Sometimes the difference between a good investment and a frustrating one lies not in the property itself - but in the structure you choose to build around it.
Three years ago, Yossi sat in a Tel Aviv café with a local investment adviser. The offer sounded almost dreamlike:
“You buy an apartment in Bucharest, rents there are rising, supply is limited and demand just keeps growing. The net yield? Around 7%-8% a year. Almost double what you'd see in Israel. And one more thing - we'll do it smartly: we'll set up a company in Romania in your name, and the apartment will be registered in the company's name. It's more ‘professional,’ it lets you expand easily, and it even helps with taxes.”
The presentation looked impressive. The graphs showed lines going up, the photos of the apartment radiated potential, and the idea of holding real estate through a “serious” company sounded right. Yossi signed, paid, and the apartment was purchased.
At first everything flowed. The tenants moved in, the rent was paid into the company's account, and the numbers looked good on paper. But when Yossi sat down at the end of the year to do the calculations and tried to understand how much actually remained in hand, the surprise arrived.
The tax that exposed the gap
When the apartment is registered in an individual's name, taxation of rental income in Romania is relatively simple and low - a final tax of a few percent of the income. A reasonable net, without much headache.
But when the property is held in a company, you enter an entirely different playing field: first you pay tax at the company level on the profit, then, when you want to withdraw the money to Israel, you pay tax again on the dividend. And if that isn't enough, a health insurance contribution (CASS) may also come into the picture if total passive income crosses a certain threshold.
The result? A significant part of the yield that Yossi thought belonged to him went to the Romanian treasury.
The quiet surprise
Yossi came to my office with a folder of reports, neatly prepared by the local accountant. He pointed at the bottom line:
“Look - after all the expenses and taxes, I'm left with almost half of what they promised me. I didn't take into account that every time I withdraw money from the company - I'm actually paying again.”
He paused for a moment and then added:
“If I had known that the same apartment, in my own name, would have been subject to a much simpler and lower tax - I wouldn't have gone into this adventure. A single apartment doesn't need a company. It needs to generate income for me, not provide a living for the tax authorities and the bookkeepers.”
The lesson for developers and investors
Yossi's story is not about a bad property or the wrong market. On the contrary - the apartment in Bucharest was rented out quickly, its value rose, and demand is strong. The problem was the structure.
Yossi is not alone. Quite a few Israelis go into real estate investments abroad with a dream of “professionalism,” or out of complete trust in the guidance they received, without checking what the investment structure actually means in practice.
It's important to understand: sometimes what looks like the right move on paper becomes a cash-flow trap in practice. Every month that rent comes in, the company's fixed expenses take a large slice of the pie. In other words: the apartment works for the company - not for its owner.
Experienced developers know how to choose when a company is the right tool: when there is a plan to hold several properties, when there are partners who need to be framed together, or when there is a proven tax advantage in a large project. But for a private investor with one apartment? Very often the company turns from a shield into a burden - eroding the yield, weighing down with bureaucracy and pulling the money out of your pocket.
How it could have looked different
In a better scenario, Yossi would have bought the apartment in his own name. The running expenses would have amounted to insurance, management fees and local taxes, without a layer of company costs. His yield would have been close to the 7% he was promised.
And only if he had been planning to buy another 3-4 apartments, or to enter a larger project, would he have considered setting up a company.
The moment of truth
At one point in the conversation I asked him: “Tell me, when you sat in the café and got the recommendation, did you stop to ask - why do I actually need a company for a single apartment?”
He was silent. He smiled a bitter smile. “Honestly? No. I was focused on the numbers they showed me - and not on the questions I should have been asking.”
As Yossi got up to leave, he said a sentence that I repeat again and again in lectures:
“My mistake wasn't in the purchase. It was in believing the structure they offered me without fully checking the tax implications.”
And that is the whole story: a good investment can become less worthwhile - not because of the property itself, but because of the way you chose to package it legally and financially.
The conclusion
Before any purchase abroad, don't ask only “how much is the apartment worth and how much does it yield.” Ask also:
- Who holds the property - me or a company?
- How much tax will I pay at the income level?
- And how much more when I want to withdraw the money to myself?
In the world of international real estate, the physical distance from the property is no longer the biggest problem. The problem is the distance from a real understanding of all the parts that make up the investment.
Because in the world of international investment, it's not always the stone in the building that erodes the profit - sometimes it's the stamp of the companies registrar.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית