In the Israeli market, we often see listing ads shouting “5% Return!” or “8% Yield!” But as investors and professionals, we know the Gross Yield is just the sticker price. The Net Yield is what actually hits the bank account.
If you want to analyze deals faster—or explain them better to your clients—here is a super-clear primer.
1. The difference (in plain Hebrew/English)
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Gross Yield: The annual rent divided by the purchase price. Simple, but it assumes the property runs itself for free.
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Net Yield: The “Take-Home” view. This is (Annual Rent − Expenses − Vacancy) ÷ Price.
2. The “Napkin Math” Shortcut 🧮
You don’t need a spreadsheet to get a solid estimate during a viewing. Formula: Net ≈ Gross × (1 − Expense% − Vacancy%)
The Israeli Example: Let’s look at an office space or a strong investment property:
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Price: 2,000,000 NIS
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Rent: 150,000 NIS/year (12,500/mo)
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Gross Yield: 7.5% (150k ÷ 2m)
Now, let’s get real.
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Ops (12%): Management fees (dmei nihul), Vaad Bayit (landlord side), insurance, repairs.
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Vacancy (5%): Creating a buffer for tenant turnover.
The Calculation: You take that 7.5% Gross and strip away the 17% overhead (12% ops + 5% vacancy). The Result: Your real Net Yield is roughly 6.2% – 6.6%.
Note: For furnished short-term rentals (AirBnb style), raise your Ops & Vacancy % significantly!
3. What counts as “Operating Expenses”?
Don’t forget these when pitching the deal: ✅ Management fees (usually 10% + VAT) ✅ Routine maintenance (Tikkunim) ✅ Structure Insurance ✅ Arnona (Only during vacancy periods) ✅ CApex reserve (Setting aside money for a new AC or boiler)
📋 Copy-Paste Deal Template
Next time you send a WhatsApp summary to a client, use this format to look sharp:
📍 Location/Project: [Name] 💰 Price: [Price] NIS 📈 Annual Rent: [Rent] NIS (Gross: [X]%) ⚙️ Est. Ops & Vacancy: [X]% 📉 Projected Net Yield: ≈ [X]%
