Case study – Investment in Beer Sheva

Beer Sheva has seen a boom in development and construction for the best part of this decade, positioning itself as the hi-tech centre of the desert, and planning to grow from Israel’s 7th to 3rd largest city. Tens of thousands of new units have been or are being built, and real estate prices in recent years, perhaps even more so than many other cities in Israel, have seen strong growth.

With a major university, infrastructure, and now the country’s largest mall, Beer Sheva has been one of the most popular cities for real estate investment in recent years.

With this in mind, we recently had a client from the US coming to look at investment properties in Beer Sheva.

In the time we had available, we visited 8 properties, managing to see a wide range of the kind of properties that are available within their budget.

We will briefly describe three of the properties that we saw in order to give you an idea of what is available, and what/how to think when looking to buy an investment property in Beer Sheva.

Apartment 1

55sqm in a new building (about two years old) near the university, with two bedrooms and two bathrooms. The building was built with students in mind, and could be bought with a yield of around 3.7%. They were asking for around 830,000 Shekel.

Other than the fact that the building is new and hence there should be less maintenance issues, and that rental demand in the area is extremely strong, what also made this one potentially interesting was that a new building will soon be going up adjacent to it, and prices there are starting at over 1m Shekel, meaning that the likelihood is that over the coming years the price of this apartment too will head in that direction and beyond.

Apartment 2

109sqm in a 20 year old, well-maintained building, near to both the university and the government district, with three bedrooms and one bathroom. The apartment was very well planned and was one of the largest of its type in the area, meaning that rental demand was constant. The yield was 4.5% and the asking price was 820,000 Shekel.

Apartment 3

80sqm in a very old and shabby building, with two bedrooms and one bathroom. The apartment itself was extremely well-maintained, and was being sold by the current owner, who had been living there for 40 years. The location was extremely central too, being right by the university and central government district. The asking price was 640,000 Shekel (below market) and the yield was 4.75%.

One of the factors that made this one interesting, apart from the location and rental demand was actually the awful state that the building was in. These kind of buildings have a chance of being refurbished by the municipality in the future, or as in this case, being totally knocked down and rebuilt, meaning that you eventually get a brand new apartment.

Of course these gentrification plans can take many years, and even fail to materialize altogether, however, as with most investments, the more risk you are willing to take the higher the potential reward. Having said that, with a rental yield of 4.75% and a below-market price, even if the refurbishment plans don’t go ahead, there is still investment sense for this deal.

Can you guess which apartment the clients went for?

Number 3 of course, but here is probably one of the most important twists of this whole episode. We saw the apartment on a Friday, and they made their offer on the following Tuesday. Someone else had gone to see the apartment on Monday and made an offer on the spot, and that was the end of that!

So, in terms of insights to take away from this specific episode:

(i) Even though Israel’s real estate market is going through a cooling period, when you see something really good, act as quick as you can. Even if you are not 100% sure yet (most of us need time to process decisions, especially ones involving large sums of money), if you think there is a good chance that you are going to make an offer, make it, even before you reach that 100% surety. That way you at least reserve your place in line, and you buy yourself those extra few days.

Obviously don’t make an offer if you are not likely to go through with it, and definitely don't sign anything before being totally sure, but the process of making and having an offer accepted itself can be a few days, which can be crucial for really good deals!

(ii) Another point to note here is that because the apartment was being sold by its owner, and not by an investor looking to make the maximum return on their investment, the price and yield in this case were excellent. Investor-owned properties in Beer Sheva are very common, and so often you will find better deals when buying from a resident owner (of course this is by no means the case every time).

Of the various hurdles that buyers need to overcome before purchasing their property in Israel, it is the venturing in to the unknown, or lack of prior experience, which can often hold people back.

Case studies can therefore be extremely useful in helping you to visualize the process you might go through when coming to Israel to find your property, be it a home or an investment.

At IAL Real Estate we specialize in helping and advising foreign residents buy Israeli investment property.

Contact us HERE today to see how we can help you!