Sofia Property Investment Rental Returns
Sofia Property Rental Returns
The Sofia property rental market has both high demand and high price levels for both the purchase and rental of a property compared to other parts of Bulgaria. It is possible to achieve Sofia property rental returns of around 5% to 7% annually by investing in the right property in Sofia.
Bulgaria has been an attractive destination for property investors for more than 20 years. During this period there has been strong economic growth with a reliable banking system. Up until 2022, inflation was kept low as were unemployment rates.
These factors have meant that investing in real estate property in Bulgaria is profitable, regardless whether your strategy is flipping the property or long-term rental. Profits from the sale or rental can easily be transferred to your bank account in your home country and bank deposits are guaranteed by law in Bulgaria.
There are several options available in the residential market:
Purchase Off Plan
New build apartment projects offer higher returns on investment although they do involve higher risk as the project may not be completed.
There will probably be a significant rise in the value of the property between the time that it was purchased off-plan to the time the property is granted Permission of Use (Act 16). So, there is the opportunity to sell when the apartment is available to use without having to finish the property.
Alternatively, you can finish the property with bathrooms, kitchens, furniture, etc and rent the property out on a short- or long-term basis.
Purchase Post Year 2000 Apartments
Although buildings constructed recently are of a higher quality, properties constructed post 2000 are of a standard suitable for western Europeans although the older ones may need refreshing.
This option has the benefit of not requiring finishing and furnishing before renting it but you will still be required to buy things like kitchenware and bed linen.
Purchasing Older Buildings and Renovating
Another option is to purchase an older apartment is Sofia Center that needs complete refurbishment. This may involve a lot of work but can create large profits as the purchase price of an old building in Sofia Center may be low, but the rental rates are very high.
Where to Invest to get the Best Sofia Rental Property Returns
If you are looking to invest in residential property in Sofia, it is better to buy apartments as they are easier to rent out with rental yields being better on smaller apartments. In all areas there is a shortage of parking spaces, particularly in Sofia Center, so purchasing a garage or parking spaces with the apartment is recommended.
The following areas are good rental locations for executives and workers in the capital, as well as business and leisure travellers visiting Sofia:
- The centre of Sofia including Doctor’s Gardens
- The up-market residential areas of the city such as: Lozenets, Ivan Vazov, Strelbishte, Lagera, Iztok, Geo Milev and Vitosha
- The business districts including: Bulgaria Boulevard, Buxton and Mldadost.
- Studenski Grad for student rentals
We work with several building and furnishing professionals who will refurbish your Sofia apartment to the required standard for rental to achieve an excellent quality apartment at a reasonable cost.
Sofia Apartment Rental Expenses
Apartment buildings in Sofia need maintenance and cleaning of common parts such as: gardens, elevators, entrances, stairs, and corridors. These cost adversely affect your Sofia property rental returns.
There is a trend for residential buildings to have a management company responsible for a block of apartments. This involves paying a monthly fee which is between 0.60 Euro per square metre and depends on the facilities in the complex. For example, if the is a fitness centre and swimming pool then you will expect to pay more.
But most buildings select a building manager from within the residents of the block who calculates how much is due to maintain and clean the common areas of the building. This fee is typically 40 Euros a month. The residents often meet twice a year to take important decisions or to collect money for repairs or refurbishment of the communal parts of the building.
Government Taxes
The rate of tax is calculated according to a range of factors such including:
- The location of the building
- The type of building
- The date of construction
- Any improvements that have been made to the building.
For a 2-bedroom apartment in a good residential area the annual tax is about 300 Euros.
Procedures For Buying an Apartment in Sofia
The procedures for buying an apartment in Sofia depend upon the age and type of the property.
For new, off-plan apartments, the purchase plan is based upon payment of a reservation deposit, usually 5%, followed by stage payments during the construction cycle, which will depend on the stage of the property development when you make the purchase.
Buying off-plan enables the purchase of a property at an early stage for a lower price. In a property market with rapidly increasing, such as Sofia, significant capital growth can be achieved when the property is completed and is granted Act 16 (permission to use).
Re-sale properties can usefully be reserved by paying a deposit of 10% of the purchase price, which will remove the property from the market. Note that some or the larger agencies insist on a 1% refundable deposit even before they submit your offer to the seller. We do not agree or use this approach.
It will take a period of about a month or two for the checks, searches to complete and the property loan (if required) to be confirmed. Then the final payment will be made and the property transfer notarised.
Rules for Investing in Property in Bulgaria
Foreigners are not restricted to buy property in Bulgaria but there are certain restrictions.
Foreign citizens outside of the European Union (EU) and the European Economic Area (EEA) cannot receive ownership of the land that their property is built upon even when they receive full ownership rights of the property. The way around this is to set up a corporation. EU and EEA residents have been able to buy land in Bulgaria since 2012.
Property Taxation Costs in Bulgaria
Taxes related to property purchasing, selling, and renting are quite reasonable in Bulgaria compared to other countries. These low taxes can help investors maximise their profit from real estate investments in Sofia.
- Income and capital gains taxation is charged at 10%
- VAT is charged at 20% (land sales are exempted)
- Annual property taxation (local tax) is normally between 0.1% and 0.5%.
of around 5% to 7% annually by investing in the right property in Sofia.
There are several options available in the residential market:
Purchase Off Plan
New build apartment projects offer higher returns on investment although they do involve higher risk as the project may not be completed.
There will probably be a significant rise in the value of the property between the time that it was purchased off-plan to the time the property is granted Permission of Use (Act 16). So, there is the opportunity to sell when the apartment is available to use without having to finish the property.
Alternatively, you can finish the property with bathrooms, kitchens, furniture, etc and rent the property out on a short- or long-term basis.
Purchase Post Year 2000 Apartments
Although buildings constructed recently are of a higher quality, properties constructed post 2000 are of a standard suitable for western Europeans although the older ones may need refreshing.
This option has the benefit of not requiring finishing and furnishing before renting it but you will still be required to buy things like kitchenware and bed linen.
Purchasing Older Buildings that need Renovating
Another option is to purchase an older apartment is Sofia Center that needs complete refurbishment. This may involve a lot of work but can create large profits as the purchase price of an old building in Sofia Center may be low, but the rental rates are very high.
Where to Invest in Property in Sofia
If you are looking to invest in residential property in Sofia, it is better to buy apartments as they are easier to rent out with rental yields being better on smaller apartments. In all areas there is a shortage of parking spaces, particularly in Sofia Center, so purchasing a garage or parking spaces with the apartment is recommended.
The following areas are good rental locations for executives and workers in the capital, as well as business and leisure travellers visiting Sofia:
- The centre of Sofia including Doctor’s Gardens
- The up-market residential areas of the city such as: Lozenets, Ivan Vazov, Strelbishte, Lagera, Iztok, Geo Milev and Vitosha
- The business districts including: Bulgaria Boulevard, Buxton and Mldadost.
- Studenski Grad for student rentals
We work with several building and furnishing professionals who will refurbish your Sofia apartment to the required standard for rental to achieve an excellent quality apartment at a reasonable cost.
Sofia Apartment Rental Expenses
Apartment buildings in Sofia need maintenance and cleaning of common parts such as: gardens, elevators, entrances, stairs, and corridors.
There is a trend for residential buildings to have a management company responsible for a block of apartments. This involves paying a monthly fee which is between 0.60 Euro per square metre and depends on the facilities in the complex. For example, if the is a fitness centre and swimming pool then you will expect to pay more.
But most buildings select a building manager from within the residents of the block who calculates how much is due to maintain and clean the common areas of the building. This fee is typically 40 Euros a month. The residents often meet twice a year to take important decisions or to collect money for repairs or refurbishment of the communal parts of the building.
Government Taxes
The rate of tax is calculated according to a range of factors such including:
- The location of the building
- The type of building
- The date of construction
- Any improvements that have been made to the building.
For a 2-bedroom apartment in a good residential area the annual tax is about 300 Euros.
Procedures For Buying an Apartment in Sofia
The procedures for buying an apartment in Sofia depend upon the age and type of the property.
For new, off-plan apartments, the purchase plan is based upon payment of a reservation deposit, usually 5%, followed by stage payments during the construction cycle, which will depend on the stage of the property development when you make the purchase.
Buying off-plan enables the purchase of a property at an early stage for a lower price. In a property market with rapidly increasing, such as Sofia, significant capital growth can be achieved when the property is completed and is granted Act 16 (permission to use).
Re-sale properties can usefully be reserved by paying a deposit of 10% of the purchase price, which will remove the property from the market. Note that some or the larger agencies insist on a 1% refundable deposit even before they submit your offer to the seller. We do not agree or use this approach.
It will take a period of about a month or two for the checks, searches to complete and the property loan (if required) to be confirmed. Then the final payment will be made and the property transfer notarised.
Regulations for Investing in Property in Bulgaria
Foreigners are not restricted to buy property in Bulgaria but there are certain restrictions.
Foreign citizens outside of the European Union (EU) and the European Economic Area (EEA) cannot receive ownership of the land that their property is built upon even when they receive full ownership rights of the property. The way around this is to set up a corporation. EU and EEA residents have been able to buy land in Bulgaria since 2012.
Property Taxation Costs in Bulgaria
Taxes related to property purchasing, selling, and renting are quite reasonable in Bulgaria compared to other countries. These low taxes can help investors maximise their profit from real estate investments in Sofia.
- Income and capital gains taxation is charged at 10%
- VAT is charged at 20% (land sales are exempted)
- Annual property taxation (local tax) is normally between 0.1% and 0.5%.
