Buying and selling real estate in Israel is highly complex, considering many factors. You’ll need an Israeli real estate law expert to help you.

Many people are still deciding whether to invest in the unstable stock market, which requires much time and expertise. Unfortunately, leaving excess money in the bank is hardly attractive, given the current rock-bottom interest rates. One avenue of investment which hasn’t lost its charm is real estate.

Real Estate Investments in Israel

Real estate investments in Israel create passive and active income for the investor. If the investor chooses to rent out their property, they may collect rent money and reap the benefits of the steadily rising value of their property. Given the nature of the real estate market in Israel, this kind of investment provides both stability and relatively high capital gains.

Many people fear investing while the market is down, but low prices shouldn’t deter them. The suitable investment will be profitable at any time. Of course, an economic crisis holds more significant risks and opportunities for profit than other times. In Israel, recent years have brought about many changes: new railways, roads, infrastructure, schools, and military headquarters moving to the southern part of the country mean many great opportunities for wise investors. A small property in the periphery of Israel will usually mean higher yields from rent. At the same time, investment in real estate in one of the major cities is still a good, reliable, and more secure option.

How do I Know Where I Should Invest in Israel?

So, how does one choose where to invest? In what? And whether to do so in Israel or some other country altogether. The most important advice is to research and thoroughly check all the options. Independently investing in real estate requires knowledge, understanding, and information. Many people opt out of investing in this field, although they have the required capital, just because they need to gain the necessary knowledge; they know they need to take advantage of golden opportunities. This article aims to highlight a few of the essential things one must consider regarding investing in property in Israel.

Before beginning the search for the perfect investment, it’s essential to plan and define the details of the investment, including the following subjects:

The purpose of the investment

If you aim for maximum returns, consider investing in housing units in the Tel Aviv central bus station area, where the rent potential from the foreign workers who inhabit the area will probably be higher than other alternatives. However, you should ask yourself whether you are prepared to deal with the inevitable day-to-day maintenance that accompanies such a choice: collecting rent every week and working with different populations. You should also consider future needs: will you want to live in the apartment or make it available for family at some point? In that case, the neighborhood’s character and the center’s vicinity should also be considered.

Partners

Will you be investing alone or with a partner? A partner may be a family member, friend, or business acquaintance. There are many advantages to investing with a partner: risk dispersal (for instance, you could invest in two halves of two apartments in different locations), shared planning and research, etc. But shared investments are only for some and come with the dangers any joint venture naturally encapsulates.

Level of risk

How “risk averse” are you? Someone who is “risk averse” will prefer a solid investment in an established location such as central Tel Aviv or Jerusalem. In contrast, a “risk taker” may prefer to invest in less “conventional” areas with less predictable prices but more potential for profit, such as Sderot, Ariel, and more peripheral areas of Israel.

Correct financial planning of the investment

• Is your investment based on private equity? Or will you be taking on a mortgage? Your equity level will impact the amount of leverage and the quality of the loan you get. These factors should be considered before searching for the right property, as they will determine the optimal amount for your investment.
• Risk management: what are the potential risks associated with the investment, and how would you deal with them should they be realized? Although Israel has enjoyed financial stability compared to other countries and has escaped the last global economic crisis more or less unscathed, there are inherent risks to investing in any market. Examples include sudden inflation, an abrupt change in the dollar-shekel exchange rates, and a deceleration of the renting market. You should leave a margin of equity that will enable you to return any debts and loans you have taken on, bearing in mind such scenarios and others.

Defining the nature of the property

This is one of the most challenging aspects of the investment process. This stage should be carried out carefully and carefully for maximum gains. Some of the most important aspects influencing the potential revenue from a property are:

• Location of the property (central areas are the most popular but are also the most expensive. A small property on the outskirts of a major city may yield higher returns)
• Size of property (most renters live alone or with a partner. 1-2 bedroom apartments are popular amongst renters, while larger apartments usually incur more considerable utility costs and municipal taxes)
• Accessibility (vicinity to public transport routes, parking availability, etc.)
• Price

What Should I Avoid When Buying or Selling Real Estate in Israel?

Apart from these issues, it is essential not to fall into the following “traps.” What NOT to do:

Investing in a property in your “comfort zone.”

Israel holds many opportunities for the wise investor. But it is essential not to choose an investment based on your fondness for a specific “comfort area” because it is a favorite holiday location, close to family members, a job, etc. One should choose an area to invest in based on cold complex and objective returns potential unless the investment is a place of residence.

Total reliance on personal capital

It is better to consider leveraging your investment, even if you can afford it alone. This decreases the risk and allows you to make further investments.

Not leaving an emergency “cushion.”

Do not acquire a property for a total cost that leaves no room for unexpected payments and costs. Consider additional costs such as purchase tax, payments to a realtor, an attorney, renovation funds, etc., and additional unforeseen costs.

Once you have properly outlined the nature of your investment, its purpose, and scope, you are ready to invest. But there are still many more questions to consider: whether to buy a new apartment from a contractor or an existing apartment (and what to look out for in each type of deal), the crucial tax implications of investing in different kinds of properties (which may affect the entire profitability of the investment), and once you have decided upon a property – what are the necessary legal precautions you should be taking. To protect your interests at all times while making the best investment, it is always recommended to consult an attorney who specializes in the field.

We are in Tel Aviv, with offices in New York and Los Angeles, California. We invite you to schedule a complimentary consultation with our firm to learn how we can solve your Israeli legal and business matters.

Aharoni Law Firm represents international clients from the United States, Canada, the UK, Europe, and Israel. Please get in touch with us from the United States or Canada at 1.888.923.0022 or in Israel at (972) 3.9055478 or (972) 50.7322688 to schedule a discussion about your case.