During the last decade, many foreign property investors have initially purchased real estate in Bulgaria to make a profit from it. It should be clear that the better the local investment climate is, the bigger the profit that everybody makes. The most attractive way to make a profit is via buying an off-plan or completed apartment, house or villa in Bulgaria, in the last couple of years has been successfully advertised to be the rental income in its various forms. This includes the popular summer resort “guaranteed rental income”, which has been converted nowadays to “flexible rental income”. But this is just a misleading name for a contract that should bring profit to the Bulgarian apartment owner.
There have been huge soap bubbles spread by former agents and developers (mostly related to off-plan property purchases and “valid” only till you sign the preliminary contract and deposit some huge percentage of the purchase price that could reach 2 000 Euro per square meter) about huge income. At the end of the day, there are many local apartment owners in holiday complexes who face small rental income then, very strangely related always with the contra-payment of the maintenance fees, or even no income, where at the same time the holiday complex where they have bought in, is advertised and booked as “full” for the whole holiday season.
Here I will detail to you some key points about renting an apartment in Bulgaria; will break a couple of lies and will try to clear your view about how your property should be managed or rented out.
1) How to secure a proper rental income? Obviously, via signing a proper rental contract with the tenant to be protective of your interests. This is something that a professional Bulgarian property lawyer may advise you. He can tell you if the offered rental amount is good for this type of property or not; what rights and obligations you should undertake under the rental relations and what not, etc. But certainly, you need to hold your Title Deed first, to be able to rent your apartment out. Secondly, your apartment should be legally allowed to be used via obtained Certificate for exploitation (Act 16). There cannot be any management and renting out of apartments within a Building that has not been entered legally into operation.
2) You could either sign a rental contract with the tenant directly or give your apartment for operation by a management company, which then rents it out and gives a percentage to you from the gained income. In case you choose the second option (mostly applicable in holiday complexes), there should be a proper management company to be interested in renting your apartment – usually together with apartments of other owners within the same complex. Per the provisions of the Bulgarian contract law, they are the actual tenants who should rent the apartment directly from you, via signing a lease contract with you. You should not take care of their prospective activities (renting it to third parties), in other words – you should not allow being involved in the trade risk of occupancy during the winter season, i.e. securing the manager’s profit.
Securing receipt of the real rental income from your apartment is a serious job. This is why the management of your apartment should not be connected with any maintenance of the common parts of the building; otherwise, you could handle the manager’s legal instruments to reduce your income (i.e. to rise their profit) via charging you fees for cable TV in the guardian’s kiosk, for example.
Also, it is important to know that proper management and renting out of your apartment means 10% Capital Gains which a proper management company should pay on your behalf directly to the local Tax Authorities because they are obliged to do it per the provisions of the Bulgarian Tax Law. Very often rental companies state to you that they charge you this 10%, but then do not pay it to the tax authorities – an activity that does not benefit you or the Bulgarian government. Always ask the management company to present to you the payment orders for the paid 10% Capital Gains on your behalf to the Tax Men. Not doing it means something is wrong with the management of your apartment, respectively you should expect troubles at a later stage, or the most common case – simply you have been robbed because of your non-understanding of the local legislation.
As detailed above, another red light should turn to you If somehow the rental contract has been related to the payment by you of the annual maintenance fees, usually due to a completely different company.
There are a lot more legal points that have to be covered, but based on the above, you should consider carefully renting out your apartment, and choose the most appropriate option for you, to ensure the real income which you will receive (yes, the local tourists are also an important part of the market). This is why contacting a trusted local Bulgarian lawyer in advance is advisable. He can design the best rental contract for you, and also can prevent you from putting your head in the bag via signing long-term management contracts which may lead to no profit for you but only to continuous expenses. A good rental contract would secure your investment on the matter.