Most people who lose money in real estate didn’t buy a bad property. They bought a reasonable property without knowing whether it was worth what they paid.
Deal analysis isn’t a complicated Excel sheet with twenty rows. It’s seven questions that need a real answer before you sign.
1. The Asking Price – Compared to What?
A “fair” price isn’t a price that looks reasonable to the eye. It’s a price that holds up against closed transactions of comparable properties over the past 12 to 18 months. The Tax Authority’s database is a starting point. But you also need familiarity with the specific market to understand whether the right comparison is to one street or to a project that closed last year.
The big risk: choosing the “comparables” that justify the price you want to pay. Independent players do this without noticing.
2. The Yield You See vs. What Actually Remains
Gross yield is annual rent divided by price – a convenient number to cite in conversation, useless for a decision. The yield that matters is net (Cap Rate): after property tax during vacancy periods, building maintenance (vaad bayit), insurance, property management fees, annual maintenance averaging 1% of property value, and if financed – mortgage interest cost relative to income. A leveraged investor should also calculate Cash on Cash return – net cash flow divided by actual equity invested – because that’s what your money is really earning.
A property earning 4% gross can easily yield 2% net. It can still be a good deal. But you need to know the right number to make the right decision.
3. What’s the Appreciation Potential – and Why It’s Not Just a Feeling
Two things drive appreciation: demand growing relative to supply, and infrastructure improvements. Both have data. Zoning plans, approved transit lines, new educational institutions, employment zones opening up – these are public data you can check. Investing in a neighborhood undergoing demographic and infrastructure change can yield appreciation that changes in the general market don’t explain.
4. How Much Entering the Deal Really Costs
The property price is a starting point. Purchase tax (Mas Rechisha) on a second home in Israel starts at 8% from the first shekel. Real estate lawyer fees, required renovations, broker costs – together they can add another 15% on top of the listed price. Calculating yield from the listed price alone is a mistake that costs money. Calculating from total acquisition cost is the real calculation.
5. Is There Rental Demand in the Area – Not Just Now
Rent projected on paper is only worth something if someone will actually pay it. How long does it take to find a tenant in the area? What’s the average vacancy rate? Who rents – families, students, workers? Each population behaves differently. And if the population changes, demand changes with it.
6. Is the Property Clean Legally and on the Registry
Land registry extract (Nesach Tabu), building permits, the municipal building file (Tik Binyan), construction violations, liens, attachments, municipal orders – any one of these can halt a deal, delay it, or add unplanned costs. Legal due diligence by a real estate attorney isn’t an add- on. It’s part of the minimum.
7. What’s the Exit Scenario
An investment without a planned exit is an investment whose price is set by circumstances, not decision. When do you sell? What’s the capital gains tax liability? Does holding more than eighteen months change the calculation? What’s the realistic price ceiling in five years? An exit scenario doesn’t guarantee the market will behave accordingly. It guarantees you don’t discover by surprise that your exit assumptions didn’t hold up.
At Almi, deal analysis is available as a standalone service. Someone who has found an apartment and wants a professional review before proceeding can engage just for this stage without taking Full Investment Advisory.