Most of us are constantly looking for what to do with our money and savings, what the best and most worthwhile investment is. The main thing guiding us is simple: An investment that is secure and that generates a return.
The real estate market certainly provides an option that meets these criteria, but the opportunity to purchase real estate in Israel is growing less and less affordable, and less feasible. The best alternative these days, in my opinion, is to be found abroad – in the US, where the price of an old three-room apartment in Givat Olga can buy you two new villas in Florida with double the return.
Data show that more and more Israelis are looking positively at investing in American real estate, but there are many possibilities, and it is important to choose the best investment for you. There are many varied options, including investing in a private rental property, a plot of land, a rental apartment, or a commercial property. I recommend investment in a private home in the US, which will generate monthly rental income. Why?
1. Many foreclosures on large homes due to the crisis in the US. Due to the housing crisis, many homeowners were evicted from their homes and have not yet been able to purchase a new property. Therefore, there are many more renters in the market. This creates an optimal situation for investors to purchase income-producing properties that will be easier to rent out.
2. An investment that pays for itself. Assuming that the property is occupied most of the time, and that it does not stand empty at all (or just very briefly) between tenants, the monthly rental income will cover the cost of a mortgage, taxes and maintenance. This means that you, the investor, have no additional expense beyond the initial investment. Over time, the mortgage on the property will get paid off, your income will increase, and the cash flow will enable you to use the investment money for an additional new investment.
3. The trend of rental prices is skyrocketing. In view of the demand for rentals, there is a marked increase in monthly rental prices. According to a report on the rentals market, 88% of property managers raised rental prices during 2015, and by the end of 2016, a further increase of 8% is expected.
4. People are interested in returning to their previous lifestyle. Many tenants who lived for years in their own private home lost their homes in the crisis. These tenants will find it difficult to move to an apartment, and will prefer to maintain their existing lifestyle. Thus, the demand for private homes for rent will increase. These people will also make better tenants, since they are used to living in a private home and will make sure to maintain it as they did their own home.
5. Tax deduction. The thought of dealing with taxes on the purchase of an additional property meant for investment, and on rental income, could be off-putting. But it is important to know that there are many tax incentives that property owners can take advantage of in order to offset costs. Depreciation, maintenance, repairs, interest (on mortgages) and payments to accountants are just a small part of all the expenses that the owner of an income-producing property can claim in a tax refund.
In summation, every investment must obviously be examined according to specific criteria in order to make an informed decision and to maximize the return on investment at minimal risk. But it is important to remember what the optima type of asset is for you.