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Money Saving Tips When Purchasing A Property In Israel..

You are looking to purchase a property in Israel, but you are unfamiliar with the language, cultural, bureaucratic, legal and economic aspects of such an important transaction! Read on to discover some of the most useful money saving tips to bear in mind when purchasing a property in Israel.

Purchasing from a contractor:

Negotiating the price:

In Israel all purchases made off the plan are linked to an index. Most often, contractors will link their prices to the Building Index. The base rate is set at the time of signing the contract, and if the building index increases by x%, you, the purchaser, must pay the increase. It may be wise to link it to the cost of living index- which may be more stable at the time you sign the contract. This can save you thousands of Shekels. In addition to this, you could choose to pay more of the purchase price earlier rather than later and limit your exposure. Be aware however, by paying the contractor earlier, he has more of your money in his account and if there is a dispute later, you may wield less power… if you decide to take this route take advice before doing so. The index is published by the Israeli Bureau of Statistics, and you can view its history and track it at http://www.cbs.gov.il

Changes in the plans:

Often the builder provides a standard apartment, and you may want to make changes based on your specific needs. Make sure that you have inspected the building plans very carefully before signing the contract – in Israel it is very common to negotiate improvements into the body of the contract free of charge. You may want, for example, extra electric sockets or stainless steel sinks, so try to negotiate this into the standard plans, and make sure you include these additional items within the contract.

Make sure that you notify the contractor of any changes as soon as possible. If you want a wall to be moved before it is built, the contractor may make a minimal charge or even no charge at all. However, if you ask him to move a wall after it has been built and the electrics have been installed it is likely to cost a great deal of money!

Lawyers Fee:

In Israel, when purchasing property from a contractor it is the norm that the purchaser pays for the contractor’s lawyer. This can be costly – sometimes as much as 2%+VAT! In this case, there may be a uniquely Middle Eastern way of saving money… Yes- you guessed it, you haggle! Often the lawyer will reduce his price by as much as 0.5%. Unless you try you will not find out!

Purchasing a Second Hand Property:

Purchase Tax:

Purchase tax is a percentage of the negotiated price.Purchase tax in Israel is only due on the purchase price of the property. One way to reduce the amount of purchase tax paid is to make two separate contracts. One contract will relate to the purchasing of the property and another to the furnishings being left in the property. This will lower the price in the property contract (as it will not include furnishings) and so reduce the amount of purchase tax due. In some cases being an Oleh Chadash will also entitle you to a reduction in purchase tax.

Building Engineer: Hiring a good building engineer coupled with some tough negotiating skills may also save you money. Most building engineers will pick up some faults with the property and they will quantify how much it will cost to repair. This may give you leverage to pressure the seller to reduce his fee.

Deposits: In Israel, the seller has paid a deposit for his water meter, gas meter and electric meter to the various utility companies. Here’s a great money saving tip – if you disconnect the utilities and the have them re-connected, this will cost you a lot of money, so instead, simply reimburse the owner for the deposits that he placed, and transfer the utility onto your name- which is a lot cheaper!!.

Some extra money saving tips – applicable to any property:

Money conversions:

In Israel, the banks charge a lot of commissions.When converting your money to Shekels, you can use a bank, or you can use a specialist foreign exchange company. I recommend the latter – it will save you thousands of shekels! The foreign exchange company can secure a better rate of exchange. They also do not charge to transfer or receive funds When you chose an exchange company, make sure that they are regulated by the Ministry Of Finance.

Mortgages:

Likeiwse when it comes to mortgages, it is wise to use a mortgage consultant in Israel, and not go directly to a bank. The consultant will search the market and obtain the best terms for you. There are about 30 different types of mortgage available For more information on mortgages I recommend viewing http;//www.isramortgages.com.

Simon Seitz made Aliyah from London in 1999 and specializes in real estate, matrimonial law, civil litigation and mediation.

Please email questions to simon@seitzlaw.net

You can see his website at www.seitzlaw.net

Purchasing Property in the US from your armchair in Israel

Purchasing Property in the US from your armchair in Israel- by Simon Seitz,Adv.

The newest craze in Israel seems to be using the services of a company here in Israel in order to purchase cheap property in the US with the aim of selling it within a short amount of time with a good profit margin. The adverts in the papers allude to huge profit margins and at face value it looks good.

The real questions are: Is the transaction safe? What are my obligations? how do I know a property actually exists? The aim of this article is to see how it works and what rights you have.

The aim of the transaction:

The stated aim of the companies is to purchase a property at a low cost and sell it within a designated amount of time at a profit. The profit is shared with the company

How does it work?

1. The investor deposits funds into the account of the company which depending on the amount will either make him joint owner with the company of a property or more likely in the case he is investing a smaller amount of money, a joint owner with the company and other investors like himself. This results in the creation of a partnership (LLC). The LLC purchases the property and becomes the registered owner of the property.

2. Each investor has a liability which explained in the contract signed. In some cases it equals the total sum of his investment. The company becomes a general partner and has extensive and exclusive power to make certain decisions which will bind the partnership. As a limited partner, the company will not disclose the identities of the other limited partners. The advantage is no one else will necessarily learn of your investment ( though there are ways and means) . The disadvantage is you cannot contact other members of the partnership if problems arise with the company. Instead you shall have to rely on the company keeping the terms and conditions of the contract. The limited partners do have certain rights IE to call a general meeting, sack the general partner etc. The contract should list all the rights of the limited and general partners.

2. What are the risks?

The primary risk is the company pays too much for the property, resulting in very little profit or none at all. If it overpays by a very large margin a case of negative equity may also arise. It is essential to demand to see the track record of the company. Ask to see figures for past investments. The other risk is that the company has bought a good property but cannot sell it, this manes that an investment term of six months may be extended.

3. What happens if I want to withdraw my investment?

Certain companies allow you to sell your share subject to a few conditions. For example, you may have to bear the cost of any expense, you may be limited to the legal entity to whom you can transfer the investment. Some companies do not let you withdraw the investment.

How do I know the property exists?

The company will be able to show you a title deed in the name of the LLC. The company will also keep accounting books here in Israel and you will be entitled to view those books.

Taxation?

Upon sale, the profit will be subject to a tax in the US. When transferring that profit to Israel you may find yourself with another tax bill form the Israel authorities. It is therefore imperative to seek the advice of an accountant familiar with such transaction in order to assess the tax implications.

CONCLUSION

The above is a first step information guide on the purchase of property in the US. From experience of my clients the transaction looks like a good quick way to make some money. However, there are a lot of pitfalls and it is therefore essential to seek the advice of an attorney familiar with such transactions.

Questions may be emailed to Simon@seitzlaw.net.

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