There is untapped potential in Israel’s real estate market, where the ancient crossroads of culture meet modern-day profitability. Recent research from UK’s comparethemarket.com positions Tel Aviv and Jerusalem among the top global cities for short-term rental revenue, with Tel Aviv ranking fifth with an impressive monthly earning potential of nearly $7,000, and Jerusalem not far behind in tenth place, averaging close to $6,000.
This striking contrast to traditional rental agreements—where earnings in Jerusalem hover around $4,156 and Tel Aviv at approximately $4,542—illustrates the lucrative opportunity short-term rentals present. Discover how you can leverage Israel’s burgeoning short-term rental market.
Understanding the Short-term Rental Market In the Israeli Real Estate Industry
To make sense of the Israeli short-term rental market, we have analyzed the short-term rental market in Israel’s top cities.
For those focused on the premium segment, Caesarea stands out as the prime location for short-term rentals in Israel. This area may present fewer bookings, but the luxury market there offers substantial profit margins (the average rental revenue per day is $386). When considering apartments for rent in Israel, Tel Aviv and Jerusalem emerge as strong contenders for consistent revenue. These cities combine a high demand for vacation rentals in Israel with robust occupancy rates of 61-72%, although the competition is noteworthy.
If you prefer to operate in a market with less competition, set your sights on Ra’anana and Caesarea. These locations have a particular appeal, especially for guests looking for specific types of short-term stays. Consider leveraging seasonal fluctuations by offering Short-term rentals in Israel’s tourist hotspots like Eilat and Tiberias during the summer. Here, the demand spikes, making it ideal for hosts not interested in year-round renting.
For a less tapped market, Nazareth might provide opportunities, especially when it comes to entire apartments for rent in Israel with flexible terms. This can attract guests during religious holidays and events. In contrast, Bat Yam showcases a high occupancy rate, which peaks at 80%, proving to be an excellent choice for Short-term rental hosts in Israel who prioritize consistent occupancy over peak pricing.
In essence, your decision on where to establish a temporary stay or a vacation rental in Israel should align with your goals—whether it’s maximizing income, ensuring a steady flow of guests, or finding a niche with less competition. While Tel Aviv and Jerusalem are versatile choices suitable for a broad host profile, specialized areas like Caesarea and Herzliya can be more profitable for those targeting specific markets.
Types of Properties Ideal for Short-Term Rentals
City Apartments
City apartments hold a prime position in the realm of the best short-term rentals in Israel, thanks to their urban location, which often puts them in the heart of business districts or city centers. These properties, which range from compact studios to spacious multi-bedroom units, appeal to travelers seeking affordability without sacrificing comfort. Not only are they equipped with modern conveniences like fully-fitted kitchens, streaming subscriptions, and high-speed internet, but they also offer significant savings compared to traditional hotel stays, making them a top choice for budget-conscious visitors.
The high occupancy rates of city apartments underscore their attractiveness to investors, with profitability spiking during peak tourist seasons and around major events like festivals or conferences. Situated in areas of high demand such as bustling business hubs or popular tourist destinations, these apartments in Israel also present an attractive hands-off investment opportunity. With the support of management companies, which can oversee the daily operations, investors can benefit from a lucrative income stream through platforms like Short-term rental in Israel without being bogged down by the day-to-day demands of property management.
Vacation Homes
Vacation rentals in Israel represent a robust sector in the short-term rental market, attracting investors with their high profitability potential. Located predominantly in areas with heavy tourist footfall, these properties are designed to cater to vacationers’ needs, varying from opulent villas in prime locations to cozy cottages that offer a homely vibe. Their allure lies in the tailored experience they provide for travelers seeking the comforts of home during their holidays, thus enabling owners to set premium rental rates compared to standard long-term leases.
With a strategic investment in vacation homes, particularly in hotspots like near theme parks, ski resorts, or beachfront locales, property owners can capitalize on the high demand. Peak seasons especially present an opportunity to maximize earnings, with Short-term rental in Israel serving as a popular platform for tourists to find such unique lodging options. Owners of these vacation properties can enjoy the benefit of heightened occupancy rates during these bustling periods, making it a financially savvy move to consider for anyone looking to enter the short-term rental market in Israel.
Condominiums
Condominiums stand out as a diverse and profitable segment within the short-term rental market in Israel. These individual units, nestled within larger complexes, cater to a broad range of travelers, from those seeking luxury to budget-conscious visitors. The variety of condominiums available allows investors to target different market segments, with the potential for high returns in prime locations like popular tourist spots or scenic beachfront areas.
The appeal of condominiums for investors, especially those new to the short-term rental game, lies in their relatively low initial investment costs. This accessibility, coupled with a wealth of amenities such as gyms, pools, and proximity to dining venues, makes them a magnet for short-term tenants. For an investor looking to tap into the best short-term rentals in Israel, condominiums offer not just a lower threshold for entry but also the option to employ professional management services to streamline their operational aspects, ensuring a balance between profitability and convenience.
Single Family Homes
Single-family homes, while not as common in the rental market, present a lucrative opportunity for homeowners. Typically, larger than typical vacation rentals and situated in residential neighborhoods rather than tourist hotspots, these properties can command higher rental rates. Homeowners stand to gain significant revenue by renting out such homes, particularly to groups like families or friends seeking a comfortable and private lodging experience.
However, single-family homes demand more maintenance and oversight than other types of rentals, a factor to consider before diving in. Additionally, it’s crucial to familiarize yourself with the local short-term rental regulations that vary by area and property type. Major cities like Tel Aviv and Jerusalem, where demand is high, can turn a vacant family property into a profitable venture, but ensure you’re well informed about the specific legalities in your region to make the most of this investment.
Legal Framework for Short-Term Rentals in Israel
The Israeli Tax Authority categorizes income from short-term rentals as ‘business income,’ recognizing that such rentals serve as a form of hospitality service. As a result, this income is not merely subject to income tax but also to Bituach Leumi, Israel’s social security, and potentially Ma’am, the value-added tax, contingent upon specific conditions. Landlords must therefore be diligent in their understanding and payment of these taxes, which differ from the tax treatment of long-term rental income.
Income Taxes
Landlords are required to register as a business and fulfill bi-monthly or monthly reporting obligations, on top of the annual tax return known as Doch Ishi. It is crucial for landlords to understand that they are not entitled to the monthly tax exemption up to 5,196 Shekels, nor can they benefit from the linear 10% tax rate applied to long-term residential rentals. This distinction underscores the necessity for short-term rental landlords to adhere to these specific tax regulations.
Bituach Leumi
Bituach Leumi, Israel’s National Insurance Institute, parallels Social Security in the US and is tasked with distributing various pensions and benefits as defined by national law. Revenue from short-term rental properties falls within its purview, with contributions pegged to profit levels: a 5.97% rate applies to monthly earnings under 6,331 Shekels, while income between 6,332 to 44,020 Shekels attracts a higher rate of 17.83%. It’s essential for property owners to be mindful of these thresholds to ensure accurate contributions are made to Bituach Leumi.
VAT for Landlords
In Israel’s VAT law, an apartment is VAT-liable if it regularly accommodates an average of five paying guests and has at least 14 square meters for two beds, plus an additional 4 square meters for every extra bed, making the minimum size for such an apartment 26 square meters, not including kitchen and bathroom spaces. Should the rental not meet these conditions, VAT does not apply, although Income Tax and Bituach Leumi obligations remain. Notably, rentals to foreign tourists are exempt from VAT regardless of meeting the criteria, but landlords must diligently gather and maintain proof that their guests are indeed foreign tourists to ensure compliance.
Purchasing the Right Property
Identifying High-Demand Locations
When searching for the right property for a short-term rental in Israel, focus on areas frequented by tourists and business executives. Look for locations with a high density of attractions, such as historical sites, beaches, or commercial centers. Major cities like Tel Aviv and Jerusalem are hotspots due to their business districts and cultural significance. Similarly, areas close to convention centers, major hospitals, or universities can also attract a steady flow of visitors. Utilize data on tourism trends, consult local real estate experts, and leverage online platforms that track the popularity of short-term rentals in specific neighborhoods.
Features That Attract Short-Term Renters
The right features can set your property apart and increase its appeal. Apartments in Israel that are tailored for short-term rentals should offer convenience and comfort. Features such as modern furnishings, a fully equipped kitchen, reliable high-speed internet, and air conditioning can be significant draws. Additional amenities like a washing machine, a cozy balcony, or access to a swimming pool can further enhance attractiveness. For higher-end rentals, consider luxuries like a gym, a rooftop terrace, or a smart home system. Remember, the goal is to create a space where guests feel at home while offering the benefits they can’t get from a traditional hotel.
Property Inspection and Legal Due Diligence
Before purchasing a property for short-term rental purposes, conduct a thorough property inspection to avoid costly repairs down the line. Engage with a professional inspector to evaluate the condition of the property, including its structure, electrical systems, and plumbing. Verify the property’s legal status, ensuring there are no liens or disputes that could affect ownership. Understand local zoning laws and the regulatory framework governing short-term rentals in Israel, as these will influence your operation. Consult with a real estate attorney to navigate the purchase process and help with the negotiation of terms that protect your investment interests.
Setting Up Your Short-Term Rental Business
Step-by-Step Guide to Setting Up
To embark on setting up your short-term rental in Israel, begin by ensuring your property complies with local regulations. Register your business with the appropriate authorities to ensure you’re operating legally. Obtain any necessary licenses and familiarize yourself with tax obligations, including VAT, income tax, and Bituach Leumi contributions.
Next, draft a business plan that outlines your goals, target market, and operational strategy. It’s vital to set up a financial management system to keep track of earnings and expenses, and consider investing in insurance to protect your property and business.
Furnishing and Preparing Your Property
Furnishing your property is critical to attracting guests and securing bookings. Equip your apartment with high-quality, durable furniture that offers comfort and style. Ensure that the beds are comfortable and that the seating areas are inviting. The kitchen should be stocked with essential cookware, utensils, and appliances.
High-speed internet is non-negotiable, as is a functional entertainment system. Invest in professional cleaning services to maintain a high standard of cleanliness. Details such as fresh linens, towels, and a welcome pack with information about the area can significantly enhance the guest experience.
Marketing Your Property
Marketing is key to ensuring that your short-term rental stands out in Israel’s competitive market. Create listings on popular platforms such as short-term rental and booking.com, ensuring that your descriptions are clear, compelling, and complete with high-quality photos. Utilize social media to reach potential guests, engaging with travel and tourism pages relevant to Israel.
Consider creating a dedicated website or blog to showcase your property and provide additional information about the local area. Encourage guests to leave reviews, as positive feedback can be the deciding factor for potential bookings. Also, network with local businesses and tourism offices to tap into existing visitor streams and offer packages or discounts.
Finding the Perfect Property with Keter Advisors
If you’re in pursuit of the best short-term rentals in Israel, Keter Advisors stands as your premier partner in this journey. With an unwavering commitment to service excellence, Keter Advisors specializes in residential properties, providing invaluable assistance to both seasoned investors and newcomers, including Olim navigating the market complexities.
Whether you’re looking to buy your dream home or an ideal investment property, you can rely on the expertise and personalized service that Keter Advisors offers. As a member of Israel’s Association of National Real Estate Brokers and a licensed broker, Keter Advisors pledges the highest standards of professionalism and integrity. From finding the right apartments in Israel to sealing the deal with ease, Keter Advisors ensures that every step is streamlined, transparent, and tailored to your needs.
For those looking to sell, rest assured that your property will receive the attention it deserves to achieve its highest value in the competitive Israeli marketplace. Embrace a hassle-free real estate experience with Keter Advisors — your trusted agent, just a phone call or click away, ready to transform your real estate aspirations into reality. Get in touch today.
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