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Building a Bulgarian Rental Portfolio

The rental market in Bulgaria is growing thanks to more expats moving over and putting a toe in the water and more importantly more Bulgarians moving to the cities for work created by the multinationals that are setting up here. Buy-to-let property took off in a big way in the UK over the last ten years and has turned many ordinary folk into property owning landlords who can live on their rental income. Slowly but surely the Bulgarian market has the potential to offer the same providing you buy the right type of property in the right location.

Bulgarian Buy-To-Lets

Buying property with the sole intention of renting it out can provide you with sound capital growth over the long term and a regular income. The best places to buy are in the cities particularly Sofia and Varna, which are continuing to grow. The more central the location the better and the easier it is to rent. The best property to buy for long term rentals in Bulgaria is a one bedroom apartment with a living and kitchen area and a bathroom. As little as 45 sq m living space is fine and apartments of this size can still be bought for a song. Rental income in the cities ranges from 500 to 800 Euros a month for a one bedroom apartment in a central location.

.A Long Term Investment

Renting out property is not a short term get rich quick strategy. It should be viewed as a long term investment, which will provide growing equity as property prices rise and a steady income. But be realistic, you will have to invest some of this income back into the property for repairs and damages caused by tenants. If you decide to get a mortgage to buy your Bulgarian rental properties, then you may not see any of the monthly income as this will be eaten up with mortgage repayments and you need to be sure that you can cover these repayments should your property be empty for any period of time. You also need to set aside money for management agents if you are not here to control the rentals yourself.

Holiday Rentals

If you want to make a living from rental income in Bulgaria, then steer clear of holiday rentals in the current climate. It is far better to aim for the domestic Bulgarian market, which is actually growing faster than the holiday let market. Tourism rates across all countries are liable to be down this year and the glut of construction in the resorts means that competition will be fierce in the letting market. Long term rentals mean a steady income all year round rather than a slightly higher rate just for the season. The holiday rental market will flourish again in the future and if you don’t need to rely on rental income then there are some excellent options around with frontline, sea view properties in the beach resorts and those located next to the ski lift in the winter resorts being the best options.

Building a Portfolio

It is far more prudent to start off with one property to rent and gradually build up from there rather than buy five properties in one go. By putting a toe in the water, you are not as exposed; you can also test the performance of your rental agent if you use one and will get a clearer idea of what your tenants are looking for and hat costs you have to pay out. If you are managing the property yourself you can use an agent like Address to find tenants and set up a rental contract’ their fees are a percentage of the first months rent. You then take over by doing repairs and collecting rent yourself thereafter. If you find that you are making a profit from your first rental and your tenant is not causing you any problems, you can look at building your portfolio to include more properties. It is best to stick with more of the same if you have found that the fist one you bought was easy to rent out. Plus the fact it’s far easier to collect rent and do repairs if all of your properties are in the same location. You may then consider taking out a mortgage to finance a second property, but you will need to be able to put 30% of the sale price down.

Using a Management Company

If you are not resident in Bulgaria or are buying property in a city, which you don’t live in, you will need to employ an agent to liaise with your tenants and collect rent. Typically they will take around 25 to 30% of your rental income, but it does mean that you will not have the hassle of tenants calling you to ask you to repair their boiler! Agents also have better links to potential clients, which means that they will be able to keep your property full far more easily than you trying to find someone yourself. It is wise to choose an agent who has a good footing in the domestic market if you are looking for long term rentals.

The Downside of Renting

The downsides of renting property pale into insignificance when compared to the earning potential available. You should however be aware that tenants will damage things in the property although it is rarely intentional. Beautiful magnolia walls will become marked, if you have furnished the property with cheap self assembly furniture it will get damaged as your tenant struggles to open doors for example. You may not like your tenant but as long as they pay the rent you don’t need to. Your tenant may also bombard you with phone calls asking to get things fixed or asking for your permission to change something in the property. You must accept that when you let property, you are running a business and this is part of your job. Don’t expect to get away Scott-free from this work unless you pay an agent to do it for you.