It is said that the easiest way to get a point across in a way that will sink in is to use a story. So, this week, let me share three stories related to real estate in Israel.
An investor who owns three investment apartments came to my office to talk to me about taking over the management of his units. Some probing questions brought to light the fact that he was undercharging on the rents. We were able to bump up the rental income by almost $11,000 a year almost immediately!
Lesson: You might be leaving money on the table. When’s the last time you checked your income vs. what the market is charging for a similar rental?
Next story: Just yesterday, I met an attorney to discuss an apartment for which I am the buyer’s broker and expert representative.
I had gone to personally inspect the apartment several days earlier. During the discussions with the lawyer, I realized that part of the “grand metziah” of this dirah was the seller attempting to sell use of the hill behind the property . . . which wasn’t his! This “find” was the reason for the seller asking for 500,000 shekel more than a similar apartment.
Now, if it had been halachically, if not legally, usable by the buyer, based on access rights, then it might have still been a good deal. However, in this case, there were other neighbors with an equally valid claim to equal access. This awareness changed the spin from the property being a wonderful bargain to being a sour, overpriced investment.
Lesson: Especially in Israel, everyone wants a “unique twist” when they buy property to show how smart they are and that they got the best deal. Sometimes it’s buying an apartment with a storage area (machsan) that can be used to expand the apartment size in the future, roof rights, or a garden that has private access which makes the apartment more valuable. Being eagle-eyed and careful can help you get the right deal that works for you without getting burned.
Next story: A client contracts with us to renovate a property near Shaarei Chesed to split it into several short-term rental units. Being that the property is located at the foot of a hill (somewhat similar to the story above, except here he was the only one with access) we understood that we could dig into the side of the hill to create more area and bigger units.
The contractor quoted a seemingly fair price of NIS 400,000 for the digging and removal of the rock and debris. But did we pay it because it was the best price from the several contractors we know and trust? No!
Instead, we first dug a hole in the rock and inspected it, to see what the debris consisted of. To the excitement of the owner, we discovered that it was simply large boulders that would have to be transported elsewhere, but not anywhere near as many stones or dirt as anticipated. And so we were able to get the price reduced by 210,000 to just 190,000. Music to the owner’s ears!
Lesson: you can overpay even when you pay an honest wage. Take extra steps to safely minimize your expenses where you can.
And finally, there’s a not-so-funny joke in Israel that goes something like this: A customer at a restaurant eats a sandwich and has a drink. When he asks for his bill, he discovers a 30 shekel charge for something called “matzliach.” He doesn’t recall ordering anything like that and so he calls for the waiter. “Excuse me, sir, I ordered a sandwich and a drink. But what is this extra item on the bill?” he asks. The waiter shrugs and says, “You can remove that charge from your bill. Sometimes it’s matzliach and sometimes it’s not.”
Like an American going to court in China without an attorney or speaking Chinese, when you work in a country with different laws and culture, sometimes people get taken advantage of.
No matter how good a deal sounds, you should seek counsel before you sign anything or put down any money.
During these last eight years of my experience managing, brokering, and renovating different properties and dealing with brokers, attorneys, government agencies, and contractors, I’ve seen more mistakes than many people see in a lifetime.
Especially for those who already have apartments in Israel but want the additional income that renting it out for the short term provides, it is imperative that you do it right, and not “chap-plop.” When done right, with Hashem’s help, you can continue to enjoy its use when you are here, while leasing it when you are away—while keeping your investment and Jerusalem home in pristine condition. v
Shia Getter will be in the New York area next week and has some availability to Five Towns Jewish Times readers for consulting with serious owners and potential investors who want to buy property in Eretz Yisrael while being properly advised. For more information and to schedule an appointment, call Sarah at 718-473-3950 or e-mail firstname.lastname@example.org.