“I'm not sleeping at night,” Roni told me as he sat across from me in the office. “I have 48 apartments under construction in Bucharest, five more months to handover, and I needed to make a decision yesterday.”
Roni, a veteran real estate developer who had already completed three successful projects in Romania, arrived with a dilemma that has become very common among my clients: to whom to sell the apartments already now, at the construction stage? To Romanians or to Israelis?
“Let's start from the end,” I told him. “What weighs on you most?”
He leaned back. “You know what? The question is not only financial. It touches my cash flow right now, my ability to complete the project without being squeezed, and my peace of mind afterward.”
The first scenario: selling to Israelis
“If I go with the Israelis,” Roni laid out the dilemma, “I can collect a 40-50% advance already now, sometimes even 70%. They understand the investment potential, they're used to payments like that from Israel, and that money gives me a cushion to complete the construction without going to the bank.”
“Sounds great,” I remarked. “So what's the problem?”
His face creased. “The problems begin the moment they transfer the money. Israelis who pay a large advance become my landlords already at the construction stage. One of the buyers in the previous project called me 11 times in one day because he saw a worker smoking in the site yard.”
He continued: “They want weekly updates, photos from the site, changes to the latest plan, and they are tense because they invested a large sum in a project that doesn't exist yet. And when the project is delayed by two weeks because of a problem with a license? I have to explain to twenty couples why the sun doesn't shine in Romania exactly as I promised.”
“And there's a bigger problem,” he added, “when most of the apartments in the building belong to Israelis who rent to travelers or leave them empty, the local Romanians don't want to buy in my next projects. It stains my reputation in the local market.”
The second scenario: selling to locals
“Okay,” I said, “so why not Romanians?”
Roni let out a long sigh. “With Romanians it's an entirely different story. The local practice is a payment of 10%, 20% at most, as an advance on signing the contract, and the balance of 80-90% only at handover. That means I need to find bridge financing for the next five months.”
“Does that hurt the pocket?” I asked.
“It doesn't just hurt,” he answered, “it can break a project. If I sell 30 apartments to Romanians at 100,000 euros each, that means I receive 300,000 euros now and 2.7 million euros only in five months. In the meantime, I have a contractor who has to be paid every month, I have suppliers, I have workers.”
“So you need a bridge loan.”
“Right,” he confirmed. “And Romanian banks don't give bridge loans on simple terms. They want guarantees, demand that I have equity of at least 30% of the project cost, do their own valuation that is always lower than mine, and the interest? Much higher than what I would pay in Israel.”
He took a paper from his bag. “I calculated it. With the loan and the interest, I'm effectively giving up another 8-10% of the project's profit. And that's before we talk about the risk, what if the bank decides midway that it's unhappy with something?”
“But there's an advantage,” he added quietly, “Romanians don't interfere during construction. They come to see the apartment twice, don't call every day, and understand that construction is a process. And at handover? They pay the balance and say thank you.”
The decision
“So why are you really here?” I asked him directly.
Roni smiled for the first time in the meeting. “Because I know there's no perfect solution. If I choose Israelis, I have money now but a headache for five months. If I choose Romanians, I have peace of mind but I have to go to the bank cap in hand.”
We sat and talked for another two hours. We went over his cash flow situation, his relationships with the local banks, his tolerance for daily pressure, and his long-term ambitions in the Romanian market.
In the end, Roni decided on a hybrid approach: to sell 60% of the apartments to locals with a 10% advance, to take a smaller bridge loan that is easier to obtain and manage, and 40% to Israelis with advances of 50%, enough to cover the financing gap, with an agreement made in advance on the frequency of updates (only once every two weeks) and limited rights to make changes.
“Thank you,” he said on the way out. “Sometimes you just need someone who has been through this with dozens of other developers to see the full picture.”
The lesson: In projects under construction, a large advance today is not always preferable to full payment tomorrow. Sometimes, the right balance between cash flow and peace of mind is the key to success.
You are welcome to share your experience in the comments
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית