As the number of foreign buyers for whom Bulgarian housing is a holiday home or an investment object grew, developers began to offer facilities in gated complexes with permanent security, and subsequently a set of additional services provided by the developers themselves for an annual fee. Thus, developers have provided themselves with a steady income even after the sale of all residential units, and property owners have been able to avoid a lot of hassle. This is how real estate management services appeared in Bulgaria.
At the moment, Bulgarian companies that have borrowed foreign experience provide two types of services: facilities management and property management.
Facilities management is the maintenance and maintenance of real estate by a management company for a certain annual fee.
Property management implies the search for a tenant, ensuring maximum rental income for a percentage of the profit received.
Bureau of Good Offices
While in most European countries the real estate management services sector has been around for a long time and is well developed, in Bulgaria this system is still in its infancy. At first, many owners were looking for acquaintances living in Bulgaria and asked them to visit the purchased house during the low season, pay the necessary bills and report on the state of affairs to the owner. Recently, buyers have increasingly preferred professional comprehensive services, which is also an indicator of market development. Companies monitor not only the maintenance of the building and its territory in order, but also the maximization of profits that residences bring in the absence of owners.
Real estate management specialists in the developed European and American markets offer a wide range of services: from servicing small apartments for a limited time to managing a shopping complex or business center for decades. The availability of certain opportunities often becomes a decisive factor for the buyer when he chooses one of the housing options.
In Bulgaria, a company providing management services can still stand out from the competition. Usually, foreign owners transfer resort real estate or luxury urban apartments to the care of firms. At the same time, the owner expects correctness and honesty from the management company, experience, knowledge in the field of management, as well as the ability to advertise, negotiate and resolve conflicts are crucial for clients.
Something is included
When concluding a purchase and sale transaction for an object in closed complexes, it has already become generally accepted to sign a real estate management services agreement with the developer. The contract stipulates round-the-clock security of the complex, cleaning of common areas, maintaining order on the territory, including lawn mowing, gardener services and maintenance of the entire infrastructure. Payment under such an agreement usually amounts to 7-15 euros per year for 1 sq. m of purchased housing and depends on the size of the complex. It is also usually indicated that the amount may vary according to the level of inflation and wages. As additional services, companies often offer payment of utility bills and property taxes, apartment cleaning, laundry and linen change, purchase of a standard set of products.
The list of services offered and their cost largely depend on the area of the country and on whether there are other facilities nearby that the company serves. Some firms operate only in certain areas, but companies covering the whole country are also emerging.
And it all started with...
A lot of companies in Bulgaria are now selling real estate, guaranteeing a certain percentage of income from renting out housing in the absence of the owner.
However, the pioneers here were not entirely honest sellers. Five or seven years ago, some British companies offered a comprehensive service for the search and sale of an object and its management for one or two years with a guaranteed profit of 10% of the cost of the object per year. At the same time, the buyers did not even come to Bulgaria, the transactions were executed in the UK. Indeed, the new owners received the promised amounts, but, having finally arrived in the country to rent housing on their own, they discovered that they had paid 50-100% more than the real value of the house when buying, and it was impossible to independently manage real estate while abroad. This is how the first articles about Bulgarian real estate appeared in Britain as a "soap bubble", and sellers chasing short-term benefits "sawed off the branch they were sitting on."
However, the disappointment of investors unaware of the country has prompted the development of management services and individual management companies in Bulgaria.
A matter of time
What are the major operators currently offering that manage rental properties?
Their work begins with signing a contract with the owner of the property, usually for a period of 3 to 10 years, then advertising and searching for tenants with whom contracts are concluded. During the entire term of the contract, full maintenance of the facility is performed, including necessary repairs, payment of utilities, local taxes, collection of fees from tenants, writing activity reports and settlement with the owner of the property. In this case, the main goal of the company is to ensure maximum occupancy of the residence.
The cost of such services ranges from 10 to 35% of the income received, and the amount of income depends on the object, its location, and the possibility of short-term or long-term rental.
If the apartments can be rented only for long periods, then the income will be no more than 4-6% of the cost of the object. With daily rent and an ideal 100% occupancy rate of housing with a favorable location, the return on investment after deducting all expenses can theoretically reach 30% per year.
It happens that if the object is located in an attractive location, and the quality of housing is very high, then companies conclude long-term contracts for the management of the object at long-term rental prices, but operate the property as hotel rooms. Having concluded the contract, the companies immediately pay the owner the amount based on the average cost of long-term employment (150-400 euros per month) minus their services in the amount of 20-30%, explaining the benefit of this approach for customers by the fact that the owners have the opportunity to open a long-term deposit in the bank and earn on it, and the company will be able, without risking, to invest additional funds for the repair of the premises, replacement of furniture, etc. This scheme should be taken into account and especially discussed when signing the contract.
Put it on someone else's shoulders
Operators try to minimize the efforts and time that the owner will have to spend: on his part, he only needs to sign a contract, hand over the keys and regularly make a profit from the bank account.
The management company undertakes the organization of inspection of housing by potential tenants, discussion and signing of contracts, regular receipt of payment from tenants, making all utility and tax payments, monitoring the condition of the facility, repair and elimination of force majeure, reports to the owner, representing the interests of the owner in communication with state, municipal and private structures. The same firm can control the construction and execution of finishing and repair work.
When concluding a service and management contract, you should carefully read the contract, ask questions about all unclear points, analyze the rights and obligations of the parties, pay attention to the payment of possible penalties and, only after understanding and agreeing with all points, sign the document.
The services of a management company save not only time, but often also the owner's money: in many cases, the client is unable to find optimal tenants, ensure maximum occupancy of his home and ensure that he will not be deceived by employers. Recently, fearing deception on the part of residents, Bulgarian pensioners who have free living space have also turned to the services of management companies. As a result, 20-30% of the income that the management company receives becomes much smaller losses than those that the owner can incur by acting on the rental market independently.
Who needs it?
Real estate owners who live abroad and do not have the physical ability to monitor their housing apply to management companies. A small part of the clients are also people of retirement age who are afraid of conflicts with employers and prefer to transfer their powers to professionals.
As a rule, at the beginning of cooperation, clients often contact company employees, worrying about housing and account receipts, but after a while they begin to trust specialists. In an optimal situation, managers are on the side of the owner, having a common goal with him – to get maximum profit with minimal risks.
The field of real estate management in Bulgaria is currently developing quite a lotIntensively: large operators are singled out, new companies are emerging, international meetings and congresses are taking place, and specialists are being trained.