In recent years, overseas real estate investments have become an option that is attracting more and more Israeli investors, mainly due to the desire to diversify risk, find properties at more affordable entry prices, and build an investment channel that isn’t solely dependent on the local market. How do you evaluate such an investment? What’s important to check before buying? And how do you know if it’s even a good fit for your personal financial situation? To help you navigate the path to investing in overseas real estate, we’ve put together a practical and comprehensive guide, complete with real-world examples.
Parameters for Consideration-Based Investing
The basic principle of investing in overseas real estate is not to “buy a property in a country other than Israel,” but rather to choose a market, a property, and a strategy that align with the investment objective. Some investors are looking for monthly rental income, others want long-term appreciation, and still others are seeking a combination of the two.
A good investment isn't measured solely by the price of the apartment or the return rate advertised. Among other things, you also need to consider taxation, maintenance, management, local demand, regulatory stability, purchase and sale costs, and whether it's actually possible to manage the property properly from a distance.
What are the main goals of Israeli investors?
Israeli investors generally have several recurring needs. The first is a desire to diversify their investments beyond the local market, especially when real estate prices in Israel are relatively high and certain opportunities seem limited. The second is a desire to gain exposure to a foreign currency or to a market with characteristics different from those of Israel.
Another consideration is the search for a deal whose price-to-yield ratio appears more favorable than in Israel. There are also investors looking for relatively simple management, or a property that can serve both as an investment and as an option for future use.
What is my specific goal?
This is one of the most important points, because without a clear goal, it is impossible to choose the right property. An investor should ask himself whether he is looking for recurring income, appreciation, a hedge against inflation, risk diversification, or perhaps a combination of several of these goals.
For the purposes of this discussion, if the goal is cash flow, it is advisable to look for a market with rental demand, reasonable holding costs, and stable management. If the goal is appreciation, it will be more important to identify a developing area, even if the current yield is more modest. If the goal is a combination of both, you need to strike a balance between stability and potential.
Setting a budget (including additional costs)
The required budget isn’t just “how much money I currently have available for the purchase.” It also includes all the costs associated with the transaction: taxes, legal fees, real estate agent fees, inspections, renovations, furniture, property management, insurance, and an emergency fund. Many investors make the mistake of focusing solely on the price of the apartment and ignoring additional expenses that can completely change the viability of the deal.
The concept of a “comprehensive budget” includes the following components:
- Purchase Price
- Purchase Costs
- Adjustment and Management Costs
- A safety net for unexpected expenses
In addition, it’s important to ask whether the budget is intended for a single investment or whether it’s capital that can be divided among several smaller assets. Sometimes spreading the investment across several assets or countries provides greater stability than concentrating the entire amount in a single asset.
What level of involvement am I willing to accept?
This is a crucial question, because investing abroad may seem very passive at first glance, but in reality requires active management. An investor needs to determine in advance how much time and energy they are willing to devote to the matter, and whether they want to be involved on a day-to-day basis or rely on local professionals.
- Low involvement: The investor wants everything to be managed for them.
- Moderate involvement: The investor is willing to monitor, review, and maintain regular contact with people on the ground.
- High level of involvement: The investor wants to gain a deep understanding of the market and conduct much of the due diligence on their own.
The lower the level of involvement, the more important it is to choose reliable partners, a good management company, and to conduct a thorough due diligence process. Anyone who isn’t willing to deal with property management needs to understand that the time saved may end up costing more in terms of expenses if the management isn’t up to standard.
How to Choose a Target Market?
Not every low-cost market is a good market, and not every high return guarantees a good investment. Selecting a target market requires examining several parameters, such as economic and political stability, market trends, and more. A market located in a country with a stable economy, a clear legal system, and well-organized regulation provides greater certainty for investors. Rental demand is another factor—if there is no rental demand, even a brand-new, state-of-the-art property will struggle to generate cash flow.
It is important to check whether the country has a permanent population, employment opportunities, universities, and tourism. Accessibility and infrastructure can provide a solid foundation for growth. Transportation, urban centers, services, and new infrastructure can provide a solid foundation for growth. If the goal is cash flow, a stable market is needed. If the goal is capital appreciation, a developing market can be considered, even if it entails a slightly higher risk.
Once you’ve chosen a country, the real decision comes next: where within that country to invest. Athens, for example, is considered a major hub for real estate investment in Greece because it is an economic and tourist center, with demand for both urban and tourist rentals, affordable entry-level prices, and many areas undergoing revitalization. The hottest neighborhoods in Athens include, for example, areas such as Plaka, Monastiraki, and parts of the city center where there is high demand for rentals.
The difference between a major city and a secondary city is clear. A capital city like Athens offers more stable demand, but entry prices are higher. A secondary city or a developing region may offer growth potential, but with more uncertainty. Therefore, the neighborhood itself is sometimes the difference between a good deal and a mediocre one, even if the country as a whole looks promising.
Top Investment Destinations for Israelis
The United States – The Great and Transparent
The U.S. real estate market is one of the most transparent in the world, with readily available historical data and clear regulations. It is suitable for investors seeking a steady cash flow (with rental yields of 5%–8% in cities such as Houston, Cleveland, or Indianapolis) but who do not expect dramatic appreciation in value. The drawbacks: federal and state taxes, great distance, and the need for a highly professional property manager. Additionally, the “Israelization” of certain markets (such as Florida) has affected prices in some areas.
Portugal and Spain – The Western European Option
Those looking for a combination of geographic diversity, steady tourism, and a reasonable price-to-rent ratio will find alternatives in Lisbon, Porto, Barcelona, or Valencia. Prices are still lower than in Paris or London, but demand for vacation rentals is high, and the tax burden is relatively low. The main risk factor: local regulations restricting vacation rentals (such as in Lisbon) could affect future returns.
Eastern European countries (Poland, Romania, Croatia)
Higher returns (sometimes 7%–10%), low entry prices, along with higher regulatory risk and volatility. Suitable for investors with a medium-to-high level of involvement who are familiar with the market or who work with a trusted local advisor.
Greece (and Athens)
Greece, and Athens in particular, is considered an attractive destination for Israeli investors because it combines a relatively large market, tourism, demand for rentals, and areas with entry-level prices that are still considered affordable compared to other cities in Europe. For an investor looking for an income-generating property, Athens can offer an attractive opportunity, especially if one chooses a neighborhood carefully and understands its characteristics.
However, even in this case, one must be careful not to be blinded by the numbers. An apartment that seems relatively inexpensive on paper may require renovation, hands-on management, or face unstable demand. Therefore, investing in Athens is best suited for those who are willing to thoroughly examine the location, the type of property, and how it will be managed. Real estate investments in Greece have become a top choice among Israeli investors interested in investing abroad.
Who is this for?
Overseas real estate investments are particularly well-suited for investors who are looking for geographic diversification, understand that a good investment requires due diligence, and are willing to work with a local professional team. This is also suitable for those who have disposable capital, patience, and the ability to think in the medium to long term.
This option is particularly relevant for Israeli investors who understand that such an investment is not a “quick buy,” but rather a process that involves selecting a market, assessing risks, tax planning, and ongoing management. Those who approach it with a well-thought-out strategy and a predefined budget will be able to gain much more.
When should you be careful?
It’s important to be cautious and carefully review the terms when someone touts a “high return” without specifying costs, when there’s a lack of transparency regarding the status of rights, or when the market is one the investor isn’t familiar with at all. Promises such as “a hassle-free investment” should also raise a red flag, because in most cases, an overseas property does require monitoring.
Furthermore, investing in overseas real estate is less suitable for those who do not have sufficient liquid capital, those looking for a quick solution, or those who are not willing to deal with issues such as taxation, language, distance, and management. If you are not willing to thoroughly understand the transaction, it is better not to get involved just because it sounds attractive.
Key Risks: What Could Go Wrong?
Any investment abroad involves an additional layer of risk compared to a domestic investment. There is currency risk; fluctuations in the euro/dollar exchange rate can affect returns. There is regulatory risk—changes in the law, taxation, or rental regulations. There is operational risk—malfunctions, tenant issues, and unexpected costs. There is liquidity risk—difficulty selling the property quickly. And there is the risk of a deal that seems too good to be true; sometimes the numbers look perfect, but in reality, there is a lack of transparency.
Therefore, it is important not to be blinded by the numbers, but to examine what really lies behind them.
Taxation – A Weak Spot That Many Investors Overlook
One of the most common mistakes is to consider taxes only after purchasing the property. In reality, the tax structure can turn a profitable deal into a problematic one. It is important to understand two aspects: taxes in the property’s country of origin (such as purchase tax, capital gains tax, and rental tax) and taxes in Israel.
Israel has signed double taxation treaties with many countries, but this does not automatically solve the problem. Israeli investors must report income from abroad to the tax authority and can claim a limited credit for taxes paid abroad. It is worth noting that there are countries where rental tax is low or nonexistent (for example, in the U.S., depreciation deductions can reduce the tax liability to zero), and others where the tax is high. Before any transaction, consult with an accountant who specializes in international taxation.
Financing Abroad – Is It Worth Taking Out a Mortgage?
Many Israeli investors assume they will finance the property using only their own equity, but sometimes taking out a mortgage from a local bank—or through an Israeli company, if possible—is actually more cost-effective, because it reduces currency exposure (if income is in shekels and repayments are in euros—that’s a problem), and it allows you to benefit from low interest rates in some countries.
The problem: Banks abroad do not always grant mortgages to non-residents, or they require a high down payment (30%–50%) and proof of documented income. Another option is financing in Israel secured by the overseas property, as Palmo offers through its partnership with Loanwise. Bottom line: Financing is a tool that can be effective and cost-effective, but only for those who understand the interest rate and currency risks.
Types of Properties: What Can You Buy?
Investing in overseas real estate is not a one-size-fits-all proposition. There are residential apartments for long-term rental, which offer a stable asset, consistent demand, and relatively low management involvement. There are also apartments for short-term tourist rentals, which offer a higher potential return but involve complex management and seasonal demand. There are small commercial properties, which require zoning verification and ongoing monitoring but can offer a stable cash flow.
There are also projects still on paper that offer high potential returns but come with risks related to execution, timelines, and regulation. Finally, there are properties for personal use, which are suitable for those who want to both invest and use the property in the future. The choice between these types should always be based on your goals, budget, and level of involvement.
Remote Property Management: Is It Possible?
This is one of the most important issues for Israeli investors. Physical distance creates a real management challenge. If you are unable to handle tenants, maintenance issues, and rent collection, you need a reliable local management system. You can choose to manage the property yourself—which requires time, local knowledge, and the ability to handle these matters—or hire a management company, which involves a cost but provides “relief” from day-to-day operations.
It’s important to consider the worst-case scenarios right now: If the tenant doesn’t pay, or if the door breaks, who is expected to handle the situation? If there isn’t an immediate and effective solution, the investment could become a burden.
How do you evaluate a local property management company?
Poor management can turn an excellent property into a cash drain.
Here are 7 questions you must ask before choosing a management company:
- How many properties do you manage? (Too few—unprofessional; too many—no personal attention.)
- What is the average response time for a service outage? Specifically, for utility outages such as water, electricity, etc.
- What kind of professional liability insurance does the company have?
- How do you screen tenants? (Credit check, history of previous tenancies).
- What is the monthly fee, and what does it cover? (Marketing, collections, processing, reports).
- Is there a termination fee?
- Does the company have three existing clients (preferably Israeli) who are willing to provide a recommendation?
In addition, it is important to know what to do when a problem arises, such as handling a complaint, arbitration, a change in management, and so on.
What happens if I need to sell the property before the planning process begins?
First and foremost, it’s important to understand that selling early isn’t a failure—sometimes a change in personal circumstances, another opportunity, or a shift in the market justifies an early exit. But it’s important to understand in advance the true cost of selling early in the target country.
The direct costs are: real estate agent fees—in some countries (e.g., the U.S.) 5%–6% of the property’s value; in Europe, 3%–5% plus VAT; and local capital gains tax—some countries reduce the tax rate the longer you hold the property. Selling after one year versus five years can result in a 10%–15% difference in tax, and early mortgage prepayment penalties—if you took out a local mortgage, there may be a penalty of 1%–3% on the remaining balance.
The indirect consequences include the loss of purchase-related costs (purchase tax, attorney’s fees, inspections)—costs whose recovery is spread out over several years. Selling within one to two years may leave you with a “technical loss” even if the property’s price hasn’t dropped. Of course, there’s also a cash flow impact—if you sold in the middle of a strong tourist season, you lost rental income that could have improved your overall return.
Despite everything, this can sometimes be a worthwhile move: if the property’s value has risen significantly in a short period of time (for example, in an area that has undergone urban renewal), you’ll still make a nice profit. If the market begins to show signs of a slowdown or falling prices, it’s better to sell at a small profit—or even a small loss—than to lose much more a year later. The recommendation is to plan in advance for a minimum investment horizon of 5–7 years for income-producing real estate abroad. Whenever considering an earlier exit, you should carefully calculate all costs; sometimes it’s better to continue renting and wait for the right opportunity.
10 Essential Checks to Make Before Signing a Contract
- Registration of the property with the local land registry —does the seller have a clear right to sell? His statement alone is not sufficient.
- Specific Property Appraisals – How much purchase tax did the seller pay? Sometimes the answer indicates a true value that differs from the asking price.
- Building Regulations and Bylaws – Is It Permitted to Rent Out a Property for Vacations? In Europe, this is a critical issue.
- Actual average rental rates —not what's published on the website, but what's charged in a specific location in January.
- Maintenance cost history —electricity bills, property tax, and homeowners' association fees. I’m asking the seller for the past 12 months.
- Debt Status – Are there any debts owed to government agencies? In such a case, the debt is “attached” to the property.
- Future Plans for the City – Is a train station in the works? Or perhaps a reception center for temporary workers?
- Surrounding rental markets – average occupancy rates in the area, not just in the building.
- Insurance Terms – Do local insurance companies agree to insure rental properties (especially Airbnb listings)?
- Management Agreement – Termination Conditions, Fees, Liability. Don't sign a management agreement without fully understanding it.
A Practical Example: Investing in Athens
Suppose an Israeli investor wants to buy a small apartment in Athens to rent out. The purchase price is 120,000 euros. Purchase costs, taxes, attorney fees, and real estate agent commissions total approximately 6,000–10,000 euros. For the purposes of this calculation, the gross yield is 6% of €120,000, or €7,200 per year. Estimated management and maintenance costs are €2,000 per year. Income tax on rental income is €1,000 per year.
The net return is 7,200 minus 2,000 minus 1,000 = 4,200 euros per year, which is about 3.5% net. This isn't a spectacular figure, but it illustrates a logical point: the gross return isn't the final number. The true return is measured after expenses, management fees, and taxes.
Overseas Real Estate Investments: The Right Path
Investing in overseas real estate can be an attractive investment opportunity, but only if it’s done properly. The right approach is to set a goal, establish an overall budget, determine your level of involvement, choose a target market, select a city and neighborhood, choose a property type, conduct due diligence, review taxes and costs, understand how the property will be managed, and weigh the risks. If you go through all these steps with your eyes wide open, you have a good chance of building an investment that leads not only to a return but also to peace of mind.
You can gain practical tools for investing in overseas real estate by enrollingin an overseas real estate course, which teaches you how to analyze deals and take all potential risks into account.
Frequently Asked Questions from Israeli Investors
Do I have to travel to the country before making the purchase?
It’s not mandatory, but it’s highly recommended. You can buy a property remotely using a notarized power of attorney, but meeting with the property manager, visiting the neighborhood at different times of day, and getting a feel for the local character—are well worth the price of the plane ticket. Anyone who buys without visiting is relying on blind trust.
What happens if a tenant stops paying rent while abroad?
The answer depends on the country. In Germany, evicting a tenant can take 6–12 months and cost thousands of euros in legal fees. In Florida, the process is relatively quick (two to three months). It’s important to check in advance what the “eviction process” is under local law—this directly affects the risk.
Is an older apartment or a newer one better?
A new apartment requires less initial maintenance, but the return on investment is sometimes lower due to the high purchase price. An older apartment has the potential to appreciate in value after renovation, but requires a thorough home inspection and more active management. There’s no single right answer—it depends on your level of involvement.
How to Choose a Property Management Company?
Get three quotes, request a conference call with existing customers (preferably Israeli ones), and find out what happens in an emergency—who’s available when you need to fix a water leak at midnight. Don’t be tempted by the lowest fee; it often comes with slow response times.
How do local tourism laws affect the profitability of an investment property?
Local laws can have a dramatic impact—sometimes they can turn a profitable deal into a problematic one when new regulations are introduced, especially in countries with political instability or in tourist destinations where the authorities are trying to balance tourism revenue with the housing crisis faced by residents.
The main impact is on three levels: Limits on rental days —some cities allow daily rentals for only up to 90 or 120 days a year, which limits business potential during the high season. Zoning restrictions —certain neighborhoods are designated as “protected residential zones,” where rentals to tourists are completely prohibited. Licensing and regulatory requirements —mandatory installation of fire suppression systems and soundproofing, registration with a government registry, and payment of an annual fee.
What Should You Do Before Investing in a Property Intended for Short-Term Rentals?
Before purchasing any property intended for short-term rentals, it is recommended to check whether the tourist rental license is “tied to the property” or “tied to the owner” and whether there is a regional quota. In Greece, for example, you can check the Ministry of Tourism’s website to see if the region is still open to new licenses. Is there a local bill proposing stricter regulations? It’s a good idea to keep track of updates from the authorities.
The recommendation is not to rely on the fact that “it works today”—markets change. If you purchase a property whose price is significantly higher than that of a similar property without a tourism permit, you’re paying a premium that could disappear as soon as the law changes. On the other hand, purchasing a property in an area that isn’t yet “locked in” but has natural demand for long-term rentals provides a safety net.
