Last week I told the story of Roni, who came to me with 60 thousand euros and one question: “Where is the best place to invest?”
We understood that the first question is not “where” but “why” - what your goal is in the investment.
But from the moment we started breaking down the options, the real problem surfaced:
Every path has advantages, but also serious pains that most investors don't prepare for.
Ongoing yield - “Why don't I see the money?”
Roni lit up at the idea of a rental apartment.
“The simplest,” he said, “an apartment that brings me money every month.”
I smiled. “Simple? Not exactly. Ongoing cash flow sounds wonderful, but reality is more complicated:
- One month without a tenant, and you're no longer in profit but in loss.
- A tenant who doesn't pay on time, and you find yourself dealing with legal proceedings in a foreign country.
- An unexpected repair, a burst pipe or a broken water heater, eats the yield of several good months.
Many investors discover after a year that the ‘guaranteed 7% yield’ presented to them in Excel is, in practice, 3% at best, after all the expenses, taxes and headaches.”
Roni leaned back. “That sounds like a part-time job, not a passive investment.”
“Right,” I replied. “That's the gap between the dream, income without effort, and reality: continuous management, malfunctions, dependence on people.”
Flip - “It looks fast, in practice it's wading through mud”
Roni tried another option.
“So maybe a flip. Buy, renovate, sell, make a killing.”
“Sounds glamorous,” I said. “But in practice:
- The renovation almost always drags on. Instead of 3 months it stretches to 9.
- Costs go over budget. Suddenly another 5,000 euros you hadn't planned.
- And if the market cools in the meantime? You're stuck with a property everyone thinks is too expensive.
Investors often tell me: ‘They told me I'd make 30 thousand euros on the flip, in the end I barely came out with 5,000, and even that after a year of nerves.’”
Roni was silent. “So it's actually not fast money, but a fast headache.”
I laughed. “Exactly. A flip suits someone with the patience to manage a project, not someone looking for easy profit.”
Future appreciation - “How long can I wait?”
At this point Roni suggested: “Then maybe buy land in a developing area. They told me that's the next big thing.”
I took a deep breath. “This is a game of patience:
- You have no cash flow. The money just sits there, for years, without returning a cent.
- As long as there is no real development, there is no demand. It could take five, seven, ten years.
- And in the meantime, taxes and upkeep eat your pocket.
The psychological element comes in here too: watching your money ‘stuck’ without moving, while other friends show you checks from rent coming into their accounts.”
Roni lowered his gaze. “Honestly, I'm not sure I have the nerves for that.”
Fund or group - “How do I get out?”
Then we talked about a fund or a group.
“Here I don't buy an apartment myself,” said Roni, “I join a managed investment. That sounds simpler to me.”
“It certainly can be,” I said, “but the pain here is different:
- You have no control. Decisions are made by the fund's managers. If they chose wrong, you're in it too.
- No liquidity. If in a year you need the money, it's not certain you'll be able to take it out. A fund has defined exit dates, and sometimes it's only after 5 or 7 years.
- Management fees. Even if the fund doesn't earn as promised, the managers take theirs anyway.
- Partial transparency. It's not always clear exactly where the money is invested, or what happens if one of the projects gets stuck.
I watched Roni freeze in his chair. “So basically if I need the money, I'm stuck.”
“Right,” I answered. “The big problem with fund investments is that the investor discovers too late that he is ‘locked in.’ He doesn't really control the assets, and he can't decide when to exit.”
I smiled. “Do you understand now, Roni?
Every path sounds shiny at first - but each one has a pain you need to know:
- Ongoing yield requires management and maintenance.
- A flip requires time, control and patience.
- Appreciation requires nerves and long-term financing.
- A fund requires full trust and the ability to wait until the fund's managers decide it's time to return your money.
And that's only the first stage. Because once we've understood why one invests, the next stage comes: with whom and where to invest.
Because even the most brilliant deal in Excel will crash in a moment if the people behind the investment are not reliable (the lawyer checking the deal, the contractor, the broker or the manager of the group/fund), or if the market doesn't truly suit you.”
The bottom line
Investing in real estate abroad is not about choosing a “cheap apartment” or a “glittering fund.”
It is first of all a choice of which pain you are willing to absorb:
- Sitting with a problematic tenant?
- Waiting years without seeing a cent?
- Being dependent on a fund manager?
- Spending sleepless nights because a renovation is dragging on?
Whoever understands this in advance spares himself costly disappointments.
And whoever doesn't, finds out the hard way, too late.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית