Property investments – 3 main types
Interest in property investment in Bulgaria has grown significantly over the last few years. And traditionally Bulgarians like to invest in property. We rank third in Europe in terms of the number of homeowners per capita. Moreover, in times of ever-increasing inflation, property proves to be a safe haven for savings.
When is the best time to invest?
The main reasons for the steady rise in property prices are high demand and inflation. Banks are also offering increasingly favourable conditions for obtaining a mortgage loan.
Despite the general expectation that the ‘price bubble will burst’, property prices are not expected to fall. Overall, according to property consultants, the best time to invest in property is when one can afford it.
In our article you can find out about the average property prices in the most sought-after areas of Plovdiv.
What does the success of a property investment depend on?
A good investment depends on market research and good market knowledge.
First of all, you need to choose a suitable neighbourhood that has the right balance between supply and demand. It is also very important whether the property has the prospect of increasing in value over time.
For a property investment to be successful, it is important that it is located in an attractive and promising area that will appeal to buyers. This is determined by its location – the neighbourhood it is in, the amenities in it and their proximity to the home. The more amenities and opportunities for a fulfilling daily life a neighbourhood offers, the more interest in the prospect grows.
3 main types of property investments
Long-term property rental
Buying for the purpose of long-term rental is the most well-known and frequently used property investment in Bulgaria.
It is important to note that in large cities, residential properties, more specifically flats, are the most favoured. In smaller towns the demand is not so great and it may be better to focus on commercial property – as a rule, tenants there are long-term tenants.
The better transport links to the city centre and its key boulevards and roads, the higher the interest in the area. Large shopping centres, nearby schools, kindergartens, eateries, supermarkets and hospitals are also key to the attractiveness of the area.
Hristo Smirnenski - Two-room flat
80 039€
Renting a property for short-term accommodation
The second type of property investment is buying for the purpose of short-term renting, or in other words, renting to live. In recent years, this type of property investment has been gaining more and more interest among investors and landlords.
With platforms such as AirBNB and Booking.com, you can easily find tenants who will pay your monthly rent in less than a week. In addition to a much higher income, you’ll be able to use your property whenever you want, and depreciation will cost many times less since your guests will mostly come overnight.
To successfully invest in a property to rent out for overnight stays, you need to look at several factors:
The intended property should be located in an area where tourism is well developed. It should be close to attractions or in the city centre.
You will also have to provide some of the amenities inherent in hotels, such as equipping the property with all the necessary facilities for guests.
Another detail that you should look into before investing in a property for an overnight stay is the condominium law. In some cases, you will need the consent of your neighbours in the entryway to rent out the condo for overnight stays.
The returns from renting out a condominium for overnight stays are higher, but you already know what you need to look into before deciding to invest in such a property.
Centre - Two-room flat
139 680€
Karshiaka - One bedroom flat
76 619€
Hristo Smirnenski - One bedroom flat
46 267€
Acquisition of property for resale
There are two strategies you can bet on here:
Buying ‘green’ property for resale
The first property investment strategy is buying a greenfield property. You buy a property from a developer before they have even started construction of the building, and sell it when the building is ready – that is, when you receive occupancy permits (ACT 16).
It is important to note that this type of investment comes with certain risks. For example, there may be delays in construction and the construction period may be delayed. You should research the developer as there are additional risks involved in buying a property at an early stage of construction. Calculate the additional costs of transferring the property in advance.
You can read more about buying a new build property in our article.
Buying a property in poor condition for resale
The aim here is to find a property in poor condition and at a low price, increase its value by renovating it and sell it for a profit. In this type of property investment, the opportunities for profit are very high, but the risks and liabilities are also high.
To succeed in this investment strategy, you need to actively monitor both the property market and the building materials market. In addition, unless you have the time and skills to do the renovations yourself, you will need craftsmen you can rely on. If you misjudge the economics, you could go bust.
Before you buy a supposed cheap property, calculate the following factors:
- How much will the renovation cost? Look at the prices of materials and labour before you make the investment.
- How much will it cost to acquire? Calculate how much it will cost you for paperwork, taxes and other costs associated with the acquisition.
- What is the realistic price you can sell the property for and how long will the process take?
Financing
When investing in property, the best option is to pay with your own money. However, if you don’t have this option, you can always apply for a mortgage loan from a bank.
It’s also important to make sure that the monthly rent on your investment home covers the loan payments – this way you minimise the risk of the investment. When investing in a property for a long-term rental, you should always bear in mind that you could be without a tenant for another month.
Be sure to consider the cost of furnishings, especially if you plan to rent out residential property, as Bulgaria is looking for mostly furnished homes.
Even if you really want to find your hit for a profitable investment, brokers are still much more familiar with the market and each new offer. The risks and pros will be calculated as soon as possible, ensuring that you don’t miss out on any offers.
With every step you take on your investment journey, it is better to consult an expert.
