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Realising your Assets

Many small second home property investors were taken by surprise when the media announced that the global financial crisis was imminent. But how do you make cuts in mortgage payments when the property market is stagnant? And how do you get out of commitments made to buy a property abroad? Fortunately there is a solution whereby people with a property in Bulgaria can get out quick if they need to. Quest Bulgaria takes a look at how it can be done and how those with cash to invest can emulate what the clever money is doing.

Boom Time

If you are wondering where the clever money is buying then the answer is ‘Bulgaria.’ We all wish we had bought in Bulgaria back in 2000, before the property boom got under way and when land was in single figures and priced in Leva. That was the time the large international investors came in and bought up large tracts of land and luxury houses by the beach. Around 2003 Joe Public started to jump onto the property bandwagon fuelled by the new second home craze publicised in the media. Prices began to soar, slowly at first with some people buying land at 10 Euros a sq m – still an absolute bargain especially for those who later sold pieces on at 50 Euros a sq m. Dwellings were similarly priced particularly in villages and many people bought up several properties and sold them on making a handsome profit. By 2005- 2006, more people were coming over to Bulgaria to invest, but bargains were getting scarce on the coast and in the ski resorts. Prices were creeping up towards the 1,000 Euros per sq m level for property and to around 50 to 100 Euros for building land. Profit margins were getting smaller, yet Joe Public was still expecting to make a killing and continued to buy with the idea of selling on. The clever money had long since turned their attentions to other international markets having sold their land on or used it to develop residential complexes and golf courses. Small investors were now competing to sell in a market where the development of new property was at an all time high, new buyers and there were still plenty had lots of choice with many quality builds to choose from.

Sounding the Death Knell

By 2008, the media was putting the kibosh on the very idea of owning property abroad with its vehement publicising of impending doom in the form of the global credit crisis. Their soothsayer predictions became a reality when Woolworths closed all of its UK stores leaving a gaping hole in the High Street. Reality set in and the aftershock of the global crisis announcements slowly began to affect many homes; house prices started to plummet and job security began to vanish, worry set in and many people changed their habits. They no longer went out for meals, they started to shop at low cost stores and those more severely hit started to make cuts in their household and personal budgets. The media talked down the market even further likening the global crisis to the Thirties Crash and this made people squirrel away what savings they did have. The problem was many people were and still are becoming victims of the crunch and many of them have property commitments in Bulgaria. Several people committed to off plan properties could no longer afford the stage payments and others looked to realise their assets like the second home they bought in Bulgaria, but how to accomplish this with stagnant property markets there too?

The Arrival of the Property Vultures

The clever money is back and they are buying Bulgarian! If you are a small investor with money to spare you may want to emulate their style. Today’s clever money comes in the form of specialist investment companies who buy up property from sellers looking to make a fast sale. The media have dubbed them the ‘property vultures’ however their services have helped many small investors to plug a gaping financial hole at home with cash realised from the sale of their holiday home.

If you are looking for a quick sale then it is worth getting in touch with one of these investment companies, but beware they are quite choosy in what and where they buy. The Dublin based investment specialist Appreciating Assets was set up solely to focus on alternative investments that have a unique angle compared to the main opportunities in the market. They are buying up coastal properties for around 450 Euros a sq m and intend on renting them out over the next five to seven years. The logic is sound and says much about the future of the Bulgarian property market – if the clever money is making a long term buy commitment here then the future for property investment in Bulgaria looks great – providing we can stick in for the next five to seven years. Appreciating Assets Director, Dylan Cullen who has years of experience in international property markets is currently buying coastal property close to the beach. The property needs to be of a decent size and the company is paying around 60,000 to 70, 000 Euros. For some small investors this quick sale may result in them taking a loss, but in times where money back home is tight it offers a perfect solution to any domestic financial woes. The company is also offering an equity release programme to Irish property owners in Bulgaria whereby they can release up to 75% of the value built up in their Bulgarian property at interest rates from 7%. This means that if you have a property valued at 50,000 Euros you can release up to 42,500 Euros at a rate of only 248 Euros a month.

Becoming a Small Scale Property Vulture

Dylan Cullen says of the Bulgarian property market, “With the impressive growth in the value of Bulgarian property this is one part of investors' portfolios that are doing well. As these assets are doing so well the last thing investors should be considering is selling them just because finances are tighter at home.” This means that if you have a property in Bulgaria you should do your utmost to hang on to it because the real estate market will pick up in the longer term. Additionally, if you have money to invest, then buying property in Bulgaria is a sound option, providing you choose the right location and pay the right price. It’s no good speculating on quaint village properties if you are looking for high future returns. Front line coastal property in resorts is the best bet. You should look to buy re-sales rather than buying directly from a developer, most of who are trying to keep prices close to last year’s levels. If you come across someone with a property to sell then make an offer and don’t be put off if they laugh or deride you for doing so. Property market values are set by the laws of supply and demand and if yours is the only offer that a hard pressed seller receives then they will have to take you seriously. Another option if you already own property in Bulgaria is to follow Appreciating Assets lead and rent it out. Be realistic about the rent you will receive and work on the basis that some money is better than no money at all. You will have more chance of filling your dwelling if you offer it out at a price below the current market value. Finally sit back and patiently wait, Cullen predicts, “The Balkan country has seen consistent double digit price growth annually for a number of years. These price increases look set to continue with the Bulgarian economy protected from credit crunch due to the nature of the local banking system.”