Property by the sea or in the mountains: what to check before investing

Resorts on the southern Black Sea coast such as Sunny Beach, Nessebar and Sozopol, and ski resorts such as Bansko, are among the popular locations for holiday properties. Although they are often compared, these are different markets. Seaside resorts have a strong summer season, while ski resorts have a winter one; some places also have year-round residents, which affects demand during the remaining months.

The location within the resort itself matters enormously. An apartment on the front line or close to the lift is usually easier to rent out than a similar property on the outskirts, but its price is also higher. Also check winter access, parking, and whether the area is not built up so densely that the view and the peace and quiet are lost within a few years.

So instead of relying on a general "resort yield", look at specific data: prices per square metre in the area, the number of similar listings, the distance to the beach or the lift, and what the particular building offers. On the market price pages of Imotilist you will find current values by locality.

A large share of holiday properties are in complexes with shared pools, gardens, a reception and security. These amenities come at a cost – an annual maintenance fee, the amount and calculation method of which you should read in the maintenance contract before buying. Ask how the fee has changed in recent years and whether the seller has any unpaid obligations.

For new construction, check the stage of the building – whether it has been put into operation – and who will manage the complex after handover. In ordinary residential buildings, the management of the common areas is regulated by the Condominium Ownership Management Act.

If you plan short-term rentals to tourists, bear in mind that accommodation establishments are categorised or registered under the Tourism Act. The municipality also collects a tourist tax for each overnight stay: the municipal council sets its amount within limits specified in the Local Taxes and Fees Act, depending on the locality and the category or registration of the accommodation establishment (Art. 61s of the LTFA). The monthly amount of tax due is determined by the municipal administration on the basis of data from the Unified Tourist Information System.

An alternative is a long-term rental or a contract with an operator who manages the property in return for a share of the revenue. Compare the terms carefully – who pays for maintenance, who bears the empty months, and when you can use the property yourself.

Rental income is taxed under the Personal Income Tax Act: the taxable income is the rent received, reduced by 10 percent statutory expenses (Art. 31 of the PITA), and the tax is 10 percent (Art. 48 of the PITA). The income is declared in the annual tax return by 30 April of the following year, but an advance tax is also paid during the year (Art. 44 of the PITA): if the tenant is an individual, the owner pays it by the end of the month following the quarter (excluding the fourth quarter, Art. 67 of the PITA), and if the tenant is an enterprise, for example an operator that manages the property, the tax is withheld by it at the time of payment.

As an owner you also owe an annual real estate tax – the municipal council sets it within limits from 0.1 to 4.5 per thousand on the tax assessment (Art. 22 of the LTFA) – and a household waste fee. When purchasing, a local tax of 0.1 to 3 percent is paid, depending on the municipality's rate (Art. 47, para. 2 of the LTFA).

If you are buying with a mortgage loan, the Bulgarian National Bank's requirements apply from 1 October 2024: the loan amount may not exceed 85 percent of the value of the residential property at the time of granting, and the term may not exceed 30 years. Plan own funds for the transaction costs as well, and a reserve for the months without a tenant.

• Compare the price with market data for the specific locality.
• Read the maintenance contract and check for unpaid fees.
• Check ownership, encumbrances and the stage of construction.
• Calculate a realistic number of rented months, not just the peak of the season.
• Include taxes, fees and maintenance in the yield calculation.
• If you are a citizen of a non-EU country, check the rules for acquiring land.

• Local Taxes and Fees Act (Art. 22, 47, 61s) – Ministry of Finance
• National Revenue Agency – Personal income tax
• National Revenue Agency – Personal Income Tax Act (Art. 31, 44, 48, 67)
• Bulgarian National Bank – requirements for loans secured by residential property (11.09.2024)

This article is not legal or tax advice and is not an investment recommendation. The information is general and current as of the publication date.