PURCHASE OF REAL ESTATE IN BULGARIA
Lately favourable conditions have been developing in the field of purchase of real estate in Bulgaria. Local realtors are interested in Russian customers and expect Russia to occupy the leading positions in this area of business. According to their version every person having monthly income more than ˆ2,000 is a potential customer of real estate property in this country.
Real estate in Bulgaria
There is no any house classification in Bulgaria, which is not clear for Russians. Mostly used are such expressions as "apartments", "flat", "house", which are habitual for Russians. New flats have final finishing and frequently they are even furnished. Bulgaria is characterized by dynamic house building process. First of all, it is construction in big cities, on the Black sea coast, at balneological and skiing resorts.
In the capital of Bulgaria - Sofia - price for a large scale housing ranges from ˆ750 to ˆ1,000 for 1 sq.m. Price for the cheapest studio-flat (50 sq.m) makes ˆ37-40 thousand. At Varna, the famous seaside resort, average price is 1,100ˆ/sq.m, maximum price - more than 1,500ˆ/sq.m. Apartment in the city costs 950-1,200ˆ/sq.m. In residential compounds average price makes 1,350ˆ/sq.m.
By Bulgarian standards the prices at the resorts are not low. For example, a 34 sq.m flat in the area of balneological resort, in Velingrad costs a little bit more than ˆ45,000. At Pamporovo ski resort price of 71sq.m flat makes more than ˆ90,000. Price of housing at the sea coast is also high. In this region one may buy a new two-storied house at ˆ130-150 thousand and three-storied house - at ˆ220-270 thousand. Price of 220 sq.m house in Trakata makes ˆ330,000. It should be noted that in Spain similar houses cost minimum two times more.
Price of an apartment at the resort makes 2,200ˆ/sq.m and includes home appliances and furniture. On the sea coast houses supposed for permanent residence in average cost 1,500ˆ/sq.m. Nevertheless summer house at the sea coast one may acquire at ˆ100-120 thousand. The most affordable housing is removed from the sea coast housing, located in so called continental part of Bulgaria. For example, 210sq.m house in Vinnitsa with 13,300sq.m of land, with utility rooms, two garages is being sold at the price of ˆ340,000. Old houses removed from the sea can be bought at ˆ22-30 thousand. In the villages at the same price can be purchased spacious (200-300sq.m) houses with land and auxiliary constructions. Price of small houses (about 60sq.m) is different depending on location. For example, in Sofia such house is being sold at ˆ75,000, but in the mountains it costs ˆ20,000.
It should be mentioned that relatively low price for real estate in the continental part of Bulgaria shows that price boom has not yet covered the whole country.
Trip to Bulgaria
Visa to Bulgaria is issued for 90 days but you may try to extend it or get a few visas one after another during a year. Those businessmen, who Bulgaria are interested in, will get the right for a long stay in the country. Also the right for a long stay have the owners of companies registered in Bulgaria, paying taxes to the local budget and having not less than 10 employees in their staff.
Residence permit in Bulgaria is to be issued to the foreign citizen only if he takes part in the country's life in the form of direct investments at the amount more than ˆ500,000. This amount can be invested not only by one entrepreneur but also by a group of entrepreneurs; in this case every participant should invest not less than ˆ50,000.
It will be helpful to register your own company in order to buy a land. Moreover it relates not only to the land for construction but also to the land, where already bought house is located. This procedure is necessary because in Bulgaria it is prohibited to buy land by private persons. But it is allowed to buy land for the company. Any person can establish his own company. It will cost approximately ˆ250 and take a little bit more than a week. At the same time it may be Russian company doing business in Bulgaria.
How to effect a transaction?
Purchase and sale transaction is to be executed using the power of attorney and through the realtor company located in Bulgaria but before that the buyer can get in Russian offices all the necessary information about the objects he is interested in. It will take about 30 days to execute the transaction. Commission fees make from 5 to 10% of the amount and to be paid by the seller. These charges are usually included into the stated price.
If speaking about methods of payment, the buyers can use different options. It is possible to arrange money transaction through the Russian banks. But this method causes a lot of problems. American Express cheques are also accepted. Moreover, you may use an account in Bulgarian bank or pay in cash. As for the amount of payment, at first the buyer makes an advance payment (security deposit), which makes 10% of total amount. The rest of amount will be paid after signing the contract.
Transactions with new-built property are to be executed in the similar way. It is also recommended to apply to the realtor companies as their specialists check the transaction validity by themselves and it is quite important. The buyer provides a security deposit to the amount of ˆ1,000-1,500 and after that primary contract is to be conducted. The contract describes chosen for purchase real estate object and terms of payment. The money is paid by installments during the construction period, which lasts about a year. In some cases buyers are offered to pay by installments during some months.
The usual practice of payment is 30%-30%-40%. The right for the property ownership is confirmed by the Act (Certificate), which is made in the presence of notary officer, buyer and seller. To perform the Act the following documents are needed:
- Statement from the State Real Estate Register stipulating (if there are any) burden (pledge, prohibition on sale, open court cases, right for the property usage by the third parties, etc.) and confirming the seller's right for the property ownership;
- Document stipulating the state price of the real estate property. The document is issued by the Territorial Tax Administration. Price stated in this document will be shown in the Notary Act.
Notary Act is to be signed by the notary officer and sent to the court. Then the judge put the name of a new owner into the State Real Estate Register, this fact is to be registered in the Notary Act. As a rule all the expenses connected with the execution of transaction make 3-5% of the transaction amount.
How to get a credit?
As for the crediting of foreign citizens, there might be difficulties. Credit can be granted only to those, who have their own company but the crediting procedure itself is quite difficult. Foreign citizen will get a credit only if he has his own business in Bulgaria not less than two years.
However, Bulgarian developers cooperating with banks offer credits to the Russian citizens. Annual interest makes 8%. First payment makes 35%, credit period - 10-15 years, the developer undertakes to provide real estate property for rent with 8% annual profitability. Moreover, there is opportunity to get credit for travel agencies with their commitment to provide real estate property for rent that will ensure credit pay off.
What's the price?
If speaking about expenses for the real estate property, the owner should pay every year real estate tax and domestic waste fee according to the waste meter data. The amount of real estate tax is equal for private and legal persons (from 0.15%). Status of the owner is not taken into account for tax calculation but local authorities install their own tax level; that is why annual real estate tax ranges from 0.15% äî 0.5% depending on the region. If the real estate property was bought by a private person and being his major place of residence, then tax can be reduced twice.
The tax is collected once in a quarter by equal portions. If a tax payer pays total amount at the beginning of year (in I Quarter), then he gets a 5% discount. Land tax makes 0.15% per year.
If the real estate owner wants to insure his property, it will cost him approximately the same as in other European countries. For example, insurance for a three-room flat will cost from ˆ300 to ˆ600 per year.
Utility charges including collection of domestic waste will make about ˆ50 (including payment for heating). Bottled gas is used here as centralized gas supply system is not well developed in the country.
Amount of fee for collection of domestic waste is determined by local authorities and depends on many factors. For example, for residential properties the size of living area and volume of waste are taken into account, for non-residential premises - the number of waste bins. In addition one should pay for creation of living environment, security and lighting of nearby territory. These services will cost from ˆ4 to ˆ8 per year while average salary in Bulgaria makes only ˆ200.
The end justifies the means
However, all the expenses will be easily reimbursed by submitting the acquired property for rent. Real estate agencies will render you assistance, the profitability will make about 4% - 8% per year (in high season on the sea coast cost of renting may reach up to ˆ1,950 per month).
Real estate agencies offer different options of renting. The owner can submit his property for rent for a year having lower but guaranteed interest or by weeks but in this case he has down-time risk.
If you buy a flat in residential compound, there is opportunity to submit your flat for rent through the management company, which maintains the residential compound and its infrastructure. In this case stable and high enough income up to 98% per year) is guaranteed. One may stipulate signing of such a contract even at the stage of property acquisition and it will serve as a guarantee of made expenditures.
Houses on the sea coast are quite popular in high season but during the rest of year they may remain vacant. If the property is located in area of a ski resort or mineral springs, it will be popular all over the year (construction companies take this factor into account more and more often).
Cost of viewing
To have a look at the matter of interest you may apply directly to the real estate agency, which arranges corresponding tours. Moreover, you may apply to a travel agency and buy a tour to Bulgaria; it will cost you less. Or you may go to Bulgaria by yourself (and arrange visa by yourself). It will take from 2-3 days to 1 week to view all the proposed properties.
As a rule Bulgarian realtors offer their services free of charge but if there is a long transfer, you will probably have to pay for it.
Earlier major inrush of Russian citizens desired to purchase real estate property in Bulgaria occurred in summer but now due to seasonal price increase for accommodation potential buyers come to Bulgaria all the year round.