Negative yields are already here in Europe, and according to Alan Greenspan on their way to America as well. What to do with your money? Gold should be part of your portfolio, but cannot be the only one. A real estate investment in Bulgaria can be an option. If you look hard enough in Sofia you could maybe find good deals, but if you look a little farther way, in Veliko Tarnovo, an easy 4.2% net yield, after all expenses and taxes, can be easily achieved.

Halfway between Bucharest and Sofia – a little gem

Veliko Tarnovo probably does not ring much of a bell for anyone outside of Bulgaria, but it certainly does in Bulgaria. Located on the Yantra river, it is known for being the capital of the second Bulgarian Empire which existed year 1185 to 1396, and for its unique architecture. Its population stands at about 70,000 souls.

Here’s a little video that gives an idea of the architecture in town.

Real Estate Investment in Bulgaria?

Why invest in a country which has one of the fastest declining populations in the European Union?

All of this at less than 1000€ per square meter

Yes, you can find historical houses in what will hopefully be a UNESCO Heritage Site, renovate them, get 4.2% net yield, and still spend less than 1000€ a square meter. A real estate investment in Bulgaria is an interesting option for one’s portfolio.

A case study of a Real Estate Investment in a Historical House in Veliko Tarnovo, Bulgaria

When prices are this cheap, don’t compromise and go for the best. It’s the best way to both gain upside and minimize losses in case of a downtown.

Here’s a 80m2 3 bedroom apartment in a historical house right in the middle of the old town, with gorgeous views. At 37,999€, less than 500€ per m2, it’s a bargain in the grand scheme of things. Major renovations are required though.

www.yantrahomes.com

www.yantrahomes.com

www.yantrahomes.com

www.yantrahomes.com

www.yantrahomes.com

www.yantrahomes.com

www.yantrahomes.com

www.yantrahomes.com

www.yantrahomes.com

www.yantrahomes.com

www.yantrahomes.com

Here are the numbers, and the assumptions:

Listed at 37,999€, with some minor negotiations, you can end up paying this price covering the agency costs (which the buyer typically pays in this market – about 2.5% of value), and your lawyer fees

Major renovations are needed. The windows were replaced, but the reality is that bar that and the roof, everything is to be redone. In Sofia, for entry level apartment buildings, one can get construction costs of about 400€ per/m2. Here, we can run with the safe assumption that we’ll pay 350€ per m2 including fixtures and IKEA-like furniture. 80×350€ = an extra 28,000€. One ends up at 66,000€ all in. So 825€ per square meter for a fully renovated, and furnished 3 bedroom unit in the historical town.

How much income?

The way the market works, foreign students typically sign 9 month leases. One could probably get 150€ per bedroom. An agency can get a lease signed per room. So 450€ per month for 9 months. Count 1 month in fees for finding the tenants, another month in management, and 1.5 month for maintenance & empty months. 5.5 x 450 = 2475€ net for the student part.

Then there are 3 months in Summer for Airbnb. The main issue being a lack of parking for the unit, and any sort of parking being at least a 20 minute walk away. This restricts the market. One could probably only get an average of 28€ per night for the place, mostly thanks to the amazing views from the balcony. After various agency fees & the like, conservatively you’ll end up getting 20€ per night. Count an occupancy rate of 40% for three months. 90X20x40% = 720 euros for the Airbnb part.

2475€ + 720€ = 3,195€

Pay your 10% taxes = 2,812€ (most people would heavily under declare in Bulgaria, but I don’t recommend you do. Foreigners are easy targets)

2,812€ / 66,000€ = 4.2%

Limited downside

Will this investment make you rich quickly? Probably not. But what’s interesting here is:

Getting in an historical town that may get UNESCO status – at less than 1000€ per m2

at a low price point (= higher liquidity)

whilst getting decent yields.

There is upside, and little downside to such an investment. In today’s world, such opportunities are very limited. It’s infinitely more interesting than buying a property in Western Europe with low yields, high regulations, anti landlord laws, high taxes, extremely high maintenance costs that eat into your yield, and little upside.

How to purchase your real estate investment in Veliko Tarnovo, Bulgaria

To be transparent, it’s the second time I went to Veliko Tarnovo. Each time I spent a pleasant afternoon in the old town. This time around I decided to look into the property market, and simply walked into an agency (Yantra Homes) and asked to visit this particular property as the headline numbers were interesting. I then did some more research to look into various costs & rents in the area.

I’d recommend the following approach:

Book an Airbnb for a week or two in the old town to get the vibe.

Walk into a few agencies. Get the listings of apartments/houses in the old town.

Put multiple offers through & negotiate hard.

One of them will work out, and you’ll get even better numbers than the above. I just went for the first I saw and ran with conservative assumptions.

Do not go for agency recommended lawyers, and do try to skimp on lawyer costs. Get the best as there can often be title deed issues/claims in that part of the world.

Happy investing. Time for me to wander off somewhere else.

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