THE LETTINGS MARKET

Bulgaria has one of the most rapidly-growing tourist industries in the world, with visitor numbers reaching 4.4 million in 2006 and, while the outlook is healthy for investors, rewards won’t be instantaneous.

With 386km of coastline, nine Blue Flag beaches, excellent skiing resorts and facilities, and a rapidly growing golf and spa market, along with 37,000km of walking paths in the Balkan Mountains, there are plenty of attractions for visitors. However, despite all these attractions, you should be aware that rental yields aren’t astronomical, and despite parallels being drawn with the Spanish market, Bulgaria is not the new Spain in terms of rental yields. The Black Sea Coast does not enjoy the profits seen on the Costas, with prices on Sunny Beach beyond the means of many locals, a situation that is destined to adversely affect the area’s rental market.

However, the major stumbling block is that 80–90% of the tourist market book their holiday through travel agents. Consequently, those who are looking to rent their property privately will find themselves competing with the larger developments and may struggle to secure bookings. You will also be hamstrung by the length of the tourist season, which is a mere four months on the coast. While this doesn’t mean you can’t make money–as long as you are careful what you buy and do your research it is possible to make a profit–it does mean you can’t rely on making enough to cover all your outgoings.

The ski resorts probably offer the best rental opportunities. Still new on the scene and with ridiculously low prices for buyers, these resorts are easily comparable with those of France and Italy, while the cost of skiing is much lower. Bansko alone received 800,000 tourists in 2006 and earned the Daily Mail’s award for Most Improved Ski Resort of 2006. Off the back of massive popularity and demand, First Choice announced that they are planning to increase their ski holidays to Bulgaria tenfold. Also, you can look at letting year round as, out of season, there are other attractions such as hiking and golf, which is a rapidly growing market in Bulgaria.

Rental income

Rental yields will always be higher for property located in complexes, as already mentioned, and these will also offer year-round property management and on-site facilities which will help to maximise your rental potential.

Rentals in Bulgaria are usually based on the number of people accommodated rather than on the size of the property, so a small onebedroomed apartment with a sofa bed can potentially yield income from four people. There are also many new developments coming online which offer up to two years of guaranteed rental income. One such development offers property for £37,200 with a guaranteed return of 4% for two years, which equates to £1,488 per year.

Rental income yielded from letting your property will be liable to tax. UK residents have to pay a 15% withholding tax in Bulgaria but this is offset against UK income tax payable.

RENOVATING A PROPERTY

While building costs are comparatively low in Bulgaria compared with the rest of Europe, the cost of building and labour materials has gone up disproportionately in comparison with the overall cost of living in the country. The cost of building work varies greatly but, as a rule, it is generally one-third that of the UK, with the cost of building a new property between £150 and £250 per square metre.

On average, you should budget to spend up to 50% of the property’s sale value on renovation works. While property repairs on Bulgarian property do not generally require planning permission, if you intend to buy a property to restore, make sure you secure building permission before you purchase. Many older properties in Bulgaria lack sufficient foundations, so get a thorough survey carried out before embarking on the project. You should also be aware that a lot of Bulgarian building is done in a traditional fashion, using techniques which differ greatly from the UK. This will only add value to the property at the end of the day.