By Shia Getter
Jews worldwide look towards Eretz Yisrael for investment. Buying in the Holy Land answers to a deep need to be connected with our heritage and provides a solid investment option. For this dual reason, Eretz Yisrael attracts many foreign buyers.
What are the options for your property once you’ve established this connection with Eretz Yisrael? In general, there are three different ways of managing your long-distance apartment.
Some buyers see their apartment in Israel purely as an investment, and aside from the appreciation value, they want to see a steady cash-flow return on their investment. This means that they will rent their apartment out to a reliable, long-term renter, receiving passive income at no cost. This is the highest income option in the long run, and the easiest.
In Israel there is no property tax; the municipal tax, “arnona,” is paid by the renter. If the apartment was renovated, or built to a high standard, your maintenance costs should be very low. Management costs are low as well, and there is no reason the apartment need ever be empty.
Future articles in this series will address choosing tenants and making renovations, both of which will set you up for a low-maintenance, pain-free investment for years to come.
Other buyers want to enjoy having their own home in Israel, whether they divide their time between the U.S. and Israel, or they just come for the holidays or a yearly vacation. But they don’t want to have constant bills from the apartment when they are not there. Making your apartment available for short-term rentals gives you the advantage of covering the costs of the arnona and utilities. Managed well, such an arrangement will bring in a nice cash flow for the months when you’re not in Israel.
Short-term rental to tourists and visitors is a niche in and of itself and should be approached as a business in order to make the most out of the apartment’s availability. You (or a manager) will need to market your place, choose good tenants, be on top of them, and be available to them. Maintenance costs are higher when you rent short-term because the quicker turnover rate increases the wear and tear on the apartment. But at the same time, short-terms can charge more per rental period than long-term rentals do, and you’ll still have your apartment available to you when you and your family want to visit.
As soon as you market your apartment for tourist and vacation rental, you have to be ready to meet prospective tenants and respond to calls, because you will be getting a lot of them. Management companies can field these calls successfully; the Getter Group, for example, maintains a high occupancy rate for the apartments under its care and is available around the clock to ensure that your renters are happy and taken care of.
Taking care of your renters means having a number they can readily call if anything goes wrong and promptly providing reliable technicians or repairmen when necessary. Luxury rentals also must be cleaned professionally between renters. If a vacationer finds a previous tenant’s socks under the bed, you have just turned a “hotel stay” into a yeshiva-dormitory environment.
A third type of buyer does not want the hassle of renters. He wants the apartment ready with his own belongings in it whenever he and his family come to Eretz Yisrael. Such investors have received a bad rap lately, since their apartments sit empty most of the year, while Jerusalem suffers a housing shortage. However, this is a shortsighted concern, as foreign investors are a very good thing for Eretz Yisrael and for Yerushalayim, regardless of whether they choose to rent out their apartments.
As I pointed out in The Jerusalem Post, as one of the city’s fastest-growing real-estate sectors, the high-end luxury market is a big part of the construction boom we are seeing lately in Jerusalem. Many of these buyers are foreign investors. From the basic perspective of dollars and cents (or shekels and agurot), the increased presence of foreign homeowners in Jerusalem is a win-win. Apart from the construction industry, these buildings provide hundreds of jobs to independent contractors such as cleaners, repairmen, and security guards.
Most notably, however, foreign real-estate investment benefits retail, restaurants, and tourism in general. On visits to Israel, these homebuyers typically are essential supporters of the small businesses that are an integral part of the Jerusalem economy.
Jerusalem is a sound investment for all types of buyers, and your investment in Israel, whether you rent out your apartment to residents, tourists, or not at all, is good for the economy and the future of Eretz Yisrael as well. In the coming weeks, we hope to guide you in maintaining and managing your investment as smoothly as possible. ϖ
Shia Getter is the CEO of the Shia Getter Group, a full-range real estate services firm in Jerusalem catering to the Anglo investor. He is a noted expert, columnist, and author of The Guide to Investing in Jerusalem Real Estate. He and his professional team manage many upscale Jerusalem properties and have helped countless people buy, sell, and renovate property in Israel.