A villa in Turkey or in Bulgaria? An investor explains his choice.

Professor Maurice De Volder of the Open University Netherlands was one of the first customers who purchased a property in Mekoa Seagarden Resort. He wrote about his reasons for investing in property in Bulgaria rather than in Turkish real-estate, and explains why he bought a villa in Mekoa Seagarden. The following is a translation from his website: Vastgoed Bulgarije.



As for so many others, for my beloved wife and I, buying 'a place in the sun' was a long cherished wish. But where? Our budget was limited and we wanted to invest it wisely. Sun and sea was a first criterion, because that type of property is easier to rent and it’s what we enjoy the most for personal use. France, Italy, Spain, Portugal and Greece are already quite expensive and much property value increase is not expected, on the contrary.

Bulgaria and Turkey are much cheaper and have a more than decent upside potential. New projects in Turkey are slightly cheaper than in Bulgaria, but on all other points Bulgaria wins with flying colours.

• Bulgaria is a member of the EU. That means better legal protection of properties and persons. Building standards must meet European standards. The euro will be introduced in a few years but already there is no exchange rate risk because the Bulgarian currency is linked to the euro. Who emigrates remains in the European social security system.

• Self-catering properties are easier to rent than in Turkey which almost exclusively attracts visitors to hotels using the all-in formula.

• Turkey is practically unreachable by car while Bulgaria is becoming more accessible by car along the new roads being built with EU aid. There is also a lot to visit during the trip and you do not have to leave the EU doing so.

• Personally, I feel more at home in the Bulgarian culture that seems less strange or hostile to visitors and expatriates. Nostalgia has a lot to do with: old churches, old farmhouses, wrinkled toothless grannies, horse carts, time-frozen landscapes, smells and practices, it feels like the Tom Jones song “Green green grass of home“.

• The climate in Bulgaria is pleasant: less sultry than in Turkey where the thermometer reaches over 40 degrees Celsius. In southern Bulgaria it rains an average of one day per month in the summer and I can live with that one summer storm.

• I estimate that security risks in Turkey are higher: health, earthquakes and terrorism. As to the Bulgarian crime where our newspapers like to write about, I never noticed anything on my many visits and I think Europe’s big cities (and Istanbul) are much more dangerous than Bulgarian cities.

So the choice of country was made but I still had to find a project that met the requirements of good quality and good investment. That proved not easy and took many months of research and a number of field trips. The ski resorts, the big cities and the countryside I could immediately eliminate: no sun, no sea and/or difficult to rent out. At the seaside one should forget about the cheap properties for which Bulgaria is famous abroad. These can be found only in rural areas or city slums. Dirt cheap, moreover, are only the crumbling barns which need a huge dose of tender loving care to make them liveable but their location means they are bad investment ideas.

A TV program with horror stories about buying abroad is called "House Trapped in the sun." You could lose all desire for a holiday home if you would take this program too seriously. But still there are some important lessons to be learned from this TV program. The three most important pitfalls when buying property abroad (but also in your own country) are:

• The owner is not really the (full) owner because he has no ownership rights at all, there are co-owners of the property, or the property is burdened by mortgages or other complications. The solution: let the notary or a lawyer check this before you sign anything.

• Buying off-plan usually means paying in advance of an important sum. It can sometimes take years longer than was agreed before the building is finished and sometimes it never gets finished. The money paid advance has been spent and the construction firm goes bankrupt, so you can kiss your money goodbye. Solution: pay only after something has been delivered.

• After completion hidden defects may come to light that require costly repair. The Bulgarian legislation provides for a ten-year warranty but what if the construction firm is in failure and how much time will it take in court to obtain compensation? Solution: prevention is better than cure, so look for a reliable construction firm and inspect their already finished buildings.

Armed with this knowledge one can avoid the mentioned three main pitfalls. But which criteria did I use to select a property? I will discuss these criteria successively.

• Part of a complex: Bulgaria is far away so you want your property maintained and secured during your absence. The complex manager can in your absence take care of the tenants. A common swimming pool is cheaper than a private one. A shop and restaurant on the complex is practical. Water, electricity, cable TV, Internet, waste collection, lawn mowing, small repairs: this is all taken care off. A heavy burden is taken out of your hands for a very reasonable fee. You have to be able to trust the management company of course: in my opinion a large anonymous management company is less reliable than if the construction company itself also provides property management.

• Distance from the beach: for your own use but also for rental, it is important that the beach is not more than 5 minutes walk. This is also an important factor for resale: every hundred meters from the beach reduces the value of the house with at least five percent. Properties on a few kilometres of the beach are much cheaper to buy but harder to rent out and their resale value hardly increases. Please note: not the sea but the beach is the most important factor. A location near a steep cliff may result I nice views but without a beach this is not the best location. Beware of properties less than 200 meters from the sea: a new environmental law prohibits construction within 200 meters from the sea, so please verify that a building permit was approved on all appropriate levels or else the building will be have to be demolished because of strict enforcement of the laws on building land regulation.

• Sea view: It is well known that (preferably panoramic) sea view is a very important added value. A co-called first line complex is no guarantee for sea view because in a big complex most homes do not offer a sea view or only very partial sea view. Go to the site yourself and see in person what sea view exists in reality and what changes may occur due to future developments.

• Quality of construction: on my travels in Bulgaria I saw a lot of low-quality building: paper-thin walls, poorly closing doors and windows, almost nothing is level, poorly placed floor and wall tiles, in short a dauntingly low quality. With properties of a few years old it's even worse: the decay is already visible by the plain eye. Dissatisfied tenants and value depreciation is the result which is exactly the opposite of what was intended: capital gain. The causes are poorly trained builders who work with bad tools and low-quality materials under too much time pressure.

• Green environment: with the exception of city trippers, most buyers prefer a property that is peaceful and quiet, surrounded by nature, and where they can breathe healthy air. Crowds, noise, air pollution, and windows with wall views are not well liked.

• Privacy: If the neighbours or passers-by can look in your plate to see what you’re eating or read your newspaper while you're sitting on your terrace, you have no privacy. It’s hard to find a decent level of privacy in Bulgarian holiday complexes. Even the detached homes seldom have a private garden. Privacy is also compromised by sharing a front door, staircase and hallway. If a hallway is not shared, it is available for personal use.

• Area size: The sleeping and living rooms should be good size. Good size certainly applies also to the exterior because you want to be able to eat and relax outside. Most balconies and terraces are tiny in holiday complexes. Watch out with the advertised total area: in Bulgaria it is normal to count the walls, the balconies, and even the shared staircase and shared garden (this is called ‘ideal parts'). Compare the real area per room and for the balcony, terrace or garden.

• Accessibility: It is important that the dwelling, although on a quiet location, is yet easily accessible via good roads and not too far from an international airport.

• Bread and games: It is very pleasant when shopping, restaurants, bars, barber shops, etc. are located within walking distance, so that you can go shopping, eating and clubbing either on foot or by a short and cheap taxi ride. Other entertainment options are preferably not more than a 30 minutes drive: tennis, sailing, diving, snorkelling, golf, etc.

• Location: not all beaches are created equal. The reputation of a location makes a huge difference in the current and future value of a property. Saint Tropez is more attractive than Salou. Exclusive places remain exclusive because there is limited space for new developments. Lozenets is such an exclusive resort. On the other hand, in and around Sunny Beach giant apartment complexes are built at an infernal pace.

• Return on investment (ROI): This is of course the ultimate criterion that encompasses all other criteria. Especially the location, area size and construction quality determine the return on investment.

• Located next to the beach, spacious properties with garden and roof terrace are extremely rare and they always increase in value. The stringent environmental legislation has as effect that plots near the sea are becoming more expensive. For that reason developers try to maximize profit by building huge complexes with small apartments. Low-density projects with spacious houses near the beach are almost impossible to find at reasonable prices.

• In the saturated market around Sunny Beach (from Pomorie to Byala) developers attract buyers by giving up to 15% commission to real estate agents. The lower the quality of the apartments the higher the commission, with the perverse effect that agents (to make matters worse, not a regulated profession in Bulgaria) will try to sell the worst housing first to unsuspecting potential buyers. Naïve buyers are also misled by the trick of the guaranteed rental income. During the first two to four years the buyer receives a guaranteed rental income of roughly 5%. The buyer thinks that his apartment has great rental potential. In reality, that is not the case. The seller overcharged and pays a portion of the high price back over the agreed number of years without getting any significant rental revenues. Thereafter, the owner will unsuccessfully try to reach this 5% income from rental.

• Well-built homes consisting of high quality materials are rare and maintain their quality over the years. After ten years they will still look their best and can be sold with a nice profit. In recent years, property value increases of 30% per year were recorded. The real estate experts from ERA predict value increases of 15% per annum in the next decade. In my opinion this is realistic given the economic growth in Bulgaria and looking at neighbouring countries such as Russia. I foresee that Russians, who are culturally very similar to Bulgarians, increasingly will surpass the buyers from other countries both in number and in bidding capacity.

• Lozenets is a fashionable resort where Bulgarian media stars, managers and politicians not only spend their holidays but also have bought very expensive villas in the suburbs of Lozenets. This exclusive air guarantees a nice investment, both for rental and sale. Burgas (Sunny Beach) and (Golden Sands) attract cheap mass tourism. Wealthy tourists want to avoid mass tourism and are attracted to the deep south where it is quieter, prettier, warmer and exclusive. The millionaire village of Lozenets is for good reason called the Saint Tropez of Bulgaria.

• In early August 2007, in the middle of the peak season I could see for myself that some hotels in Sunny Beach and Golden Sands were half empty. In the south, however, in Primorsko and Lozenets, all the hotels were overbooked and one could only find a bed-and-breakfast in the home of locals. That was an eye-opener and my decision was taken, I wanted to buy a property in Lozenets. Once a decision was taken about the location, of course I still had find a specific property which satisfied my other criteria. As said Lozenets is exclusive and therefore I did not have to compare lots of complexes as I had done everywhere else: from Kavarna in the north to Sozopol in the south, including Sunny Beach and Golden Sands.

Adequate space and privacy is of course not be found in the center of Lozenets so I searched just outside the center but close to the beach. Using those criteria I found exactly three complexes: Oasis Resort, Lalov Egrek and Mekoa Seagarden. Oasis Resort and Lalov Egrek offer little indoor and outdoor space and little or no sea view while prices are much higher than in Mekoa Seagarden. So I decided to examine Mekoa Seagarden thoroughly and I visited it several times. I was warmly received by John Millard and his team. They showed me the Mekoa construction quality achieved by workers trained in Germany. What a contrast to the poor construction I saw in Sunny Beach and the surrounding area: Mekoa offers German quality of workmanship and materials. Some examples: internal doors from Hörmann, external joinery of Thyssen Krupp and bathroom appliances from Ideal Standard. John confided to me how difficult it is to find good builders in Bulgaria and the proper building materials. But since the Mekoa company itself keeps a number Seagarden properties in its own possession for rental purposes, they do not want to make concessions regarding quality. They don’t want to be confronted later with problems and additional costs. In August 2007, I went to the notary and signed a contract with Mekoa for a property to be built for me.

Since John and his colleagues now have become friends, I promised to act as a reference customer when customers have questions. Legally, building a house in Bulgaria is actually the same as in most other in Europe: the notary is responsible for the accuracy of the information contained in the notary deed.