The most expensive decision in an overseas real estate deal is made before you have seen the property. And most people don't know they are making it.
Oren sat across from me with a sheet of paper. An actual sheet, printed, with a table he had made for himself.
In one column it said “company.” In the second, “private.” Under each, a list of pros and cons he had collected over two months. He put the sheet on the table and said: “Ilan, I need you to tell me who's right. Because everyone told me something different and everyone sounded sure.”
Oren is a high-tech guy, late forties. Manages teams, used to making decisions with data. He didn't come to me with a problem. He came before. That already puts him in a small minority of the people I meet; most arrive after they have signed, when the question is no longer relevant.
His story started a year earlier. A friend told him about yields in Europe, Oren started reading, joined a few groups, attended two investor conferences. The deeper he went, the more opinions accumulated. And each opinion sounded more certain than the last.
I started reading his list.
The first marketer told him you must have a company. “Everybody does it. It's what protects you. If someone sues - they get to the company, not to you.”
Another marketer, in another country, told him exactly the opposite: “A company for one apartment? You'll pay a local accountant, annual reports, fees, more than the apartment will bring you in the first year. Don't complicate things.”
Someone he knew from work, who had already bought there, told him about a two-company structure he had set up. Oren didn't understand why two. He asked, got a vague answer about “optimization,” and wrote it on the sheet.
And a fourth person told him to open a company in Israel, and that the Israeli company would hold the property abroad. “That way you manage everything from here.”
I raised my eyes from the sheet.
“Oren,” I said, “I'm going to tell you something that will annoy you. Everyone was right.”
He looked at me without a word.
I explained. The first marketer sells in a project where the typical buyers purchase several units, and for them a corporate structure really is called for. The second sells single apartments to small investors, and for him the company really would be a weight. The friend from work did a deal with partners, in a country with a different law of its own, and therefore arrived at a two-company structure. And the one who talked about an Israeli company holding a property abroad simply repeated a sentence he had heard, without understanding what stands behind it.
“None of them lied to you,” I said. “Each described the case he knows. The problem is that you are not their case. And when you copy an answer from someone else's case, you don't get its benefits. You only get its costs.”
Then I asked him the question I ask first. Not “how much money do you have.” Not “which apartment did you find.” Not “what is the expected yield.”
“Oren, what are you planning to do with this property over the next ten years?”
He stopped. Really stopped. The sheet he had prepared, with both of its columns, didn't answer that anywhere.
“I think I'm buying one,” he said slowly. “But if it works, I'll probably want more. And maybe my brother will come in with me. We've talked about it.”
That was it. That's where the answer is. Not in the list of pros and cons, but in the sentence he said hesitantly.
I explained why it matters.
If he buys one property, alone, as a passive investment, and intends to hold it long term - a private purchase is simpler, cheaper to maintain, and the reporting in Israel is clear. No company reports, no additional accountant in a foreign country, no annual fees. He receives rent, reports, moves on.
But if within two years he wants a second and a third property, and his brother joins as a partner - the picture is completely different. Then three questions come in that have no good solution after the fact.
The first is liability. With one property, the exposure is limited. When there is activity - tenants, tradesmen, maybe a renovation, maybe a malfunction, the exposure grows, and it reaches him personally.
The second is partnership. If he and his brother are registered as two private owners of a property, and one day one of them wants to leave - ownership of the property itself has to be transferred. That is a process. In a corporate structure, a change in shareholdings is a completely different action, and the property doesn't move from its place.
And the third, which is the most important - is when.
“Oren,” I said, “if you buy now in your own name, and in two years you want to move it into a company, that is not a technical act of changing a name on a form. In most of the countries where I work, transferring ownership from a person to a company is considered a taxable event, with everything that goes with it. This decision is made before the signing. After it you no longer decide, you only pay.”
He listened, and then asked the logical question: “So maybe just set up a company from the start? To be safe?”
I said no, and that this is the opposite mistake, less dramatic, but wearing.
Because if the plan with his brother doesn't materialize, and he is left with one property alone inside a corporate structure, he will pay for years for something he doesn't need. Annual maintenance, reports, a local accountant, sometimes representation too. I've seen investors whose structure's annual cost ate a respectable chunk of the yield, and at some point they started thinking how to dismantle it. That, by the way, isn't free either.
“To be safe” is not a strategy. It is a way of paying for both options instead of choosing one.
“So what do I do?” he asked.
I told him that first he closes the question with his brother. Not “maybe” and not “we'll see how it goes.” One clear conversation, before touching a contract. Because the entire structure derives from his brother's answer, not from the theoretical advantages in his table.
And I added one more thing, because it came up in his sheet more than once. The words “Israeli company” - in most cases I accompany, that is not the structure that fits. What is right depends on the country where the property is located, its local law, and his tax status as an Israeli resident. Each of the countries where I work has its own rules on this, and they are not similar to one another. A structure that works excellently in one place can be expensive and cumbersome in another.
“So there's no general answer,” he said.
“There is,” I replied. “The general answer is that there is no general answer. Anyone who gives you one without first asking how many properties, which partners, and in which country - is answering someone else's question.”
Oren spoke with his brother that same week. The answer was yes.
He didn't buy the first apartment he found. He built the structure first, and only then started looking for a property. It delayed him by a few weeks, and he didn't like that. Investors weigh the delay against the fear of missing a deal, and almost always the fear wins.
But it saved him the moment I see with others. The moment when someone discovers he should have decided differently - and that it's already too late to decide at all.
The questions I would ask in your place
- How many properties do I truly foresee within five years, and not how many do I say I foresee?
- Is there someone who might come in with me, and if so, have I talked to him or am I assuming?
- What exactly happens in this country when ownership is transferred from a person to a company, and who checked that for me?
If you are about to make a purchase abroad and are torn over this question, don't look for the one who sounds most sure. Look for the one who asks you questions before he answers.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית