Ever wondered how everyday people seem to effortlessly become millionaires in the Israeli real estate market? You’re not alone. Imagine being able to buy properties without having loads of cash in hand, even during challenging times like the coronavirus pandemic.
Sound too good to be true? Keep reading—I’m going to break it down step-by-step so even someone completely new to real estate investing in Israel can follow along and take action immediately.
Step 1: Understand What It Means to Be a “Millionaire”
First off, let’s clear up something crucial: when people say someone is a “millionaire,” they usually mean net worth, not necessarily cash in the bank.
- Net Worth Explained:
Net worth is simply the total value of everything you own (like properties, investments, and savings), minus everything you owe (debts, mortgages, and loans).
Example: If you own an apartment worth ₪800,000, but have a ₪400,000 mortgage, your net worth from that apartment alone is ₪400,000.
Being a millionaire in this context means your net worth is at least a million shekels—not that you have ₪1,000,000 just lying around.
Step 2: How People Buy Apartments in Israel Without Cash in Hand
Here’s the secret sauce. Most Israelis aren’t buying properties outright. They’re using smart financial strategies to purchase real estate with little or no initial cash investment.
Here’s how it usually works:
A. Leveraging “Other People’s Money” (OPM)
- OPM Explained:
This means using borrowed money—from banks, investors, or financial institutions—to purchase property. - Real-Life Example:
Let’s say there’s an apartment listed at ₪750,000. If you don’t have cash for the down payment (usually 25-30% in Israel), you might borrow this money. You then pay it back slowly, typically through the monthly rent you receive from tenants or your regular income.
Tip: Always ensure the monthly repayments are manageable and clearly understand the terms before borrowing.
B. Creative Financing Strategies
If traditional mortgages or loans seem difficult, there’s another option: combining different funding sources. For example:
- Private Loans from Investors:
Private investors (friends, family, or professional investors) lend you money directly. You agree on an interest rate and repayment timeline. - Leveraging Your Pension or Retirement Funds:
In some cases, you might temporarily withdraw or borrow from your retirement fund. However, this must be done very carefully—usually under advice from a financial advisor.
Quick Example Scenario:
- Apartment price: ₪730,000
- Down payment required (around 25%): roughly ₪182,500
- Funds borrowed privately: ₪100,000
- Personal savings or pension borrowed: ₪50,000
- Additional short-term loan or creative finance: ₪32,500
You repay these sources monthly from the rental income you get or your regular salary, eventually building equity (the percentage of the property you truly “own”).
Step 3: Picking the Right Property (Even in a Crisis Like COVID-19)
The coronavirus pandemic in 2020 might have scared many people away from investing. But savvy investors saw this crisis as an opportunity.
- Why Crisis = Opportunity:
During crises, property prices might drop temporarily, making properties cheaper to buy. - Picking the Right Property:
- Look for apartments priced below the average market rate.
- Pick areas where demand remains strong despite a crisis (e.g., cities close to Tel Aviv, central cities, or places near developing infrastructure).
Real-Life Example:
- You find a well-sized apartment listed around ₪690,000, slightly below the usual market value of ₪720,000. This gives you built-in equity, meaning instant value once the market recovers.
Step 4: Managing Your Monthly Cash Flow Wisely
Buying an apartment isn’t just about finding funds initially. It’s about managing your monthly finances smartly.
- Cash Flow Explained:
Cash flow refers to money moving in and out every month. You always want more money coming in (from salaries and rent) than going out (loan repayments, property maintenance). - Pro Tip:
Keep your regular job or steady income source. Invest wisely and patiently, managing your finances monthly, ensuring payments are comfortably covered.
Step 5: Increasing Your Income Streams Strategically
Many people build wealth faster by creating additional income streams.
- Additional Income Stream Example: Imagine creating a side project or freelance business, earning an extra ₪1,400–₪1,600 each month. Put this extra money towards paying down loans or saving for your next property.
- Reducing Expenses:
Sometimes switching jobs temporarily to one with a lower salary—but higher growth potential—can help you strategically grow wealth long-term.
Step 6: Growing Your Real Estate Portfolio Over Time
Once you’ve bought your first property, building your next becomes easier. Here’s how the cycle works:
- Buy Property #1 with minimal or no cash.
- Gain Equity as the property value appreciates (goes up in price).
- Refinance (take out a new loan based on increased property value) or use rental income to fund your next investment.
- Repeat the process, carefully managing risks each time.
Too Long; Didn’t Read (TL;DR):
Here’s your simple, actionable checklist to getting started in Israeli real estate:
- Understand net worth vs. cash.
- Use borrowed money strategically (loans, investors, creative finance).
- Buy during crises or under-market-value opportunities.
- Wisely manage monthly income and expenses (positive cash flow).
- Create extra income streams for easier repayment and faster wealth-building.
- Repeat the cycle to grow your portfolio.
Ready to Get Started?
This isn’t magic—it’s strategy. Anyone, including you, can do this if you plan carefully, educate yourself, and remain consistent.
If you’re intrigued by the possibilities, your first step should be learning more, consulting professionals, or beginning to research potential deals.
Start small, dream big, and see where investing in Israeli real estate can take you!
Happy investing!
