Honest advice on buying off plan in Spain and Bulgaria

The Spanish property market is cooling in many areas such as the Costa del Sol so you need to buy sensibly and make sure that you are buying good value properties in areas that have still to see the large capital growth over the coming years. I believe that in Spain such areas as Costa Almeria, Murcia, and parts of the Costa de la Luz continue to offer great value but you must still be aware of the factors that will influence your return and your ability to sell the property on. In Bulgaria there are some fantastic gains to be made but again I would exercise a degree of caution. Having just returned from Bulgaria last week, it concerned me just how many people are piling into areas like Sunny Beach which, frankly, look to me massively overdeveloped already. When combined with fairly low build qualities and a fairly downmarket feel, I wonder to whom all these investors (many of whom are buying off plan for the first time) are going to sell to in 18 months or so. The same applies to Bansko, which I have been told is already at capacity as far as numbers of people the resort is able to cope with on a day to day basis. In my opinion, areas such as Kavarna on the coast offer much better potential for growth than Sunny Beach. This area is going to have a brand new marina and two new golf courses very nearby and traditionally these two factors are excellent for ensuring capital growth and also a healthy supply of end users who want to holiday there in the years to come. There are some very reputable builders constructing high quality but still very affordable developments such as Kavarna Gardens and Kavarna Hills and they are proving very popular with investors and end users alike, which again is encouraging. For investors wanting a ski resort then Pamporovo looks a good bet for the future and we hope to be bringing you some attractive investment opportunities there in the very near future. At this moment in time we are still researching the area and the developers to ensure that they meet up to our strict criteria. In light of the above, we have put together the following guide to explain the criteria that we look for before we are happy to recommend a new development to our investment clients. Criteria for making a development attractive as an Off Plan investment. 1) Purchase price. How does the development compare to similar finished or soon to be finished developments in the surrounding area. If it's no cheaper then you are not getting any benefit from buying Off Plan. 2) Price per square metre. Again, how does it compare to finished developments of the same standard in the same location. 3) Payment schedule. Ideally as low a deposit as possible, normally the lowest is 30/70, in other words 30% down and 70% payable on completion. We have been able to offer even better payment terms than this recently, even as low as 15% deposit and 85% on completion at the excellent Jumilla Golf and Country Club. Any development worse than 40/60, walk away from. 4) Is there a bank guarantee being offered by the developer? In Spain a lot of the time yes but in places like Bulgaria at the moment it is not possible to get a bank guarantee as the market is still so new that the banks there have not ever had to offer them before. This again makes it vitally important to know the financial stability of the developer, if they have only been around for a few months with no track record can you really be sure they will deliver the product you expect? 5) Can you sell your contract before completion? Not all developments allow you to do this and obviously of you only find out after buying then you are in for a shock. We often hear of clients who have bought through other agents and then when they come to sell, the contract they signed doesn't allow them to do so. We never recommend a development to investors where selling on is not possible. 6) If you can sell before completion are there any restrictions? Some developers say that you can sell before completion but then have a clause in the contract that states only when they have sold all the other apartments or that you cant sell for a lower price than the remaining apartments or finally that you must sell through the sale office of the developer who will then charge massive fees for doing so, reducing your profit. All developers normally charge 1-2% to change all the paperwork over from one name to another, but this is normally paid by the buyer. 7) Location, location, location. Is the development in an area that has high demand now or is expected to do so by the time of completion? If not then you may struggle to sell it on as you must remember that the person you sell it too will probably be using the apartment themselves or intending to rent it out and if it is not in a desirable area with good amenities and road network they will probably look elsewhere. 8) Orientation of specific apartment. No one wants to wake up on holiday to find the terrace and garden already in the shade, so almost never buy an east or north-facing apartment as the demand is very small! If you are buying a golf course or beach development, always go for southeast at a minimum but ideally south, southwest or west because nearly everyone wants afternoon or evening sun. Obviously if you are buying in a city centre development or in a ski resort then this is not always practical. 9) Time to completion. Make sure that there is normally 16 months or more to completion, the longer the better, as you need to allow 4 months to sell and 12 months to see an attractive level of capital growth. 10) Is the development first stage price release or close to it? Developments in Spain sell very quickly and normally over the course of construction the developers will increase prices four or five times. You need to get in as early as possible to maximize your profit. We are always amazed at some of the big estate agents who sell apartments to investors that have had numerous price rises, as this massively reduces your profit. Remember that on a development that has a 30% / 70% payment schedule, if the price of the apartment goes up 10% then that is actually a 31% gain on capital invested. See the example below; Purchase price =