Additional Costs of Purchasing Real Estate in Israel: A Guide for Foreign Buyers

When considering such a life-changing decision like buying a home or a home away from home in the holy city of Jerusalem, one must be aware of all the associated costs. As usual, at Jerusalem Estates, we are here to guide and advise you. Here are the other costs, aside from the purchase price, that we believe are significant enough to account for when making a purchase:

Understanding Purchase Tax in Israel

1) TAX—perhaps the least popular word in the English language—comes in at number one. Here, we are dealing with purchase tax only, or Mas Rechisha, as it is locally called. The rates for an Israeli resident purchasing their only property have a progressive rate depending on the value of the transaction. However, a foreign resident (or an Israeli purchasing a second home) pays a flat rate of 8% and 10% on any part of the purchase above 6,055,070 NIS, which is currently just over 1.8 million USD.

In fact, for those of you considering making aliyah, the tax is lower on the first property than the regular Israeli resident rate. For specifics on how to take advantage of this, even post-purchase, please be in touch.

Broker Fees: What to Expect

2) Broker Fees. In Israel, both buyers and sellers of real estate will pay a broker, usually not the same one (more on that in a later edition). The standard fee charged is 2% plus VAT (currently 18%). Some brokers are known to charge more to foreign buyers if they are doing a lot more work to assist them. But here at Jerusalem Estates, we are happy to help with whatever you need for the standard rate.

Legal Fees: Why They Matter

3) Lawyers' Fees. These generally are 0.50 percent plus VAT. While some lawyers may charge lower, in my experience, given the low proportional cost of legal representation, it is worth paying the standard rate for someone who really knows what they are doing. You want to ensure everything is as it should be. Here too, we are ready and waiting to refer an English-speaking Israeli lawyer to help you—one I have personally used on several occasions over the years. He is both extremely competent and trustworthy.

Additional Costs to Consider

Maintenance and Upkeep

When you purchase a property, especially in a city like Jerusalem, maintenance and upkeep are crucial. You need to think about regular expenses like cleaning, gardening, and repairs. These costs can add up quickly, so it’s wise to budget for them in advance.

Property Management Services

If you’re not planning to live in Jerusalem full-time, you might want to consider hiring a property management service. These services can handle everything from tenant relations to maintenance issues. While this adds another layer of cost, it can save you a lot of headaches in the long run.

Homeowners Association Fees

If your property is part of a community or condominium, you may be subject to homeowners association (HOA) fees. These fees cover shared amenities and services, such as security, landscaping, and maintenance of common areas. Make sure to inquire about these fees before finalizing your purchase.

Insurance Costs

Don’t forget about insurance! Property insurance is essential to protect your investment. The cost can vary based on the property’s location and value, so it’s a good idea to shop around for the best rates.

Closing Costs

Finally, remember that there are closing costs associated with any real estate transaction. These can include various fees, such as title insurance, recording fees, and transfer taxes. It’s important to ask your real estate agent for a breakdown of these costs so you can prepare accordingly.

Final Thoughts

Purchasing real estate in Jerusalem can be a rewarding experience, but it’s essential to be aware of all the associated costs. By understanding these additional expenses, you can make a more informed decision and ensure a smoother transaction. If you have any questions or need assistance, don’t hesitate to reach out. We’re here to help you navigate this exciting journey!

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