Real Estate Investments in Israel
If you’re interested in investing in real estate in Israel you have several options.
Direct Investment in Property in Israel
If you have seen a house or apartment you would like to purchase, it would be prudent to do some tax planning. Your real estate lawyer can help you answer the following questions and decide on the best approach to minimizing any tax obligations:
- How much is the purchase tax on the property?
- How much will the capital gains tax be upon selling the property?
- Is there a way to minimize any possible tax liabilities?
- How will this purchase affect any tax obligations on other properties in your Israeli real estate portfolio?
- What might be the effect of this purchase on tax obligations in your country of origin or another country?
- Would it be better to put the property in the name of a family member instead of in your own name?
- If you want to register a property in the name of a family member, what might be the tax ramifications for that person?
- If the family member has family who might stand to inherit should the property be put in the name of a trust?
The answers to these questions will affect your tax responsibilities, which will impact the profit you can expect to realize from your investment.
Another option is to invest in an investment fund which invests in Israeli real estate. If it is an official REIT (real estate investment trust) then it is governed by the Israeli Security Exchange Commission. There are also other funds that are not REITs that you can invest in. In this case you will need to understand how the fund works, when you can pull your investment, and what your tax obligations may be.
Joint property ventures with construction companies or developers are also a possible investment vehicle. This method has its own tax ramifications which you should investigate carefully for your own situation. In addition, you should make sure you have a solid contract to protect yourself, as you would in any business venture.
When considering investing in real estate in Israel, it’s essential to be aware of the legal issues associated with each type of property. For instance, there are different rules governing zoning and registration of rights for properties in a moshav or a kibbutz, a new neighborhood, a commercial building etc.
Irrespective of the investment method you select, asking the following questions and getting answers to them, is essential for a successful deal.
- Where is the land?
- What is the land zoned for (residential, commercial etc.)
- Can the zoning be changed?
- Is the zoning in the process of being changed and if so how far along is it? (The answer will affect the worth of the land, the viability of the project and the time to see a return on your investment.)
- If it is a building, what type of building (historical, modern etc)?
- Does the structure have building rights?
- Can those building rights be used or can they be sold and transferred to another building?
- Are there protected tenants in the building? (This is a critical question because if there are protected tenants they need to be compensated in order to vacate the property and this could be expensive).
- What is the neighborhood around the building like?
- Is there a building or land close by which is zoned for something specific? How might that affect the value of your property?