Bulgarian real estates

At a certain point in his life, each of us decides to take a major step forward – purchase a real estate. The reasons for this purchase are several – you’re tired of being a tenant and paying someone else’s mortgage; you have enough money and want to make an investment; or just want to take hold of a charming villa to spend your holidays at. Whatever the reasons, the months during the purchase process can prove to be some of the most exciting times in your life. The Bulgarian real estate agency “Address” offers five valuable steps to consider during the purchase of a new property.

1. Calculate your budget!

What kind of credit will I get? Before starting the purchase process you have to calculate carefully the money you have available. If you purchase a real estate with a credit, it would be wise to ask for the assistance of a credit consultant first. He will give you valuable advice on the amount of money you’re likely to receive.

The use of a real estate sales agency is also a good idea, especially because at the current state of the market you needn’t worry about a commission reward for the agency.

2. Find a fitting consultant.

Well-qualified specialists working in your region – and respectively well-acquainted with the market inside the district or village itself – will surely be of good use to you.

3. Inspections.

This is the hardest part for the potential buyer, so make a list of things you consider to be of utmost importance – the amount of noise in the neighborhood, on which floor is the apartment, the condition of the basic accommodations, does the apartment need serious renovation or just a facelift, etc.

Consider how you feel about the real estate itself and think carefully how is it going to fit your current daily routine. Ask questions to the consultant, he knows many specifics about the neighborhood, the quality of construction in the area, etc.

4. Factors for the assessment.

Location and infrastructure – think carefully if the area of the estate you’ve chosen is fitting for you and is the infrastructure satisfactory. Do you have public transport to take you to work, are there convenient institutions nearby – kindergartens, grocery stores, police departments, hospitals, etc.

A typical example – if you like a certain charming house or a garret in a modern suburb, you should most probably take gas expenses for a car into consideration.

Type of construction – brick or concrete is the main question. Everyone knows the advantages of the brick and the drawbacks of concrete, but if brick walls don’t fit your budget, research carefully the construction date of the block of flats. Over the last few years, the Bulgarian market offers new construction techniques – ecological construction and prefabricated houses – they are relatively cheap and have decent thermal insulation.

Distribution of rooms and floor – there are several potential issues with floors. The first and last floor of a building aren’t recommended, but if there’s a significant difference in price, it’s better to take the other factors in consideration first.

5. Conclusion of the deal.

You’ve found your beloved real estate and now want to move in as quick as possible. The conclusion of the purchase process is the finalizing of the deal itself. A notary inspects all documents for errors and verifies the legitimacy of the deal in the end. The new notarial act is added to the national registry.

The profitability of this investment in 2009 is higher in comparison with 2008. The price of real estates in Bulgaria is dropping faster than the rent prices. This means that if you purchase an real estate at a good price, the eventual profitability from letting it will be higher. The estimates come from the non-banking mortgage crediting business union CREDITEX. It’s based on up to date data from experts.

Profitability

For the experts from the union, the relation between rent prices and real estate prices is an important clue for the direction of the real estate market. The current average profitability from real estates in Sofia during the first half of this year is 4,5% on a yearly basis, while for the second half of 2008 it was 4,1%.

Return

The return of investment is measured by the so called “gross rent multiplier”. It shows the number of monthly rent payments that can pay off the investment in the real estate – the lower this index is, the higher the Return of investment of the estate, and the quicker the real estate will pay off. As a rule of thumb, indexes of over 200 months means that the estates are overvalued. The gross rent multiplier for the first six months of this year lowered to 209,4 months, compared to 237,3 months for the last six months of the last year.

Example

For example, the current profitability of the investment in a standard three rooms apartment in the district Mladost in Sofia would look something like that: the rent price for the estate varies between 320 and 380 EUR per month, or between 3,840 and 4,560 EUR per year (depending on the type and location of the estate). However, this isn’t the net profit for the owner. Usually this sum has to cover different expenses – insurance of the real estate, taxes, major repairs over periods of time and losses from eventual periods without tenants. Because of this, the net income from an real estate like this one is about 15% lower than the gross income – or an average of 3,570 EUR per year. If we divide this income to the market value of the apartment (about 75,000 EUR), we will have a 4,76% current annual profitability from the investment – a number that’s higher than last year’s.

Reasons

The explanation for the growing profitability of the real estates lies in two reasons; first, the crediting institutions don’t finance the purchase of estates adequately, which lowers the prices; second, the inability to purchase a new home through crediting forces a percentage of the potential buyers to rent estates, which sustains the level of the rent prices, despite the growing supply.

Over the last five years, we’ve seen a decrease of profitability from investments in real estates in Bulgaria – which was no surprise to specialists in the conditions of high-speed crediting and large supply on the market. Since the beginning of this year, there have been signs of an increase of income from the real estates – an indication for the stabilizing of the estate market, commented CREDITEX.