The search for holiday home bargain buys is expanding and there are some potential goldmines to be found in the old Eastern bloc. But always look before you leap.

It seems all the world is a holiday hot spot these days but nowhere is it more true than in Europe where former Eastern bloc countries are now clamouring to join the European Union and to do that they have to make themselves ultra attractive to the West.

Leading the way is probably Croatia. Recovering fast from the conflicts that followed in the Balkan region, it is rising back to the heights it enjoyed in the days when it existed as Yugoslavia.

The Hollywood set have found the country and these new arrivals are buying into unspoilt coastlines, islands, medieval towns, a Mediterranean climate, virtually no crime and great cultural diversity. The Italians have long known this and have easy access to the country.

As a consequence Croatia is rapidly becoming a hot spot for international property investors. As an approved candidate for the next EU enlargement the country has revived its tradition as a holiday destination. The political agenda is for stability, safety for investors and a good tourist infrastructure.

CROATIA

Prices have doubled over the past three years and continue rising, with Dubrovnik, Split and Istria leading the list and already very expensive. Property and site titles are freehold and foreign investors need government approval. While mostly a formality, this can take up to 15 months and any purchase contract should reflect this point with regard to the payment structure and withdrawal rights in case of refusal. Sound legal advice is strongly recommended.

There's no stamp duty, no yearly property taxes, no difficult inheritance tax and – if property is held privately and for longer than three years – zero capital gains tax. Double-taxation agreements are in place with the UK and Ireland.

ROMANIA

Over the last few years returns have been high in many central and eastern European countries, with Bulgaria the current doyenne of the property investment world.  But for investors looking to stay one step ahead of the crowd, Romania offers some attractive features.

House prices in Bucharest, Constanta, Brasov, Cluj, Timisoara, Oradea, Ploiesti and Targoviste rose 40 per cent in 2003-4. Additionally, property values are also relatively low, with investors able to buy homes from £20,000.

Romania also has a series of benefits for people looking for holiday-lets and second homes, with beaches on the Black Sea to international quality ski resorts.

MONTENEGRO

One of the coming areas but as an investment opportunity considered slightly high-risk. The appeal lies in the ten miles of beaches around the resort of Ulcinj on the Adriatic coast and if this part starts drawing the crowds then it could be the long shot that pays off the best.

Montenegro is found at the bottom of the Dalmatian Coast and the number of Brits who have ventured there so far is less than 100. If the developers win the day, however, that could change.

BULGARIA

It is still possible to buy a place for the price of an average new family car in Britain, just under £15,000, if you know where to look, are prepared to venture a little off the well-trodden path, and, in some cases, don't mind undertaking some renovation work.

The Brits have found Bulgaria, many of whom see it as one of the last opportunities to get in on the ground floor on a property hot spot.

Sold as the new Tuscany – with lovely, mountainous countryside studded with ancient tumbledown farmhouses crying out for restoration – the Bulgarian countryside is stuck in the 1950s, with few cars and mains electricity a rarity.

Yet the housing market is nothing like the 1950s. Property in Bulgaria is rising fast and in 2003 prices rose more than 25 per cent. Some homes rose 50 per cent, especially the ones in Sofia, in the Black Sea beach resorts and in the ski resorts of Borovets and Bansko.

British buyers are focusing on the villas on the Black Sea, Bulgaria's playground where it is still possible to find beautiful fishing villages that rival Spain, at a tenth of the price. The ski areas in the Rhodope Mountains in the south are also starting to attract investment. It is also possible to buy cheap and lovely properties along the Danube, Bulgaria's northern border with Romania.

Today it is home to the likes of John McVicar, the former gangster and writer. The three Maleeva sisters, all tennis stars, have country houses while King Simeon of Bulgaria returned from exile in Spain and was given several palaces and castles as part of the restitution process.

Foreigners, however, cannot own land in Bulgaria, so you have to set up a company to own it. But unlike some countries, there is no requirement for local ownership of the company, so this is perfectly safe. Stamp duty runs at about 2.5 per cent and it costs about £600 to set up a company.

With low-cost airlines constantly opening new routes access to Bulgaria is likely to get easier and less expensive.

HUNGARY

Hungary has plenty of popular support for EU membership and a fast-growing economy. With property prices in the capital Budapest around 50 per cent lower than other European capitals, it's not surprising the British are waking up to the country's potential. The Irish, who have enjoyed Europe's biggest property boom over the past decade, are also keen buyers.

County Kildare-based Overseas Property Investments have been helping Irish clients to find property in Hungary. OPI's Joe Fahy says property prices just don't compare to Spain or France.

"In Budapest you can buy a one-bedroom apartment in a good part of the city for £54,000," he said. "There are cheaper. A three-room apartment in District 6 of the city, which is very nice, is on for £31,800. At the other end of the scale, you can get a 133 square metre apartment for £79,000."

There is also reasonable rental demand for well-located western style apartments and gross yields of six to eight per cent can be achieved on residential apartments.

But while Eastern Europe turns into the new property Eldorado, those old favourites Spain and France continue to appeal.

SPAIN

Some half a million Brits own overseas properties, and Spain as the most popular destination, has plenty going for it with plenty more to offer.

Travel along the Costa Blanca or the Costa Sol and you will find so much building going on you will wonder where all the builders are coming from. Spain so far has offered plenty for the investor – longevity, reliability, and infrastructure, stability, familiarity and popularity. Prices may have stabilised but the country is still in demand.

Buy-to-let investment opportunities in certain parts of Spain still stack up brilliantly against the competition. This is especially true on the Costa del Sol. Properties in the areas south-west of Marbella are experiencing strong capital growth. But more importantly, it's an area where strong rental income can be achieved all year round.

Not only are summertime rental prices some of the highest in Europe, but the favourable climate throughout the winter months has led to a massive development of world-class golf courses. This makes 30-35 weeks' annual rental a realistic proposition – with a potential yield of 10-12 per cent.

For a hard-headed investor, well-chosen Spanish property is still a very sensible choice, comfortably seeing off newcomers with aplomb.

FRANCE

There are still bargains to be had in France in places like Normandy and Brittany although there has been a marked increase in hostility towards the British homeowner in both areas.

Further south the Dordogne is synonymous with Brits abroad. Some villages, such as Eymet, are practically English speaking. There are cricket teams and lots of grocery stores where you can stock up on Marmite. There is a fox-hunt outside Pau, one of the most beautiful cities in France, with views over the Pyrenees.

Another option in France is the leaseback scheme. This was introduced by the French government about 26 years ago to encourage investment in good rental accommodation. It allows investors to purchase a freehold property, which is rented out through a tourist management company for a period of nine years. A net yield is guaranteed.

Leasebacks can be a very attractive option for investors who are looking for a high and long-term guaranteed rental return on their investment, who would also like to own an attractive pied-à-terre in a well-located town or holiday resort in France to enjoy in retirement.

THE GOLDEN RULES OF BUYING ABROAD

Think about exactly why you want to buy. Is it mainly for investment or as somewhere to visit or live? If it's for investment, what returns are you looking for? How much money do you have to put down and how much can you borrow? Your objectives should be clearly defined before you start looking. Think long-term. How long do you want to keep the property for? When will you sell? You'll need to understand the tax implications of this too.

Although it's a good idea to see your property first-hand, don't be seduced by its idyllic location or rustic feel. Be practical and understand all the risks – particularly when buying older properties or looking to do any renovation work.

If buying for investment, it is important to understand how comfortable you are with risk and invest accordingly. Some properties in Eastern Europe offer high potential returns but potential losses too.

Finally, speak to the experts. If you don't know the area that you are buying in well, then seek professional advice to ensure that you are getting a good deal and that you understand the process. UK based companies are generally the best.