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Alon Gal advises: to buy an investment property or the dream apartment?
The business coach is coming to Walla!
Business: Every week Gal advises in areas of life that concern us all.
This time: the listener is debating whether to buy the apartment in which she lives or an investment apartment
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real estate investments
Alon Gal
Alon Gal
Friday, 26 March 2021, 00:01
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Apartments (Photo: ShutterStock)
Many couples struggle with the question - whether to buy a residential apartment or live in a rented apartment.
There is no doubt that buying an apartment involves many costs, and in most cases also taking out a mortgage from the bank, so many are apprehensive about making the move.
A listener who aired on business coach Alon Gal's program on 103FM Radio, married and the mother of 3 children who lives in a rented apartment and owns an investment apartment, shared that she wanted to buy another apartment.
She wondered if she should sell her apartment in order to buy the house of her dreams, or buy an investment property.
The listener said that she owned an apartment for investment in Tel Aviv, which she purchased immediately after the marriage.
"We bought it for a million and a half, today it is worth around 2.2 million. There is a mortgage of NIS 300,000 left, and we rent at NIS 5,500 a month. We live in another apartment in Holon with a rent of NIS 9,000, and are interested in buying another property."
She stated that they were interested in purchasing the apartment in which they live, "a 6-room apartment, a kind of mini-penthouse", but it is estimated at 4 million, and they must sell the apartment for investment for this purpose.
She wondered, "Should this be a property that will serve us for residence, or alternatively buy another property for investment and continue to live in rented accommodation?"
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To the full article
Alon Gal explained that today the family's living costs stand at a total of NIS 5,500, since they have to add NIS 3,500 to the rent, and they pay a mortgage at a monthly cost of 2,000.
He also stated that if they want to buy an apartment worth 4 million, they will have to take out a mortgage in the amount of about 2.5 million.
He was shocked: "This is a terrible decision. If you want to take out a smart mortgage, in order not to put the entire premium at a high and unlinked interest rate, in terms of interest rates it is about NIS 11,000. In fact, in one day you worsened your situation by NIS 7,000."
Gal recommended to the listener to buy an apartment for investment, and explained the principle: the apartment generated the potential profit, its value will not exceed another million, and its return is about 3 percent.
The listener admitted: "This is a property in Tel Aviv and it is difficult for me to give it up."
Alon explained to her that in any investment tool that is considered 'stupid', such as a study fund, it can yield a return of 10-6 percent per year.
"Maybe you can triple the return you get."
Therefore, Gal recommended that they sell the apartment in Tel Aviv.
"Buy an apartment for a good investment with a return of 5 percent, make a diverse investment portfolio that knows how to yield 8-7 percent over the years - and you double your returns. Let's say you buy the house, in practice you do not have a house, you actually rent it from the bank to "The next 30 years. Today you live in a house you love, with 6 rooms, a mini-penthouse. I do not see why at your age you should significantly worsen your financial situation."
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