Introduction to property management in Israel

The State of Israel is a good place to invest in yield-generating properties because of its robust economic growth and consistently rising real estate prices over time. Investment in Israeli property is considered relatively low-risk. Also, reforms in land tax in recent years have made the potential returns all the more attractive. Land betterment tax when selling an asset in Israel will run at 20% to 25% of the value accrued between acquisition and sale, meaning – the actual price received minus the buying price and accrued costs.

If you are a foreign resident considering the acquisition of property in Israel, the following provides some pointers and tips that you should know about the local real estate market before cutting a check.

Israel's property prices have been trending upwards since the nation's establishment in 1948. That applies everywhere in the land but most markedly in the prime areas characterized by chronic low supply of assets and land. That shortage has led the prime areas to constantly spread beyond Tel Aviv, helped in part by the development of train lines and highways that shorten travel time.

The average rate of return on commercial property is 8% to 10% a year, while residential properties generate average returns of 4% to 5%. The difference is mainly because under certain circumstances property rental can be exempt from taxation, rendering it all the more important to consult with local experts. Tax on rental income from apartments can vary widely and you need to find out which will be the least costly for you.

Tax exemptions can also apply when selling property, which again applies mainly to residential assets. You should closely study your options before closing a deal.

Israel's real estate market operates mostly in dollars, but a trend has developed of using the strong local currency. Still, because of the ingrained habit of quoting in dollars, the state of the U.S. currency has created attractive opportunities. Prices in euros have also dropped in recent times.

The norm in Israel is to rent apartments unfurnished.

One law you should study before buying property in Israel is the Tenant Protection Act, which in some cases prevents the possibility of raising rent or evicting a dweller. Be careful to ascertain the status of tenants in any building you acquire, to see whether the law applies. Naturally, "protected" properties can be attractive propositions but you do want to know in advance what you're getting into, because the price should be lower than a comparable unencumbered asset.

Another risk property owners run in Israel is squatters. Under Israeli law, if a squatter is not evicted within 30 days (you can call the police for help), then the only recourse is the protracted process of suing for eviction through the courts.

If all the above has failed to persuade you that when buying an asset in a foreign country, you should hire a local property management company to protect your interests – let us add one more point. When you buy an asset, you undertake to maintain it for the benefit of the tenants. You have to handle problems, effect repairs, find tenants and keep a close eye on the property.

We as the leading property management company in Israel call on you to show your faith and invest in Israeli real estate. As a company that has been managing properties for decades, including for foreign residents, we promise you that keeping the rules – all the rules – will assure you of peace of mind, good returns and also, the pleasure of visiting Israel.