Real estate investment in Bulgaria

Short answer: don't do it!  Even running the business yourself, you'll be hard-pressed to make any money, unless you take a looong view and factor in the potential long-term increase in the property's value. Just do your sums very realistically, and you'll soon realise that buy-to-let here is a mug's game unless you manage to find some property in a fire sale, or your Nigerian uncle really does stump up that promised cash...

@Boris-Gleb

It's an interesting idea, and I'm a fan of having a bit of my money in bricks-and-mortar. I'm definitely not as skeptical as @Jimj but you do need to consider the potential return on buy-to-let property. I already have a couple in Plovdiv, but I think that's because I decided to buy them soon after we first moved here... and, today, I'm not so sure I'd be as willing (or could even afford it).

Plovdiv is a similar-sized city to Varna with similar property pricing, I think. While I agree that a nice central apartment has the best long-term letting potential, they are now quite expensive. I'd guess that a new one bedroom flat might be up in the 150k euros ballpark, so it's not a trivial investment. And LT rent might be 500-600 euros pm. It's a potential yield of 5%-ish (before expenses and taxes). Your view on this yield might be swayed if you have a very bullish outlook on Bulgarian property prices over the next years, especially with adoption of the euro coming (maybe).

In terms of managing your investment, I really don't see an option to delegate it all. Apart from anything else, there are two distinct issues: choosing and buying a property, and then renting it out. Also, many new apartments for sale are unfinished, so you have the project of renovating it from Bulgarian Standard, and getting it furnished (or partially furnished) for rent. Or you can try to find fully-finished (maybe even furnished) apartments, that you consider rent-ready. Not many, and expensive.

Once you have purchased an apartment and made it ready to rent, you can easily list it with an agent to find a nice long term tenant. They get a commission for doing this. But very few want to take any additional responsibility for ongoing management of the apartment, collection of rent, etc. This is a lot of extra work for little benefit.

Overall, I reckon it's much more of a DIY project than you seem to believe.

Good luck with your fledgling property empire! :-)

Well that's that idea gone up in smoke.  Never mind Boris you could Always buy a burger van 😀

Good luck with €600/month for a one-bed anywhere in BG, unless that includes all the ancillary costs, which you as the landlord don't get to trouser! You'll be lucky to get 900 leva unless you've paid top dollar for the apartment and fixtures. Out of that you'll be paying income tax, municipal tax, insurance, maintenance fees, sinking fund for the block, management fees, redecoration, wear and tear on F&F, an allowance for empty months etc.You'll often find yourself wondering if it'd be easier if you just bought a brazier and threw money straight into it.

Just a pointer which I wish I'd known beforehand: don't ever be tempted to take a foreign tenant; they're self-entitled and arrogant, and live like pigs...you may sometimes get a bad Bulgarian tenant but you will always get a bad foreign one, regardless of nationality.

@JimJ

Again, I agree with you, there are costs associated with buy to let. And, I agree with you, it's not an investment type that appeals to everybody.

But all the issues you raise are merely indicating that your potential return is lower... not that your original investment is going down. From that perspective, it's a silly comparison to say that buying a 150k apartment is no better that burning your money! You're confusing buy-to-lets with boats. :-)

Moreover, most folks doing buy-to-let are not just hoping for their 2-5% net income from the property. Usually, it's a long term bet on the health of the property market, with the expectation that you will have some gains in property appreciation (vs. core inflation).

The Sofia property market has gone kinda nuts from 500-600 per m2 (new construction) twenty years ago, to 2.5k ish per m2 today. That's way more than core inflation, and someone buying buy-to-let apartments in Sofia 15-20 years would have seen their investment double or triple. I have no idea what the outlook is for property investment made today, it's a judgement call.

My view is that an apartment in Bulgaria (if you buy wisely) is a pretty safe investment, and has potential for a small income, and a little property appreciation. You also have to bear in mind that one common alternative (a certificate of deposit in euros at a Bulgarian bank) is generating about 1%. Which is not index-linked (as a property typically is). This is probably one reason that many Bulgarians are putting their money in real estate.

Similarly, you're pretty alarmist about tenants. I'm not a big expert, but most tenants are good. And the bad ones can be locals or foreigners. However, indeed, a bad tenant can cause havoc with your return/finances (depending on how much damage they do, and how long you let them get away with not paying their rent). But that's why you take a sensible security deposit, and try to act promptly if there are any issues. And, just as there are a few bad ones, sometimes you get a great one, who stays for years, pays on time, and rarely bothers you.

@gwynj

My point is that the difference between renting an apartment at a profit and at a loss can be wafer-thin.  If you buy to rent with the expectation that you're going to live on the income, then you're in for a nasty surprise (unless you're also hoping for a long-term crash diet 😎).  The only way you're going to make any money is by factoring in the long-term appreciation, and that assumes you picked the right time, place and property.

My observations on tenants are based on all-too personal experience, including British tenants who proudly told me how the property had been cleaned to "showroom-standard": it took me a week just to clean the darned oven to a standard that wouldn't cause me embarrassment when shown to a new tenant, not to mention the candle wax stains all over the carpets and a myriad other things. To be fair, they were amateur slobs in comparison to the "Italian Giant" who made more mess in a paltry 6 weeks than I ever imagined possible.  Incidentally, I'd also add "family members of friends" to my "Must Avoid Tenants" list

My relatively meaningless musings-

I've never done buy to let, but I did rent my UK flat out for a while after I got married and moved into hubby's place. My first tenant, a pretty, very proper seeming young woman, was a disaster. Trashed the place, broke things, left the last two months rent unpaid. I barely made enough to cover the mortgage and other costs. In between, I had a couple of months with no rent as person after person agreed they wanted to rent the place then never showed to sign the contract. When I did finally get another tenant, a rough around the edges ex-squaddie desperate for somewhere that would take him as he had a bad credit history due to his ex-wife (my gut feeling said he was fine) he was a dream tenant. I was still not doing much more than covering expenses. After he eventually moved out, I decided to sell the place, made a nice profit on the purchase price.

My feeling is that Jim and Gwyn are both right here, but in different ways. Jim is replying on the basis of Boris-Gleb wanting income from the properties. Especially if one is borrowing to buy the properties, the income margin will be very narrow. And if one has the cash in invest, the question has to be asked of whether income could be earned from it in easier, more reliable investments. Gwyn is replying more on the basis of buying when property is cheaper with the goal of long-term gains in property prices, rather than immediate income.

Problem is, those gains are very much based on when one buys. I flew back to the UK via Sofia earlier in the year and shared a taxi with a young Thai guy working in the UK who'd horrified his mother by his craziness paying cash for an apartment in a southern Sofia suburb off plan pre-Covid, purely because Sofia was the least expensive capital city in the EU and he wanted to invest in property. He admitted he'd fretted his gamble might not pay off, especially when the building work completely stopped for two years. Finally this year the building got Act 16, he'd gone to visit, been overjoyed with both the apartment and the prices they were selling for - three times what he'd paid, even unfinished!

Varna apartments would also have been a great investment if one bought six or seven years ago.. Prices have risen there faster than anywhere else in the country, even Sofia. Apartments that would have been 40-50k EUR to buy when we first visited Varna in 2016 are now selling for over three times that. I'm not sure whether they're such a great investment now. Is that rate of price growth sustainable?

One the other hand, if I had 600,000 to invest, I'd consider it -- getting residency, plus a few apartments with the potential for a small rental income and possible capital gains. But it would be a gamble and one that would have to be considered very carefully. I'm also not sure I'd trust anyone else to manage the properties. I've heard too many horror stories of negligent estate agents here in the UK to want to risk it.

@gwynj we're making around 8.9% on our studio apartment yearly.  That said, we don't let it longterm, instead, it's on Airbnb.

We bought it for €55,000 in May 2022 and our turnover is around €4900 per year.  The apartment would now sell for €72,000, so it's been a great investment.. We prefer renting it on Airbnb, as most guests are short stay, certainly no longer than one month, so, we can keep it clean and well maintained.  I do the cleaning and maintenance,  my missus does the washing (towels and bedding).. So far, out of 42 bookings, only one has left it in  a bad state, although we had some weird thefts...  One guest took a duvet cover, another stole a kitchen knife, which was made even more interesting, as he was about to go to the airport, to board a flight to Luton!.  Our overheads work out to be around 6% of our income and we're quite generous to guests, giving them tea, coffee, two packets of snacks, fresh fruit, bottle of wine, 2 x beers, 4 x soft drinks and various bottled water.  What's interesting is, that 90% of guests are not greedy and often only consume a coffee and a small bottle of water, meaning,  we carry over the stock to the next paying guest.

@janemulberry we bought two apartments in Varna in April and May 2022. The one we live in was €148,000 and our studio was €55,000.  Our apartment is now valued at €215,000 and the studio at €72,000.  We also bought two garages and a parking space in November 2022, for €22,000, €23,000 and €12,000 respectively.  They're now valued at €29,000, €30,000 and €20,000.   So, despite coming into the market a little late, we've done extremely well,  mostly down to the influx of Ukrainian  migrants, who rapidly pushed prices up.

Thanks to all for wise comments, this drives me to think the main point is to get the right follow up when renting. No doubt cyberescue1 made good deals, but difficult to replicate to us. I feel confident to find interesting properties at acceptable price in Varna but the way cyberescue 1 is running successfully the business requires a lot of daily involvement not compatible with our way of life. We are sharing our time between 3 different countries in EU, meaning up to 5 months away from Varna.

Just thinking such an investment would give a poor return unless hypothetical high profit when reselling property..

@cyberescue1

You made very wise choices buying when you did.

@janemulberry It was a very interesting experience, thankfully, helped by my wife's cousin, who's a freelance estate agent and knows Varna well.  Buying our home, required either finding a large 4 bed apartment, or 3 bed maisonette, both very rare in Varna.  We ended up buying a maisonette, after looking at 7 properties, with very inconsistent asking prices!.  We found a range from just €80,000 for a cramped, deshevilled maisonette, to €210,000, which is where it became inconsistent – either  a large 4 bed apartment, a very large 3 floor 4 bed maisonette, with roof problems, or a brand new, what they advertised as 3 bedrooms, turned out to be 2 bedrooms!.  Settling for a spacious, 2008, 3 bedroom maisonette, at €148,000, which was, in.my view, a very reasonable asking price.

Buying the studio, was a lot easier, as there were loads available at the time, just needed to find a good one.  We found a 2018 block, with a studio, converted from an office, on the 1st  floor, in perfect condition.

When you search for maisonettes now, you'll be lucky to find one for sale.  Even studios are less common.  Still plenty of one bedroom apartments going though.  To make money now, it's necessary to buy something sort after.

Our timing was governed by finance being  available (compensation claim / inheritance) and the hassle of gradually transferring the funds from UK account,to Wise account, to Bulgarian account.

The buying process was very smooth for all our purchases - we had a good solicitor and notary.

@janemulberry

Spot on . Very good explanation .

If your looking for the kind of gains experienced in Bulgaria over the last years it might be better to look 200-300 miles north along the black sea... although there is a war going on.