TO BUY OR NOT TO BUY

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.