Furthermore, many investors tend to estimate the annual return based on the rent they were told, and do not measure the costs of taxes, electricity, water, maintenance, brokerage and other fees, and thus may reach a return of 5% instead of 7%. The supposedly affordable and expected return of 8% IFA is not always accurate.
They must also remember that in addition to the rental yield for which we invested, there is also a return on the sale of the apartment as a result of the increase in price. Sometimes this return is much higher than the monthly return and in most cases does not require any effort from you.
All that is required of you is to purchase an apartment in reasonable areas - those where the increase in apartment prices has not raised their prices to unattainable levels - and which are expected to rise further, while carefully monitoring a real and stable price and an area that is not problematic.
Apartment for less than half the price
A very significant factor that is important to be aware of is the huge gap between apartment prices in the same neighborhood. On certain streets, even in the center of the area, you can find 3-room apartments for half a million NIS, while in the new building across the street, a 3-room apartment will cost over a million NIS.
There is no doubt that there is justification for a certain gap due to the condition of the building, its age, and the population. However, these gaps are narrowing over time due to the mixing of the population and the establishment of modern parks near the new project, and in particular due to the municipality's desire to accelerate plans for evacuation, construction, or neighborhood rehabilitation.
These things can turn the tables, and someone who bought for half a million NIS will discover after a few years that their apartment is worth twice as much.
Price increase? Not just in ultra-Orthodox areas
There is a very common mistake, even among veteran investors, who claim that in ultra-Orthodox areas there is a higher price increase than in general areas.
This claim was true perhaps 5 to 10 years ago, but in recent years price increases are no longer the preserve of ultra-Orthodox concentrations alone.
From the Tax Authority's sales data, we can see, for example: In the first half of 2012, the price of an average apartment in Bnei Brak decreased by approximately 4.41%, and in the city of Elad, the average apartment suffered a decrease of 7.31%.
In contrast, during the same period, an average apartment in Or Akiva rose by more than 8% and in Pardes Hana Karkur by more than 10% in just six months. Together with the monthly return, an annual return of 25% can be reached.
However, there are Haredi areas, and in particular Haredim, that have experienced a significant price increase, but they usually had clear and unique circumstances and not necessarily due to being in Haredi areas.
Shmuel Rosenblatt is the co-CEO of Empiria Real Estate and Finance, which develops and manages real estate ventures 02-6222255
The above does not constitute any purchase recommendation.
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