Investing in real estate abroad - how do you do it right? (Photo: ShutterStock)
As I recall, about three weeks ago, on the eve of Passover, the Bank of Israel raised the interest rate in the economy, according to most forecasts, for the ninth time in a row, by 0.25% to a level of 4.5%.
In doing so, a 16-year record was set for the level of interest, since January 2007.
In the background, the hovering inflation that for the time being refuses to go down.
The slowdown that has already begun in the economy may turn into the beginning of a recession, and among the many elements of life that are going through a vague episode of uncertainty, one of the most prominent of which is the housing crisis and within it the dream of owning an apartment in Israel.
The purchase tax rate for investors in Israel has also increased recently and many Israelis who planned to buy apartments for investment in Israel, decided to change direction and focus instead on investments overseas.
The public discourse on the possibility of purchasing property abroad is wider than ever and the benefits are clear. An excellent example of this is Greece. A short flight away, the Israeli meets a completely different real estate reality.
Opportunities to purchase real estate in Greece
After dealing with a severe economic crisis for many years which cut real estate prices and turned Greece into a magnet for daring real estate investors, reality is aligning.
With the backing of the European Union and thanks to thriving tourism, Greece is showing an impressive recovery and the economic outlook for the coming years points to the kind of growth that Israel has experienced in the last decade and more.
If you are thinking of buying an apartment in Greece, when you come to buy an apartment, check the past performance of the contracting company, check the model offered to you and above all check whether there is an identity of interests between you and the selling body and the manager.
For example: Does the seller/manager share the risk with you or only the profit?
Is the management company's salary based on success?
Or she will enjoy a salary independent of income from the property.
According to Nir Shmol, CEO of the Urban Development and Renewal Company and the Shanir Company: "The banks in Greece are back in business and as a result the local real estate market is currently experiencing a significant construction boom, the development trend is accelerating and it is leading to a steady increase in housing prices and an increase in the supply of properties, which is barely able to keep up with demand Property prices in Athens have already risen slightly, but at this stage they are still relatively low for the Israeli investor, who can now for the price of an average apartment in Gush Dan purchase 3-4 apartments in the city center of Athens and enjoy a high return."
Opportunities to purchase real estate in Greece (Photo: ShutterStock)
Haim Eitan, managing partner at Shinir for managing real estate investments abroad: "Many of us Israelis rely on property quality indicators based on our familiarity with the Israeli economy and with our local housing culture here.
When we examine the efficiency of a property for investment abroad, it is important to disconnect some of these indicators, because they are not relevant in the destination country. Assuming that you are not going to move your life to a foreign country and live in the property, it is actually a financial product whose role is to work for you under the best conditions. Real estate is A great, stable and solid investment channel, when you examine it sensibly and understand its purpose."
Investing in real estate abroad is an excellent financial channel, which has a comfortable entry level and with excellent potential for value increase.
Neutralize any emotion or real estate cultural indicators that you are familiar with. from Israel, since your property abroad is essentially a financial product. All the components and anchors of the transaction must be examined to allow the property to maximize its financial potential.
In addition, internalize that the chance-risk equation must exist, one does not exist without the other.
Your job is to understand what risks exist and what tools are offered to you on the other hand, in order to reduce them and increase the likelihood of success.
Consulting/management is a lever for maximizing success.
Choose with whom to make the transaction and check the property management model with the identity of interests test.
So what do you need to know when approaching to purchase a real estate property abroad, what advantages are important to find and what should you watch out for?
The ten commandments for purchasing property overseas:
Investing in real estate abroad - how do you do it right? (Photo: ShutterStock)
Location Location Location
Every real estate person knows how to recite this mantra and it is indeed the first one, but does the location alone guarantee success? The answer is that success is a dynamic concept and in order to increase the performance of your investment you need to understand what type of property you have chosen to invest in, and hence the existence of anchors must be ensured More that faithfully serve the purpose and potential of the property you own.
Depending on the type of property, one must examine transportation accessibility, the existence of educational institutions, community trade activity, tourist centers, seasonality, etc. provided that the anchors around your property contribute to the demand in that location.
Understand what type of property you are purchasing
The type of property you purchase has a huge impact on how it is managed.
A commercial property, for example, will be managed in a completely different way than a residential apartment, and this will be managed differently from office real estate. It is too short to detail the multitude of property types, so we will focus on the most common and favorite type among Israelis, residential apartments. Here we will meet two main segments - short-term or long-term rental. For long-term
rental has many advantages, the most prominent of which is a phenomenal return compared to returns from long-term rentals. It should be taken into account that a short-term rented property requires direct and professional management that includes not only the maintenance of the property but also its marketing on accommodation sites such as Booking or Airbnb in order to maximize exposure. Since the tourism market Airbnb is very developed, certainly in touristic cities, you will have no difficulty finding a reliable management company that will take care of all your property needs and allow you excellent passive income. An apartment for long-term rental will provide a more solid but stable return over time.
Don't skimp on management and maintenance services
Of course, you can purchase and manage any property independently, but reality proves that in order to get the best out of the property you have purchased, local knowledge is required, which you will find difficult to obtain on your own, without long tuition fees, and usually also hurts the pocket in such a way that the investment's viability will be lost.
Our recommendation is to use full management and maintenance services of the property by a reliable local company.
This will help you save time, administrative and technical involvement that is almost impossible with remote control and in most cases the management services will prove to be worthwhile.
Check the track record of the management company and especially the salary model of the company and whether it meets the same interests as you as the owner.
Correctly estimate the increase in value
Next to the current yield component there is the appreciation component and for most Israeli buyers it is the most important of the two.
Focus not only on the inviting entry price, but also on the macroeconomic data of the city/state and its growth in the coming years.
The optimal business opportunity for you will be the one that combines price, location and a growing economy alongside a supply that does not satisfy the demand.
Consider all the associated costs
When you come to weigh an annual return, take into account additional expenses beyond the purchase price of the specific property.
Ancillary expenses will usually include one-time establishment expenses, ongoing management costs, legal expenses, required insurances and taxes.
A tip from us, calculate your expected return from the property assuming 70%-80% occupancy and it will reflect a realistic picture for you in the annual balance sheet.
They taught the subject of taxation
The issue of taxation is critical and can determine whether the investment is worthwhile.
As a general rule, real estate investments abroad must pay tax both to Israel and to the country where the property is located.
However, in most of the countries where it is customary to invest, there is a tax treaty signed with Israel that aims to prevent double taxation.
Since the taxation policy is different in each country, we recommend consulting with a relevant professional knowledgeable in the field of real estate taxation in the destination country.
Spread risks
A big advantage that lies in the low entry level abroad compared to prices in Israel is the support for the diversification principle. When it comes to investments, risk diversification is the name of the game. With the investment amount of an average apartment in Israel you can purchase several apartments abroad and our recommendation is, as long as you have the necessary capital of course , to do this through dispersion in different areas and/or different types.
Diversifying an investment allows for a situation where if one property's income is temporarily damaged due to wear and tear or difficulty in finding a suitable tenant, the other properties will compensate for this and balance the economic risk.
safe
Security is actually the extent of your legal hold on the property.
When you come to purchase a residential apartment abroad, it is important to understand exactly what path the money is expected to take and what are the guarantees given to you by the developer/company. Full ownership is of course taboo ownership and if you invest through a fund, you must understand the structure of the companies in the transaction and your position in relation to them. Make sure that a lawyer is involved in the transaction An expert in this niche.
Insurance
Leave nothing to fate.
The property you purchased is actually an investment plan for your capital and therefore hedge the risks with all possible tools.
Make sure that the property is insured against natural damage, fire, general loss, loss of rent, etc.
The most important decision: who to invest with
As mentioned, you can purchase and manage a property independently, but this is not recommended.
If you don't know how, don't do it yourself.
In Israel, there are many companies that offer properties abroad, some act only as brokers and some represent a local entrepreneur. Do your homework and figure out which company makes you feel the most at ease about investing in your future.
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