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How do you calculate rental profitability in Israel?

Rental profitability in Israel

Rental profitability in Israel.

Calculating the rental profitability in Israel of a commercial or residential property can be done using the following formula:

Rental return = (monthly rent * 12 / purchase price) x 100ALSO READ: How to calculate taxes on property income in Israel?

Defining rental profitability in Israel

To calculate rental profitability in Israel, you must first determine the annual rent you receive for the residential or commercial property.

In large cities, long-term rental profitability is generally around 2.5% - 3%.
For commercial premises in Israel, you can expect a return of around 6%.

This can be the total amount of rent you receive during the year, or the average amount of rent you receive each month if you don't receive a fixed rent throughout the year. Next, you need to determine the purchase price of the commercial or residential property. This may be the actual purchase price of the property, or the estimated purchase price if you don't know the exact purchase price. Don't forget to take into account any ancillary costs associated with the acquisition of the property. Once you have these two pieces of information, you can use the formula above to calculate the rental profitability of the commercial property. For example, if you receive an annual rent of 120,000 Shekels for a commercial property you bought for 1,000,000 Shekels, your rental profitability will be 12%.

Example:
Rental yield = (120,000 / 1,000,000) x 100 = 12%

What factors need to be taken into account?

It's important to note that this formula doesn't take into account all the costs associated with owning the property, such as taxes, maintenance and management fees.

For a more accurate calculation of rental profitability, we recommend that you take these costs into account and include them in the calculation.READ ALSO: COMMERCIAL PREMISES IN ISRAEL - IS IT BETTER TO INVEST IN A SCI OR IN YOUR OWN NAME?Do you have a question?

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In a nutshell:

Calculating your rental profitability in Israel will enable you to optimize your investment and compare available products.

Your questions - our advice

  • How to calculate loan amounts in the profitability calculation?
  • How can I obtain credit in Israel if I am a foreigner?
  • What's the best way to invest in Israel?

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A native English speaker qualified in both Israel and the UK, Boruch cares for the English speaking clients.

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English speaking accountants in Israel
Address: Kanfei Nesharim 68. Merkaz Oranim
Phone number: 02 631 9000
Fax: 02 631 9005
Email: office@cpa-dray.com