Thu11152018

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Rentals Reality

Many who are planning on buying a holiday home in Bulgaria are also considering renting the property to generate some income to cover costs. The rental market in the country is still in early stages and so buyers should look at long term potential for decent returns. How are property owners doing in the current economic climate?

 

The most successful rents are gained from those properties which have something unique or unusual about them. Perhaps a particular service which is offered or an unusual building - and top of this list would be location.

Currently it can be quite difficult to make a living offering holiday accommodation and if you are seriously interested in rentals, then you’ll need to thoroughly research the market.

 

Tour Operators

Up until now over 80% of those visiting Bularia for a holiday have done so using a package holiday at a hotel. The involvement of the large tour operators has made it very difficult for the individual to rent a property at a price which is competitive. Large companies have the ability to charter cheap flights and negotiate extremely low prices with hotels and apartments.

On top of this there has been significant hype from some agents and developers offering 'guaranteed rental returns'. Any cursory study of the tourism market in Bulgaria should alert anyone to be suspicious of the claimed 10% guaranteed rental yield.

 

Rental Returns

Quest Bulgaria conducted a straw poll amongst readers and found that a realistic return is 5 to 6%.

Over-estimation of potential returns and purchasers buying with large mortgages (and, indeed, it has to be said, greed on the part of some property owners) has led to conflicting pricing in rents demanded.

 

Prices

The discrepancy in prices asked has led many rentals to be standing empty.

Richard Slater from Pride Property Management in Varna told us "It's no good coming up with any old price and hoping. Those owners who are more savvy on pricing are getting more bookings. Tourists are looking for quality properties to rent and all our high quality 3 bedroom villas with a pool are booked solid and are the most popular. Apartments in resorts have done worse as they find it difficult to compete with tour agents".

Richard went on to add "Many buyers wonder about buying on a new development further back from the sea or in the middle of nowhere because it's cheap. Why not. But what about renting it? Front line properties right on the beach, apartments right next to the ski gondola, or quality detached rural authentic homees are the ones obtaining good rental prices with higher occupancy - and they'll also be the ones obtaining best resale price over the next few years".

Typical weekly prices for holiday rents being achieve are :


City, Ski or Coastal One Bedroom Apartment - 315 euros
Coastal Three Bedroom Villa - 690 euros
Rural Three Bedroom Villa - 320 euros

The trick as always is location and quality. Add to this mix a dose of realism on achievable rental prices. You'll probably end up buying a Bulgarian property at less than 30% of an equivalent in the UK, so take a medium term view and you'll achieve rental returns of 6%, capital growth of 15 to 20%, plus... enjoy a beautiful holiday home for yourself.

Follow our top tips for rentals...


 

Top Tips for Rentals

In essence you’ll be looking at one of two types of rentals: either self catering or serviced accommodation.

If self catering is your thing, then it’s worth seeing if you can get more than one unit up and running as this will lower the cost per unit for you and cut down the cost of installing electrics, septic tank, pool, etc. For those looking at bed and breakfast, or even a hotel, then you’ll need to be able to speak Bulgarian, so that you can register your guests as well as, possibly, employ local staff.

The Property

Location and rental rates are the two key issues. Think about who your clients are that you are targeting. What will they want? Access from the airport and local attractions will be important. The amount of money you will be able to charge will depend upon many factors. The location, size and quality of your property, plus what other similar properties are achieving in the same area.

Always remember to factor in all the costs and decide if you want to offer an “all in” rate (to include bed linen, electricity, logs, etc) or whether you prefer the customer to pay for electricity used separately.

Don’t forget that you’ll have to pay income tax on the rental money you make.

With the market being still in its infancy, it is difficult to determine true rates, with most people putting on whatever figure they think they can get away with: so, ignore the highest rates when you are doing your research.

 

Self Catering v Serviced

Regulations cover both types of accommodation.

Self catering - the property should be registered with the Ministry of Economy and Energy to be rated. The local council will come and inspect the property. This can be a lengthy process but they will usually give you a temporary licence whilst this happens. The rating is based on facilities.

Serviced accommodation - Get a good translator! You’ll need to visit the municipality offices to register your property with them and the fire brigade and tourist board. Get an accountant as you’ll need to buy a cash register and understand how this system operates. The tourist board will give you a registration book so that you log your guests. The property will then be inspected by both the tourist board and the fire brigade. Check you comply with fire regs beforehand. After the checks, you’ll receive your licence.

Agents

Many buyers who live outside the country will use a letting agent to handle bookings and turn-rounds at self catering accommodation. Remember to have a written agreement with them, which you should ask your lawyer to check before you sign.

Insurance

It is critical that you have public liability insurance. If something happens to one of your guests at your property, you could be in for a very large claim against you.