New Home in Israel vs. Resale: Which is better
Whether you inherited an apartment in Israel or invested in real estate, the question that always arises is whether it is worth selling an apartment or putting it up for rent? The answer to this question is derived from several different factors. By analyzing those factors we will help you make an informed decision on the matter and give you some general rules of thumb.
So what are the main factors that influence the decision whether to sell an apartment that you own or to put it up for rent and keep it for the long run:
Housing Market situation in Israel: the last year in the housing market of Israel what tremendously good with a steady 20% price uplift (in 2022). Still the decision for the coming years could vary of course. This depends on quite a few factors, such as the level of Interest Rate that impact loans financing cost and the level of the Purchasing Tax, which drive away some of the Real Estate investors but typically less influence Home Buyers. Nevertheless, since there are not enough Construction Beginning today, do not catch up with the population growth and immigration rate to Israel, we expect over time the general trend of apartment price rising to continue, especially in areas of demand around Tel Aviv and the center of Israel.
Potential uplift of the Apartment Price & Rental Fee:
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Each apartment or house has got a different price fluctuation profile. Typically in the first years after occupancy, it begins with an excessive price increase compared to other properties in the neighborhood. After those few years, the annual price increase of an apartment will stabilize and will be in accordance with the average change in the price of equivalent properties in the neighborhood. In addition the property price, we need also to factor in the monthly rental paid. By adding them up together we get the Total Value Change for you (for more detail refer to: Real Estate Investing Consulting). Looking at the change in the Total Value year over year could also give us a fair indication on the attractiveness of the apartment.
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Very old apartments can be given a face uplift by carrying out a cosmetic renovation, which increases their rental value. This makes it possible to raise the rental fee, which in return contributes to increasing the Total Value Over Time for you (For more details about Rental Raising tips click here)
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Apartments in buildings that were built (or received a building permit) prior to 1980, have got another component that may substantially increase the future Value of the apartment. Those assets Landlords can carry out a "TAMA 38" project for strengthening the buildings or demolishing it and re-constructing it. Both options will dramatically increase the Total Value of the apartment over time, hence voting for put it up to rent and wait until the TAMA 38 completion date.
Property Management & Rental : Especially in the "Inspection" year (the 1st year of living in the apartment) as well as in old apartments, the Property Management process could be time consuming. This requires a lot of patience and time spending since you may receive multiple phone calls to deal with technical issues. Cases such as water pipe leaks, air conditioning problems, replacement of lighting fixtures or Rental Contract Renewals could be very time consuming and annoying to some people. By the way, you can solve this hassle by outsourcing it to Property Management & Rental agency but if you intend to do it yourself, you need to be aware of the hassle.
In summary: we have compiled for you a number of rules of thumb which will lead you to positively consider putting an apartment up for rent and enjoy profitable long term holding:
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The apartment is in a usable condition and does not require anything but a minor renovation (if at all)
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It is located in an area of high demand (mostly around the center of Israel)
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You can get a steady reasonable rent (~3% or ~6% on capital in case of financing)
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There are optional reasons for a price uplift, such as TAMA 38 in the horizon
Of course every apartment and every landlord has got his own unique circumstances that could influence the decision. If you would like to consult with us, the initial consultation call will be free of charge and we will be glad to assist. Call us at: +972-53-5783636 or WhatsApp us at: