In recent years, more and more Israelis have been looking overseas and discovering that it is sometimes easier to buy an apartment as an investment in Greece than in Rishon LeZion. High real estate prices in Israel, coupled with a sense of economic and security uncertainty, are prompting investors to seek alternatives that will allow them to both diversify their geographic risk and lock in a higher return on equity. But it quickly becomes clear that the real question isn’t “how much does the apartment cost” but rather “how much does the entire transaction cost, what’s left after taxes, and how do you finance the move without putting your household under cash flow pressure.”
This guide aims to clarify the three key factors that determine any overseas real estate investment from the perspective of an Israeli investor: costs, taxation, and financing.
The important question isn't whether someone promises a double-digit return, but whether you can enter the transaction details into a calculator for estimating returns on overseas real estate investments and determine whether it truly aligns with your financial goals.
Enter real data and determine whether the transaction they’re considering aligns with their financial goals and the level of risk they’re willing to take. That’s why we’ll also focus on questions such as: Who is each tier suited for, when is it relevant, and when is it actually better to hit the brakes—whether you’re considering a small apartment in central Athens or an entire building in a developing suburb.
The Costs of Buying Real Estate Abroad—Much More Than Just the Price of the Apartment
Why is it important to start with the costs?
Before discussing returns, taxes, or financing, it’s essential to understand the full picture of the costs. Many investors are drawn to the relatively low prices compared to central Israel—“a 60-square-meter apartment in Athens for the price of a parking space in Tel Aviv”—but overlook the long list of associated expenses: purchase taxes, professional fees, renovations, property management fees, property taxes, insurance, travel, and more. When these costs aren’t factored into the initial calculation, it creates the illusion of a high return, which shatters the moment the money starts flowing out of your account.
In principle, costs can be divided into three categories: one-time costs at the time of purchase, ongoing costs throughout the period of ownership and rental, and hidden or unexpected costs—ranging from sudden renovations to conversion and transfer fees between banks in Israel and abroad. Once this framework is established, every transaction becomes measurable and comparable across countries, cities, and even different types of properties within the same neighborhood.
One-Time Costs – What Happens on the Day of Signing (and Before)
With every overseas real estate purchase, there is a fairly consistent set of one-time costs that must be taken into account:
- Purchase Tax/Transfer Tax in the Destination Country – The tax rate varies from country to country and sometimes also depends on the type of property or the value of the transaction. In Greece, for example, there is a distinction between new and existing properties, and there are sometimes tax breaks in certain areas.
- Fees for a local attorney—The attorney reviews the property rights, the land registry entry, any existing liens, municipal debts, and so on. In most cases, this is not an expense worth skimping on.
- Notary and Registration – In many countries, including Greece, a notary is an integral part of the process of signing the contract and the final registration of the property.
- Document Translation and Certification – Israeli certificates, Land Registry extracts, corporate documents, and the like are sometimes required to be notarized and translated into the language of the foreign country.
- Engineering Inspections and Appraisals – Structural inspections, reports on the condition of the apartment, and official appraisals for financing or insurance purposes.
All of these factors usually add up to a few percent of the transaction price. If you don’t factor them in from the start, the “real” return will start to erode from day one.
Ongoing Costs – How Much Does It Cost to Maintain the Property Over Time?
Even after you've signed the contract, the costs don't stop there. The ongoing expenses include:
- Property Tax/Municipal Tax – In most European countries, such as Greece, there are various municipal taxes based on the size of the property, its location, and sometimes also on its use (residential versus tourist).
- Management Company – For overseas properties, it is almost always recommended to use a local management company that handles tenants, rent collection, maintenance issues, and even reporting to the authorities. The standard commission is usually around 8–10% of the rent, and sometimes higher if the property is a vacation rental that requires more frequent and extensive maintenance.
- Maintenance and Repairs – Even if the property is relatively new, you should expect ongoing repairs: plumbing, electrical work, painting, replacing appliances, boiler repairs, and so on. It’s a good idea to set aside an annual budget for each property in advance.
- Insurance – Property insurance, and sometimes also third-party liability insurance or rental income loss insurance, depending on the state and the level of risk.
- Accounts and Fees – A local bank account, bank transfer fees, currency conversion fees, and sometimes a recurring payment to an accountant or bookkeeper in the destination country.
Even after taking recurring costs into account, it’s important to include in your Excel spreadsheet expenses that don’t occur every month, such as travel, renovations, and periods when the property is vacant.
A Practical Example—A Deal in Athens: “On Paper” vs. Reality
Let’s say you’re considering purchasing a 60-square-meter apartment in central Athens for 150,000 euros. The real estate agent is presenting you with an expected gross return of 6%, based on a monthly rent of 750 euros.
On paper, 750 euros a month equals 9,000 euros a year, which is 6% of 150,000. But if we break it down:
- One-time costs: Let’s assume 5% in taxes and fees—that brings you to an effective purchase price of approximately 157,500 euros. If you also factor in 15,000 euros for renovations and furnishings, the total comes to 172,500 euros.
- Ongoing costs: Property management fees of 8%–10% of the rent, insurance, property taxes, and maintenance.
- Periods without tenants: Even one vacant month a year significantly reduces the return on investment.
After all the adjustments, the net pre-tax cash flow could be closer to 4%–4.5% of invested capital, even before accounting for taxes and financing. This figure is still excellent compared to the alternatives, but it’s a different story from what was presented in the presentation.
Who is this for, and when is it relevant?
A detailed analysis of costs is particularly suitable for investors who view overseas real estate as a financial tool rather than “a story to tell their friends.” It’s also relevant for those planning to expand in the future: the cost model you develop for your first deal in Athens can serve as a foundation for additional deals in Greece and even in other countries.
When should you be cautious, and for whom is this less suitable?
If you’re looking for a “quick deal” and think that all those Excel spreadsheets are “just confusing,” there’s a risk you’ll find yourself repeatedly surprised by expenses you didn’t take into account. Investing in overseas real estate is less suitable for those who don’t have a cash reserve to cover renovation cost overruns, two months of vacancy, or unexpected repairs, and for those who rely almost exclusively on a developer’s marketing presentation. In such situations, it’s sometimes better to stick with simpler investments, or to start with a market you can manage closely before venturing abroad.
Taxation on the Purchase of Real Estate Abroad – Two Tax Systems, One Investor
Why Taxation Is “The Elephant in the Room”
Many Israelis invest in overseas real estate under the assumption that if the money “stays abroad,” the Israeli tax authorities won’t be able to access it. This is a mistake that has already cost quite a few investors dearly. In practice, anyone who invests in real estate abroad must navigate two tax systems—that of the host country and that of Israel—as well as the rules of tax treaties, tax credits for taxes paid abroad, and the choice between different tax treatment options for rental income and capital gains.
In principle, all rental income from overseas and all capital gains from the sale of overseas property must be reported to the Israeli Tax Authority, even if the money was not physically repatriated to Israel. In the host country, the investor may be considered a non-resident and may be required to pay taxes in accordance with local laws. Your role as investors is to understand the framework and ensure that you are working with an accountant who is familiar with both Israel and the country of investment.
Taxation in the Destination Country—Greece, for example
In Greece, as in most European countries, there are taxes on rental income and on capital gains from the sale of real estate. Tax rates, tax brackets, and the deductibility of expenses vary from time to time, so it is important to check the most up-to-date information, but the principle is similar:
- Regarding rent—income tax is paid on a progressive scale. In some cases, certain expenses such as maintenance, renovations, management fees, and the like may be deducted, in accordance with local law.
- Upon sale—capital gains tax may apply to the difference between the sale price and the purchase price (sometimes after adjustments). In some countries, there are also tax benefits for assets held for more than a certain number of years.
- In addition, there are municipal taxes and property taxes, and sometimes special levies that are collected along with the electricity bill or through the municipality.
This means that even if you are not a resident of Greece, the authorities there consider income from the property to be taxable income and require proper reporting. In most cases, you will need a local accountant to handle this for you.
Taxation in Israel – Double Taxation, Tax Credits, and Tax Regimes
In Israel, every Israeli is required to report their worldwide income, unless there is a specific exception. Income from rental property abroad can be taxed in several different ways, depending on tax laws and professional interpretation:
- Taxed as passive income—as part of your ordinary income, according to your marginal tax brackets, with certain expenses deducted, and sometimes with a tax credit for tax paid in Greece.
- Taxation Under the Flat-Rate Tax Scheme – In certain cases, there is an option to use a flat-rate tax scheme for rental income from abroad, with its own rules for deducting expenses.
- Business Activity – If the Tax Authority deems your activity to be “business-related” (for example, holding a large number of properties, a high level of involvement, or rapid turnover), the tax liability may differ and may also include National Insurance contributions.
Capital gains from the sale of property abroad are generally subject to capital gains tax in Israel, after a credit for capital gains tax paid in the destination country, subject to tax treaties. This means that it is not enough to consider only the tax paid abroad—you must also factor in the tax in Israel to determine what you actually have left in hand.
A Practical Example – An Israeli Investor in an Apartment in Athens
Let's say you've purchased an apartment in Athens and are renting it out on a long-term basis:
- In Greece, you'll pay tax on your rent, based on the tax rate applicable to you there. Let's say you actually paid 2,000 euros in taxes per year.
- In Israel, you are required to report your annual income in shekels (after conversion at the official exchange rate), choose an appropriate tax bracket, and calculate your Israeli tax. If your Israeli tax comes to 3,000 euros, but you’ve already paid 2,000 euros in Greece, you can receive a credit for those 2,000 euros and pay only the difference in Israel, subject to certain conditions.
- When you sell the property, you will pay capital gains tax in Greece in accordance with local law; you will then also need to file a tax return in Israel, claim a credit for the tax paid, and pay the difference if the tax in Israel is higher.
It’s important to understand that your return calculations must be based on “after-tax figures in both countries,” not just after-tax figures in the destination country. The bottom line could be completely different if the tax structure in Israel is less favorable for your income, or if you’re already in a high tax bracket.
Financing – How to Put Together the Financial Puzzle
What exactly is “proper financing” for overseas real estate investments?
Financing is not just a matter of “where to get a loan with the lowest interest rate.” It is the element that links costs to returns and risk. An investor in overseas real estate can finance the transaction from several sources: loans and mortgages in Israel, financing from foreign banks in the target country, partners or additional investors, or a combination of all of these. Each choice affects the amount of equity required, the monthly repayment amounts, the level of risk in the event of a decline in rent or a change in interest rates, and sensitivity to exchange rates.
In principle, the higher the leverage (i.e., less equity and more debt), the higher the return on equity is likely to be—but so too are the level of risk and the dependence on income from the property. At the same time, the choice of financing currency (shekels versus euros) directly affects cash flow: income in euros versus loan repayments in shekels can work in your favor if the euro is strong, and eat into your cash flow if the euro weakens.
Financing in Israel – The Advantage Is Convenience, the Risk Is Currency Fluctuations
The first and most natural option for an Israeli investor is to finance the purchase through the Israeli banking system:
- A second mortgage on an existing property in Israel—in many cases, this is the most accessible solution. You use the property in Israel as collateral and take out a loan with mortgage terms, an interest rate, and a repayment schedule that suit your needs.
- Loans for any purpose/consumer loans – typically with varying interest rates and shorter terms.
The major advantage of financing in Israel is that you work in a familiar language, within a regulatory framework you’re familiar with, and with an Israeli mortgage advisor whom you can meet in person. The main drawback is currency sensitivity: if the monthly payment is in shekels but the rental income is in euros, any change in the euro/shekel exchange rate directly affects your cash flow. Furthermore, loans secured by existing properties (reverse mortgages) typically have less favorable terms than mortgages intended for purchasing a property in Israel—so it’s important to understand the interest rates and terms in order to calculate the final costs of the transaction.
Financing in the Destination Country – A Loan “in the Same Currency”
Another option is to obtain a mortgage or real estate loan from a bank in Greece. Not every bank is willing to grant loans to Israelis, and there are sometimes additional requirements (high equity, a local bank account, additional collateral), but when it is possible, there are several notable advantages:
- Property Suitability – The bank has reviewed the property in Athens, is familiar with the local market, and is prepared to provide financing directly for it.
- Euro-denominated financing—Rental income in euros is used to repay a loan in euros, so the currency risk is low.
- Sometimes, interest rates and other terms—which may be attractive compared to what is offered in Israel, depending on the time period.
Disadvantages: Dealing with a foreign banking system, documents in a different language, the occasional need to open a local bank account, and a higher equity requirement due to a lower financing rate (for example, only 60%–70%).
A Practical Example – Ways to Finance an Apartment in Athens
Let's go back to the €150,000 apartment in Athens, and suppose you're deciding between two financing options:
- Financing from Israel – Take out an additional mortgage on the apartment in Israel, in shekels, for an amount equivalent to 150,000 euros (let’s say 600,000 NIS). The rental income in euros is converted to shekels and used for the monthly payment. If the euro strengthens, you “profit”—each euro is worth more shekels. If the euro weakens significantly, the income in shekels decreases, and the mortgage payment in Israel becomes more burdensome.
- Financing in Greece – €60,000 in equity, and a Greek bank provides a €90,000 mortgage on the apartment. The monthly payment is in euros, so the ratio between rent and mortgage payment is less sensitive to exchange rates. On the other hand, the down payment you’re required to make is larger, and navigating an unfamiliar system can be challenging. Additionally, Greek banks do not allow foreigners to obtain mortgages due to regulatory restrictions.
Palmo offers an “Israeli” mortgage to finance the purchase of property in Greece, which makes financing much more convenient.
There is no single correct answer; it all depends on your capital structure, your ability to meet repayment obligations, and your willingness to take on currency risk versus regulatory and cultural risk.
How to Bring Costs, Taxation, and Financing Together into a Single Picture
The purpose of this whole picture is not to scare you, but to put you, the investors, back in control. A proper analysis of a deal in Athens—or any other market—should look like this: First, map out all one-time and recurring costs; then calculate the net cash flow after taxes in the target country and in Israel; and only then examine how financing payments fit into that cash flow over the years. If, after all the calculations, you still arrive at a reasonable return relative to the risk and effort involved, and such a deal improves your investment portfolio—then there is potential for a sound investment move.
This option is suitable for investors who view overseas real estate as part of a long-term financial plan: capital preservation, generating passive income, geographic diversification, and perhaps also the opportunity to benefit from properties in a developing European city like Athens. It is less suitable for those looking to “double their money” quickly, without studying the numbers and without taking responsibility for understanding the risks.
Questions and Answers
What Are the Real Costs of Buying Real Estate Abroad?
It’s not just the price of the property itself that matters, but also purchase taxes, attorney’s fees, registration, renovations, insurance, and ongoing management. In addition, there are also less obvious costs, such as transfer fees, foreign currency conversion, and travel to the destination country.
Why Is It Important to Check Taxation in Both Israel and the Destination Country?
An Israeli investor may be liable for taxes both in the country where the property is located and in Israel; therefore, a local calculation alone is not sufficient. Only a double-check provides an accurate picture of the net return and the economic viability of the transaction.
How Does Financing Affect the Feasibility of the Transaction?
The financing determines how much of your own capital you’ll need to contribute, and what your monthly payment will be over time. It also affects the level of risk, especially if the loan is in shekels but the income from the property is in euros or another currency.
Why is Athens considered a good example for Israeli investors?
Athens provides a clear picture of all the components of an investment: purchase price, associated costs, local taxes, and financing options. That’s why it serves as an excellent example for Israeli investors who want to understand what an overseas transaction actually looks like in practice—and not just on paper.
Who is this type of investment suitable for?
This investment is best suited for those who are willing to work methodically, analyze the numbers in depth, and seek professional advice when needed. It is also suitable for those who want to diversify their risks and build a medium- or long-term investment portfolio, rather than seek a quick profit.
When Should You Be Careful?
You need to be careful when you don’t have a financial cushion to handle unexpected expenses, slow months, or changes in interest rates and exchange rates. Even those who rely solely on a marketing presentation without understanding the actual taxes, financing, and costs may find that the deal isn’t as good as it initially seemed.
