Different paths to owning a home

An apartment from a developer is purchased directly from the developer or contractor building the project, usually before the building itself has been constructed or during the early stages of construction. This is the most common way to buy a first home in Israel.

How does it work?

1. Select the project and apartment at the developer's sales office.
2. Sign a purchase contract with the contractor covering the transaction terms, payment schedule, delivery date and technical specifications.
3. Apply to a bank for a mortgageA long-term loan for purchasing a property, with the property serving as collateral for the bank.. Most projects have bank supervision that regulates the financing process.
4. Payment for the apartment is generally made in several stages according to the progress of construction.

Legal protections for buyers

These protections are intended to reduce the buyer's risk, especially when a transaction is completed years before the apartment is actually received.

A pre-saleAn early sales stage in a real-estate project at a price below the market price. is the earliest marketing stage of a real estate project. At this stage, the developer offers a limited number of apartments for sale, sometimes before a final building permit has been issued or before construction has begun.

Why do developers do this?

To begin construction, the developer needs bank financing and supervision. The bank requires proof that there is demand for the project. The developer therefore sells the first apartments at a reduced price to reach the quota set by the bank, thereby releasing the construction financing.

Why can it be worthwhile for you?

• Attractive price: Prices at this stage are generally lower than those set later in the project, so some buyers see a pre-sale as an opportunity to enter the real estate market at a relatively low price.
• Flexible payment terms: Often, only a small amount of equity is required at first, for example 15%–20%, and the balance is paid close to delivery.
• Profit potential: The apartment's value is expected to rise significantly as construction progresses and the building permit is received.

The risks: what must you take into account?

• Planning uncertainty: If you buy before the building permit is received, the plans may still change according to municipal requirements.
• Delays: A project at such an early stage is more exposed to bureaucratic delays that can last years.
• Financing risks: If interestThe "price of money" – the amount paid for the use of someone else’s money, as income to the depositor or as a cost to the borrower. rates rise or your mortgage terms change before the final payment date, you may face budget difficulties.
• Difficulty selling early: It is very difficult to sell the apartment to a third party before it is ready and receives Form 4 (טופס 4), making the investment less liquid.

When is it advisable to complete the transaction?

There is a dramatic difference between a pre-sale before and after a building permit:

Another path to owning a home is through state lotteries, mainly known today as Dira BeHana'ha, or "Apartment at a Discount," and previously as Mehir LaMishtaken, or "Buyer's Price."

How does it work?

1. Obtain a certificate of eligibility: Through one of the registration companies—Alonim (אלונים), Milgam (מילגם) or Amidar (עמידר).
2. Register for lotteries: Register through the official Ministry of Construction and Housing website for projects in cities relevant to you.
3. Win and choose: If you win, you will eventually be invited to choose an apartment according to your position in the lottery.

Advantages: your purchasing power increases

• A substantial financial discount: Usually around 20%, but in some cases it reaches 30% or 40% of market value.
• Low equity requirement: You can enter a transaction with only NIS 120,000 in equity.
• High leverage from the bank: The bank calculates the mortgage according to the apartment's higher market value rather than the price you actually paid. This may allow financing of up to 90% of the transaction.

Disadvantages: the price of patience

• Long waiting period: Usually 4–7 years pass between winning and receiving the keys.
• Lack of control: You are limited to cities where lotteries are held and may not be able to choose the floor or direction you wanted.
• Restriction on selling: The apartment may not be sold for five years from the date of occupancy, or seven years from the date of the lottery.
• To avoid Mas Shevach on a sale, a holding period of at least 18 months after Form 4 is received is also required.
• Claims were previously made about the construction quality of discounted apartments. In recent years, however, the apartments offered have been in regular mixed buildings, so their construction quality is ostensibly the same as that of standard developer-built apartments.

Another way to enter the real estate market is a model known as "one-third of an apartment." Three people—friends or family members—join together to buy one property, based on the understanding that buying alone is not possible.

How does it work?

The three partners sign one purchase contract and one joint mortgage. They share the expenses, including the lawyer, renovation and monthly payments, and share the profits from rent or an increase in value upon sale.

Advantages: why can it be worthwhile?

• Lower-cost entry to the market: Each partner provides only one-third of the required equity.
• Tax benefits: If this is your first apartment, you may sometimes benefit from the reduced purchase tax for a sole residence on your share.

Disadvantages: what are the risks?

• Financial dependence: If one partner does not pay their share of the mortgage, the bank demands the money from the others. You are financially "married."
• Personal dependence: What happens if one person wants to sell while the others want to remain?
• Legal complexity: The transaction requires a very careful co-ownership agreement defining every possible scenario.

A flipA strategy of purchasing a property, improving it, and selling it for a profit within a short period. is a "buy, renovate, sell" strategy. You buy a neglected property below market price, renovate it quickly and sell it for a profit within a short period.

How does it work?

The process generally looks like this:

1. Finding the property: Locate a "bargain"—an apartment with unrealized potential because it is neglected, inherited or owned by a seller under pressure.
2. Improving it: Carry out a targeted renovation. The goal is not to create a "dream home" but to make cosmetic and infrastructure improvements that raise the property's value in the eyes of an average buyer.
3. Exit: Sell the property and earn the difference between the purchase and renovation costs and the new market price.

Advantages: relatively quick money

• Capital gainA gain created by an increase in the value of a particular asset (such as a rise in a share price) and realized only when the asset is sold. within a short period: Unlike a long-term investment, the goal is to see the money and profit within a few months.
• Control over value: You do not rely only on market prices rising; you create the increase in value through the renovation.
• No ongoing management: There is no need to deal with tenants, years of repairs or building-committee matters.

Risks: what can go wrong?

• Budget overruns: A renovation budgeted at NIS 100,000 may end up costing NIS 150,000 and consume the entire profit.
• Long time on the market: If the market freezes and the apartment does not sell quickly, financing costs such as a mortgage erode the profit.
• Lack of experience: Without knowledge of construction or an accurate valuation, it is easy to buy a property with hidden problems.
• Price increases: Renovation costs and apartment prices have both risen sharply in recent years, reducing profits.