The Property Banks Buyers Guide to Bulgaria
This is uncomplicated and much the same as the process in the rest
of Europe.
Research to find the right location to suit your needs and find a
desirable property at the right price.
Negotiate. It is quite normal to for some price negotiation to take
place.
You make a verbal agreement to purchase and sign a Preliminary
Contract, including a 10% deposit payment for the property. This
removes the property from the market. The 10% is only refundable if
the vendor pulls out of the sale. The lawyer's fee for drawing up
the contract is approximately 150 euros.
The Lawyer (who will often represent both purchaser and vendor)
checks that all municipal costs and paperwork are in order, prior to
the day of completion, which is often within 3 weeks.
The Notary deed is signed before the public notary and both the
owner and the purchaser are present. The purchaser pays the balance
of the purchase price, along with the notary fee, which is around
5%, depending on the declared value of the property. The Notary then
registers the transaction in the Real Estate Registry in order to
make the purchaser's title deeds defendable against third parties.
You are now the proud owner of a property in Bulgaria. Don't forget
to insure it just as you would any of your other properties at home
or abroad.
Fee Percentages
Approx.
2% Stamp duty.
3-6% Estate agency commission.
5% Notary fees.
10% In ski resorts to cover agency and legal fees, but not stamp
duty.
12% Land purchases to cover formation of Ltd company.
Running costs
The running costs associated with a property in Bulgaria are much
lower, compared to those in other European countries. The owner of a
property pays an annual property tax, which is 0.15% of the declared
value of the property. In addition, owners pay waste-collection
fees, public lighting etc. which are also minor expenses compared to
in other countries.
In residential developments, the owner may pay a fee per year or a
community charge for 24-hour security, cleaning, swimming pool,
gardening, insurance, etc.
Mortgages
Mortgages are now available for property purchase in Bulgaria. Their
typical interest rates are variable and around 7% with borrowing at
around 70%.
We can help you to find the financial institutions that best suit
your needs. Buy to let mortgages will naturally take into account
your projected rental income whilst calculating your suitability for
the mortgage.
It is clear that buying property in Bulgaria can be a very lucrative
option. We will help you avoid any possible pitfalls and guide you
in the right direction for the best deals currently available. The
importance of location and price for a wise investment is never
overlooked in achieving our aim: to ensure you find the best
property to fit your own particular needs.
What to Buy
Off plan
By far the most popular option is to buy off-plan. It makes
financial sense to get in there while the price is at its lowest and
sell upon completion of the project.
Take this example:
Purchase price = €200,000
pay 30% deposit = € 60,000
plus 7% IVA (VAT) = € 4,200
Total investment = € 64,200
When the project is finished, if the developer puts up the price by
10%, then the increase is € 20,000.
If you bought the apartment immediately when it was released at €
200,000, then your gain would be as follows;
€ 20,000.00 / € 64,200.00 = 31%
If you had bought it newly built, after the increase, then you would
have thrown away a 31% gain!
Remember, developers normally charge 1-2% to change all the
paperwork from one name to another, but this is normally paid by the
purchaser.
Resale's
Investment in older properties is the cheapest way to buy property
in Bulgaria and, bought in the right location, can offer good
returns.
Bear in mind though, that your idea of paradise, next to a lake in
superbly remote corner away from mass tourism, is not your average
purchaser's ideal location for a second home. When you wish to sell,
it could therefore take you a good deal longer for the right
purchaser to come along, than if you had invested in or near to
tourist facilities.
Renovation is often easier and cheaper than building from scratch
and avoids the problem of foreigners legally being obliged to own a
company in order to buy land.
The cost to build is approximately 100-200 euros per m2 as opposed
to a new build at 80-350 euros per m2.
The construction quality in Communist times is not comparable to the
standards that are upheld today, so you may be in for more work than
you bargained for. This is definitely an option for the more
adventurous!
Words of Advice
With the absence of bank guarantees in Bulgaria, it is of utmost
importance to know the financial stability of the developer. If they
have only been around for a few months with no track record, can you
really trust them to deliver the product you expect?
As prices creep up, remember that the price of an off-plan
development property must compete well with that of a similar
finished or soon to be finished property in the surrounding area. If
it is no cheaper, then there is no benefit buying off plan.
Many of these developments appear rather remote. Make sure there
are, or there are soon to be, amenities and roads to link the area
to the facilities you need. If there is no evidence of this, you
could struggle to sell on when you need to, let alone achieve the
price you want.
There are developments that do not permit you to sell on your
contract before completion so be aware of the stance taken by the
developer before signing anything. We never recommend a development
to investors where the option to sell is not available.
Other developers may permit you to sell, but often under certain
conditions, for example:
- only once they have sold all their other apartments.
- they may allow you to sell but only if you don't undercut the
sale price of the remaining apartments.
- or you may have to sell through the developer's sales office
only, while they burn you for a hefty commission.
Buy-to-Let
year guaranteed rental agreements are widely available for many of
the newly built properties. Management services are also commonplace
and often provided by the development company themselves. So you can
effortlessly rent out the property for the time you are not using
it, leaving nothing more for you to do but enjoy your property,
and/or sit back and watch your investment grow!
On average, annual returns of your investment are between 8 and 10
%, provided you allow 95% occupancy time. You will receive regular
monthly payments to your bank from the rental income generated by
your property. Annually, this amounts to between 8 and 10% of the
total investment price.
Land
For foreign individuals, land purchase in Bulgaria is essentially
not permitted. However if you set up a private Ltd company which
then owns the land, you are free to do so. This is a simple enough
procedure (formation costs around 500-700 euros depending on the
value of the property) and it seems a small price to pay for the
land investment opportunities still available. As soon as the law
changes, which it will do in line with new EU standards in 2007,
land prices are predicted to increase steadily.
Company Formation for Land Purchase In brief:
A company is incorporated onto the Commercial Register in a district
court. The application for registration and legal documents are
filed with the Court by a managing body.
Commercial law stipulates that in order to become incorporated a
Private Ltd Company must:
• have Articles of Association or Memorandum of Association;
• have appointed a Managing Director or Board of Directors;
• have paid at least 70% of its authorised capital, including at
least one-third of each member's contribution.