In the past year or so, the commercial real estate market has started to come back to life, and with so many trades taking place, it has left the feeling that referrals are not a temporary phenomenon, but a real change in trend, heralding the arrival of a new era in the world. It is a window of opportunity to trade at attractive prices and good profits.
Why Foreigners Should Invest in Israel
When examining any type of investment and especially real estate, you need to consider the nature and quality of the transaction on the one hand and the alternatives available to the investor on the other. The Israeli commercial real estate market, which had suffered a severe recession over the past decade, has begun to rebound in the past year. As real estate prices have not yet peaked, this phenomenon opens a window of investment opportunities for foreign investors.
For example, referring to a productive real estate transaction in the United States with AAA tenants, the expected return on that transaction is approximately 5% – 7% if the transaction is successful. However, productive real estate transactions with AAA tenants in Israel will yield an average return of 7.5% – 10%.
In addition, the sale price of the property and the revenue calculated in relation to the transaction were based on “date” leases that did not yet reflect the revival that occurred at the branch. It is expected that there will be additional latent potential for each transaction as real estate values rise and future rental values rise.
Financing real estate transactions in Israel is different from offshore procedures.
Dealing with real estate and making productive real estate transactions are mostly financial transactions. We often read that transactions do not take place due to inadequate loan terms, as the profitability of a transaction depends on the funding rate, interest rate, and ultimately loan repayment method approved by the bank. Checked pattern. The cash remaining in the hands of investors.. What is the required funding rate for a foreign resident interested in acquiring Israeli real estate and how is it determined?
Financial Statement Correspondence – Foreign residents do not have a fixed income in the State of Israel and must provide financial statements signed by the authorities of the country of permanent residence. You cannot get a loan without this financial statement. It’s important to remember that financial statements are used as the basis for determining the percentage of the loan the borrower can get.
Personal Guarantee – Most loans granted in Israel require a personal guarantee. Contrary to procedures accepted abroad, banks are not prepared to provide loans on mortgage properties.
Funding Ratio – The funding rate is determined by several key parameters. First, appraiser appraisal: The loan a bank receives is based on an appraisal the bank receives from a real estate jerusalem israel appraiser. The funding rate an investor receives comes from the appraiser’s assessment, not the price of the property. Second, the nature of investment: in a productive transaction, the loan rate is affected by the quality of the lessee, and the loan rate can reach 85%. In venture deals, the funding rate can drop significantly, averaging 50-60%.
Of course, the quality of the financial statements helps determine the percentage of funding an investor can receive. The stronger an investor’s economy is, the more likely they are to get a higher loan rate, because a personal guarantee is required every time they take out a loan.
The key to successful trading
Foreign investors must exercise extreme caution as they trade far from where they live and work according to the following key factors:
Commercial Environment – A lot of time should be invested in an in-depth study of the real estate business environment for investment. Care must be taken not to be static in terms of price and rental ratio compared to other properties in the area. Anything more than 20% different from what is allowed in your area should be a warning light and we should thoroughly investigate why we are entitled to such premiums.