Not every real estate investor who loses money bought a bad property. A large share of the mistakes we see are made before the purchase, during it, and sometimes long after – and none of them were necessary.
These are the 5 mistakes that recur most often.
1. Buying Based on Price, Not Cost
The property price is one number. The total cost of entering the deal – your true total investment – is another, usually higher by 15% to 20%. Purchase tax (mas rechisha) on a second home or investment property starts at 8% from the first shekel. Lawyer, brokerage, required renovation – add to the sum. Anyone calculating yield on property price alone is calculating on the wrong basis and discovers the difference the hard way.
2. Choosing a Property Before Choosing a Market
“I saw an apartment that looks good” – that’s not a priority order. The question that precedes the specific apartment is: what’s the market? What’s the population there? Where is demand heading? What’s planned for the area over the next five years? An average property in a rising market is a better deal than an excellent property in a declining market.
3. Taking What the Bank Offers
A bank offering 4.8% when running a tender you could get 4.1% – charges you an additional 140,000 NIS on a million- NIS mortgage over 20 years. A tender between banks is the simplest action people don’t take.
4. Not Planning an Exit
“We’ll hold forever” – that’s not a strategy, it’s the absence of one. Even if you don’t plan to sell in the coming years, you need to know: what happens if we have to? How much capital gains tax (mas shevach) on the profit? What’s a realistic market price in a downside scenario? Who’s the pool of potential buyers? Decisions made under pressure always come out worse.
5. Thinking Experience in One Field Is Enough
People who succeeded in tech, finance, business – sometimes come to real estate with too much confidence. Real estate is a market that requires specific knowledge. The high price you can pay for lack of experience in this field is particularly high. Even experts make mistakes – which is why they bring in domain experts alongside them.
Mistakes are part of learning. But not all of them have to cost money. An early conversation with people who have seen many deals can save you from entering some of them.