An investment apartment is judged by its yield, but the yield depends on costs and risks that do not appear in the advert: purchase tax, building violations, a tenant who will not leave, and tax on the rent.
Purchase tax on an additional apartment
A buyer who already owns an apartment pays 8% on an additional apartment up to about ₪6.06 million and 10% above that, under a temporary provision in force until the end of 2026. On a ₪2 million apartment that is ₪160,000, which changes the yield in the first years. Details in our purchase tax guide.
Legal checks
- Land Registry extract or a rights confirmation from the Israel Land Authority or a housing company: owner, mortgages, attachments and notes.
- Building file at the municipality: permit, additions without a permit, splitting an apartment into two units. An unpermitted split unit may lead to a demolition order and a fine.
- Betterment levy and new plans affecting the building.
- Existing tenant: the lease, its end date and any extension option. You buy the apartment with the tenant.
Tax on rent
Letting a residential apartment in Israel offers three options: an exemption up to a monthly ceiling (about ₪5,654 in recent years), a 10% track on the whole income, or marginal tax after expenses. The track is chosen every year, and the choice depends on the rent and your other income.
An off-plan apartment as an investment
When buying off-plan, also check the security under the Sale Law, the index linkage and the delivery date. See a lawyer for buyers of new apartments from developers.
When you sell
Selling an investment apartment usually carries no exemption from capital gains (betterment) tax, so planning the sale matters as much as the purchase. See capital gains tax on selling an apartment.
Where do you go from here?
At Paz Israel & Co. Law Office we accompany real estate investors in Israel, Israelis buying property in Cyprus and foreign investors buying in Israel: checking the property and the seller, negotiating the contract, accompanying you through registration and coordinating with tax advisers. In Cypriot transactions we work in coordination with a local Cypriot advocate. For more information see our real estate investor services page, or contact us to schedule a meeting in Tel Aviv, Jerusalem or Modi’in.
This article provides general information, is correct as of the time of writing, and does not constitute legal or tax advice. Cypriot law is checked in every transaction with a local advocate.