If you're thinking of buying a holiday home abroad, you seriously should pay attention and learn from the story of Bulgaria. Bulgaria has been the newest hype word around the international property market. It has been marketed furiously as the new El Dorado for holiday homes.

When it comes to buying properties, abroad or at home, it's all about location location location. However, if you're a property investor, it's also about price, it's about being the first in a market, about spotting the trend changes and picking new trends before everyone else. And Bulgaria seems to have all of these. It's located in Eastern Europe, soon to join the EU. It offers something for everyone's taste, as it has nice beaches at the Black Sea and also mountains quite popular with skiers. It's also very cheap, but the prospects are there, as EU will pour money into Bulgaria into the next decade.

So what's wrong with Bulgaria?

It's been over-marketed and a lot of investors have rushed in to buy cheap and sell in couple of years for a handsome profit. In the meantime there is always the rental market. Holiday home rental market is a viable means of paying for your property or, at least, for the inherent maintenance costs. The demand for Bulgarian properties has been huge. And, in turn, this has awakened a whole generation of property developers. The result: over-development.

The over-supply of holiday apartments, holiday villas and other holiday homes has created a dramatic competition on the holiday home rental market, with the returns for holiday home owners plummeting. The annual rate of capital growth has also dropped from a 36% in 2005 to 13.9% in September 2006, according to Assetz Property Investment Tracker.

On the rental market, the return on investment has plummeted from 116% in 2005, to just 35% in September 2006 according to the same source. The drop in the return is also aggravated by the poor management from local agencies.

Should you avoid buying in Bulgaria altogether? The answer is no. But you have to take into account this worrying trend. You can still buy in Bulgaria, but do your own research. If you want to rent your holiday home, research where tourists are going. There are hotspots and there are dead spots. In the end it's all about location location location. Put yourself in the shoes of a regular tourist. Who is your targeted regular tourist anyway? Where would they go? That's where you want to buy your dream holiday home for the best rental return on your investment.