Key Things to Know When Buying in Israel

First, let’s go over some key things you need to know when you’re buying property in Israel. The terms can be a little confusing, so here’s a simple breakdown.

Ownership (Freehold vs. Leasehold) This is a big one. You need to check if you are buying the land itself (that’s freehold or private) or just the right to use it for a long, long time from the state (that’s leasehold or leased).

Land Registration (Tabu, Minhal, Amidar) This is just about who officially has your name recorded as the owner. Tabu is the main land registry. Minhal (also called the ILA) manages state land, and Amidar is a public housing company. Your lawyer will handle this, but it’s good to know.

Zoning (Taba) You’ll hear the word “Taba” (it’s a Hebrew acronym: תב”ע). This is just the official city plan. It dictates what you’re allowed to build in the neighborhood, like how high buildings can be or if an area is for homes or businesses.

The Costs and Taxes

Now, for the costs. There are quite a few taxes and fees to be aware of.

• Arnona (Property Tax): This is the regular bill you pay to your city every month or two. It covers things like trash removal, street lights, and schools.

• Purchase Tax (Mas Rechisha): This is a one-time tax that you, the buyer, have to pay to the government when you buy the property.

• Aliyah Benefits: If you’re a new immigrant (Oleh Chadash), this is really important. You can get a big one-time discount on that Purchase Tax.

• Capital Gains Tax (Mas Shevach): This one is for the seller. They pay this tax on the profit they made when they sold the property (the difference between what they bought it for and what they sold it for).

• Betterment Tax (Hetel Hashbacha): You pay this to the city, but only if its planning decisions (like allowing you to build more) made your property more valuable.

The Buying Process and Your Team

Here’s what the actual process involves.

• Lawyer Fees: You can’t get around this one. In Israel, both the buyer and the seller must have their own separate lawyers. This is the fee you pay your lawyer for their work.

• Real Estate Agent Commission: This is the fee you pay the agent, if you used one, for helping you find the home.

• Down Payment: This is the amount of your own cash you need to have ready. It can’t be part of the loan. For example, a first-time Israeli buyer needs at least 25%.

• Mortgage (Ishur Ekroni): The “Ishur Ekroni” is a key document. It’s the pre-approval letter from the bank that says, in principle, how much they agree to lend you.

• Appraisal (Shammai): The bank will send an appraiser, called a “Shammai,” to figure out the property’s true value. Your loan amount will be based on their number, not necessarily the price you agreed to pay.

• Home Inspection (Bedek Bayit): This is a “Bedek Bayit.” You hire an engineer to check for hidden problems, like leaks, mold, bad wiring, or structural issues.

• Debts or Liens: Your lawyer will do this. They’ll check to make sure the seller has paid all their bills (Arnona, water, electricity) so you don’t get stuck with them.

• Building Rights: This is just checking what the law allows you to do with the property. Can you add a room? Can you legally close that balcony?

For Foreign Buyers and Investors

And if you’re an investor or buying from overseas…

• Foreign Buyer Rules: There might be extra rules if you’re not an Israeli citizen. You might need special permission to buy certain types of land or be required to put down a larger down payment.

• Currency: If your money is in dollars or euros, you’ll need to think about the costs and risks of converting it to Shekels to pay for the property. Exchange rates fluctuate.

• Yield and Resale: This is an investment calculation. “Yield” is your profit from rent. “Resale” is just thinking about how easy it will be to sell the property later on.