been "the worst" since the economic collapse of 1997.

CRISIS IN PICTURES
In the third quarter of 2010 the average monthly income of an adult member of a family in Bulgaria decreased by 2.2 percent on a year earlier. At the moment it is 932 leva, or 466 euros, according to the National Statistical Institute.

THE CRISIS IN FIGURES
The crisis was already a fact in Bulgaria at the beginning of 2009, but the owner of an accountancy firm in Gorna Oryahovitsa would deny it even more vehemently than then Prime Minister Sergey Stanishev.
AT A TIME OF CRISIS
Rays of hope have started to peep through the cloud-covered economic horizon – even in the new EU member states. Poland has managed to avoid going into recession.

BRITS GONE HOME
At first, they stopped buying. Then it got worse - they started selling. Yes, it seems the British have deserted the Bulgarian property market and the Bulgarians are taking it very personally.
THEN € NOW
"The Bulgarian economy is stable." The words former Finance Minister Plamen Oresharski uttered in October 2008 seem more than just a little out of place a year later.

BITING HARDER
While last autumn the prevailing opinion of people in this country was that the economic crisis did not have a direct effect on them, their view is now completely different.

GO GREEN, EVERGREEN
The commercial real estate market in Bulgaria is at a crossroads.
WHAT A LOVELY CRISIS
The "monster munch," as Londoners call the current credit crunch, in my view is running out steam. Everyone is growing tired of the pundits.
GATED IN OR BLOCKED OUT
According to a saying very popular among Bulgarians in the past, "In his life, a man must do three things: raise a child, plant a tree and build a house for his family." Nowadays this way of thinking no longer reflects the urban lifestyle – the current rati