Sunny Beach Bulgaria

P

PaddyL

Guest
Hi,
I was thinking of investing in a one bedroom rental apartment in Bulgaria for investment purposes. I have read property is cheap, Bulgaria is planning to join the EU in 2007 and that it is now being advertised extensively as a tourist destination. Does anyone know more about the pitfalls etc that may arise by investing in this country ??
Thanks
 
That's a bit harsh rainyday. He is asking for information before he buys. If others have positive first hand experience in the same area then why not do a bit more research and even go out and see the place first hand?
It's nosy fair to lump this guy into the same category as those who buy with no prior research at a property show...
 
I honestly couldn't imagine anyone buying property in Bulgaria after doing indepth research including visiting the country, unless of course they fall into the "hopelessly optimistic", "impressionable" or "reckless" categories. Having visited there twice, in my view Bulgaria is in many ways a pleasant country, but economically, and in terms of the operation of rule of law, it sadly appears to be a basket case. Personally, I wouldn't buy a suit in Bulgaria let alone a property but others may disagree.
 
OK, so it was a bit harsh - but it is an important point. I was pointing out the huge flaw in his logic that buying a property because it is cheap is a good idea.
 
Tommy, I bow to your superior knowledge on the subject. Personally I think you would have to live and work in a country for at least six months to really know it.
I agree rainyday, cheap and good value are not the same thing.
 
Hi Purple

What I have written here is simply my own experiences of visiting Bulgaria. I do not present myself to be an expert on the country nor do I claim that my comments are in any way definitive or possibly even relevant to the issue of property development in that country. As such people can heed or ignore them as they see fit. That said I was interested to read the recently linked Guardian article that confirmed many of my beliefs about the economic and social plight of post-Soviet Bulgaria.

Personally I think you would have to live and work in a country for at least six months to really know it
Click to expand...
I wonder how many property investors bother to do so?
 
Sorry if I sounded a bit glib there Tommy, I was agreeing with you. I am a great believer in only investing in what you know about. If it looks good enough to put your money into then take the time to find out all about it and be sure.
 
First of all let me nail my colors to the mast -- we advise clients on property in Bulgaria. One of my clients suggested I might like to reply to the comments here.

Bulgaria, like any improving country has it's good and bad points. Obviously, EU entry in 2007 is positive as well as the already established infrastructure and tourism industry. Remember, it is not a new destination. People have been taking holidays there for skiing and sun for over 30 years.

Buying in Bulgaria is an easy process and with 86% Bulgarian Orthodox Christian population they escaped the ravages of war so common in the region. Title deed to property is secure.

Be careful on some fronts.
1) If you invest in Sofia --the area you invest in is important - probably over 50K euro for 1 bed and u are starting to hit a good area.
2) Buying an old house. All property sitting on its own plot is called ''villa''. Be very careful --true villas, as you and I would know, are few and far between.
3) description of property -- especially in relation to the resort areas can be very optimistic. Example, one of our clients asked me about a villa in Sunny Beach for 20K euro. Turned out to be about 10 miles inland and was a 2 bedroom wreck with outside toilet.

If the Forum would like me to answer any general questions I'd be happy to do so. Trying not to plug obviously --but people can email me and I'll give them our website.

Thanks

Tom
 
Hi Tom - Thanks for your response and for declaring your interest up-front. For your information, we have no difficulty with regular contributors who participate on AAM in a community spirit showing a link to their own website in their signature.

On this specific issue, would you care to expand on some of the other key issues that would be relevant for potential Bulgarian investors, such as;

- Taxation (CGT & Income tax, local authority fees)
- Legal issues (title, inheritance rights, tenant rights)
- Currency risk
- Property management (agency fees, contractor rates)
 
Hi and thanks

Just wanted to be upfront about things.
Our website is www.buyinbulgaria.com ( nice and simple). Lots of property there but, we also spend around 3 months writing background info there. So, even if you never look at the property -the info is good.
Ok, back to questions
- Taxation (CGT & Income tax, local authority fees)
CGT is 20%
As at 2003, an individual pays a progressive tax of 15% - 29%.
Local Authority fees are very low and dependent on the area. Never really a consideration.
- Legal issues (title, inheritance rights, tenant rights)
Title --full title, checked carefully by both Lawyer initially and Notary at final purchase stage
Inheritance rights -- wife automatically gains title to property following death of husband. We would advise clients to get a will done, although not necessary it does give one a sense of security.
Tenant rights --good question -to the best of my knowledge the rights of a tenant is ruled by the rental agreement he signs with the landlord/owner - for private dwellings. I will check with our lawyer and come back to you.
- Currency risk
None --THe BG LV ( LEV) is pegged to Euro at just over 1.956 LV to the Euro. All property transactions are now done in Euro. When we started first all transactions were in dollar ( ah, them were the days!!).
- Property management (agency fees, contractor rates)
You missed a question, extra fees when purchasing :
1) Agent fees --vary generally between 3% to 10%.
We charge 3% for new property and 5% for land sale and finding older property.
2) Tax -- 2% paid at Notary Stage.
3) Notary fees --about 400 Euro
4) Legal Fees --can be up to 1.5%. We have lawyer for our clients to use in BG and he has agreed a flat fee of 400 Euro.

So - rental fees:
Rental market is only in initial phase in Bulgaria. People are buying into BG for the huge capital appreciation.
However, to find tenant - normally 50% of first month rent.
Ongoing fees are dependent on what you want -- can vary for 5% to 30%

One thing I have to mention - like Spain up to a couple of years ago - Developers along the Black Sea coast underestimate the price of the apartment at Notary Stage. Take an example of a 50,000 Euro apt -it might go down on the legal documents as 15,000 Euro. You will be fully receipted by the developer for your 50,000 Euro but on the Notary document it appears as 15,000 Euro.
Saves the developer VAT and saves the client tax.
I don't like it personally but, we have to live with it.
It tends not to happen in Sofia. The price is the price there/
This is common in many countries and just don't think it happens in Bulgaria. Just felt I had to note it.
Any other q's please ask

Tom
 
currency pegging???

Hi,

I wold have thought that the lev or whatever it is eventually joins the Euro, there can be no certainty that it will not re-value upwards or downwards given macroeconomic circumstances and an agreement with the EU.

Regards,
Gearoid.
 
Re: currency pegging???

The Lev fell by 90% against the dollar within the space of a few months in 1996/97. In August 1996 the 300 lev would buy you a dollar. In July 1997 you would need 2600 lev to buy a dollar. Needless to say this caused widespread economic hardship. According to people I talked to at the time in Bulgaria there was a real fear among the population that people would literally starve.
 
CGT is 20%
Click to expand...
Are you referring to Irish CGT or Bulgarian? Which applies when an Irish tax resident buys & later sells a property in Bulgaria
As at 2003, an individual pays a progressive tax of 15% - 29%.
Click to expand...
I presume this is the Bulgarian rate - Is there no Irish tax liability?
 
Guys
To clear up a few points.
1) The Lev IS pegged directly to Euro --1.9567 LV to 1 Euro.
No currency variation.
2) CGT in BG is 20% --same as here
3) BG personal taxation is what I was referring to.
4) Joint taxation agreement between Ireland and BG
5) BG hope to join Euro zone in 2009

For a great treatment of BG tax situation look at the PWC website. Check here for articles:
[broken link removed]

Tom
 
Thanks Tom - Are you certain that the tax treaty between Ireland & Bulgaria covers CGT? There is no danger that investors could get hit for CGT in both countries (as I understand is the case for Irish investors in France today as the tax treaty does not cover CGT in France).

And are you saying that the tax treaty means that there is definitely no Irish income tax liability on Bulgarian rental income?
 
Lev

Until the Lev is officially backed up with the assets of the Eurozone, pegging it to the Euro offers no guarantee that it will remain at the current exchange rate.
 
Re: Lev

Guys, negative comments without the facts are pretty useless, at best, and at worse, are misleading.

The LV is pegged to the Euro -pure and simple, no currency variation.
However, BG are planning to enter the eurozone in 2009.
I am no tax expert and maybe someone else will explain ''joint taxation agreements''. All I know is BG and Ire have one.

But, then don't believe me --have a look at PWC Bulgaria for the latest updates:
[broken link removed]
 
Re: Lev

I am no tax expert and maybe someone else will explain ''joint taxation agreements''. All I know is BG and Ire have one.
Click to expand...
Wouldn't you think that it is pretty critical that investors have a clear view of their tax liabilities before they commit?
 
Misleading

The only misleading comments I can see are those that suggest that because of an artificial peg, there is no currency risk. That was disproved by the ERM crisis in the 90s and the rounds of devaluations that followed. Here's some theory from 2000 siteresources.worldbank.o...lgaria.pdf
 
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