Three new clippings

Hi there!

There are three new clippings this weekend which will be published on Good2004.biz later this week.

One, “Romanians’ interest in Bulgaria,” discusses the fondness of the Rumanians for vacations on Bulgarian beaches, and why (better water, lower prices) and explains that the Rumanian Black Sea coast tends to be polluted by the water from the Danube River delta which channels “all the dirt from Europe into the Romanian area.” Buyers from Rumania are still seldom, but market surveys have started all the way down to our area of Nessebar/ Sunny Beach. Even last summer, we had Rumanian tourists in our hotel in Nessebar’s Old Town.

The second clipping talks about the ecological responsibility of construction projects and developments. The also show an example of return on investment:
“The project is being offered to clients at an average of 13% below current market value, so owners benefit from an inherent profit from the moment they buy. If a conservative average capital growth of 15% is assumed over a 5 year period with a 70% mortgage, investors stand to earn a substantial 183% return on investment equating to an average annual rate of 31.26%”

Which brings up a question. Do you know how to calculate a return on investment? This is a relatively simple calculation that is most easily done on a Microsoft Excel® or similar spreadsheet. If you don’t know how, speak to your financial advisor or look in the Internet for a typical calculation.

For those of you who don’t know (or have forgotten), Return on Investment (ROI) is a calculation that shows the interest rate you would have to earn from a bank to equal the return (profit) you get from an investment (in this case, buying a house). Since you can only expect to receive around 4-6% interest from a bank account, the return shown above of 31% is a nice investment. The bank interest rate can be fixed, and is relatively secure. HOWEVER, a speculative real estate investment is more risky. For example, you can have problems with the house’s construction, the market may not move with the speed – or in the direction – you had anticipated, you can have other non-related problems that make you back out of the investment without attaining the gains you anticipated. Not to mention possible political problems (although I think these are relatively unlikely in Bulgaria and the European Union).

If someone wants more on the ROI calculation, let me know, and I will show and explain a simple example in a future blog entry. There are also other financial measuring sticks, like payout or payback time, that can be used to describe the attractiveness of a project. Maybe we’ll discuss these in the future?

The third clipping - SATURATION OF SUPPLY ‘RUINING’ PROPERTY MARKET IN BULGARIA’S BANSKO RESORT - focuses on the potential negative aspects of investing in any real estate market. This shows what can happen in an over-developed market. This is one of the circumstances any investor should take into consideration when investing solely or principally for capital gain. Bansko has a number of problems to take into consideration when you compare it to the Nessebar area: it is dedicated to a small geographical area, it has infrastructure problems that will not be easy to solve, access in the prime skiing season is difficult, and it is a small market that is substantially overbuilt. The Nessebar – Sunny Beach – Ravda area is much larger, geographically and economically. The area is not overbuilt – and the summer construction-stop helps regulate this. The infrastructure is in much better condition, although still not great. Access is easy – daily national and international flights to and from Bourgas, plus easy access by highway, and (of course) no snow in the summer season!

Ciao for now…

Craig