In three deals, in three different countries, exactly the same mistake repeated itself.
Yoav first approached me about four years ago. A completely new investor, with no experience in real estate abroad, with a good salary and a strong desire to start “working for himself” through property as well. He came to me after he had already chosen an apartment in Bucharest. Not after market research. Not after checking regional yields. He chose it because he flew there, saw it in a marketer's ad, and “fell in love.”
That was the word he used. I fell in love.
I accompanied him through the deal, everything was in order legally, and when the apartment was delivered he turned to an Israeli interior designer recommended by a friend. He wanted it to look “like his home in Tel Aviv” - an open Scandinavian-style kitchen, light parquet, designer lighting. Beautiful. Expensive. And entirely not what the local market looks for in a rental apartment in Bucharest, where tenants, students, businesspeople, couples and young families alike, mostly look for a simply furnished, functional apartment without an expensive design story.
Two years later, Yoav came back to me. This time with an apartment in Greece.
The same pattern again: a visit, falling in love, a relatively quick purchase, and then - design. This time a small villa in the Peloponnese, designed in a boho-chic style he had seen on Pinterest. Gorgeous. And intended, in terms of the local rental audience, for a tourist who comes for two weeks in summer, not for the year-round rental market in which he had actually invested.
The third time, in Cyprus, I already knew to ask him: “Yoav, who are you renting this to?” He answered honestly: “Let's see how it turns out.”
What turned out, in the end, is that all three apartments were rented. That is the important part to say - they did not sit empty, he did not lose the principal. But in two of the three, the actual yield was significantly lower than what he had planned in his head when he fell in love with them. Not because the numbers presented to him were false, but because the numbers always assume the apartment will suit the relevant tenant. And an apartment designed for the taste of the buyer, and not for the taste of the potential tenant, will usually be rented at a lower price, for a shorter period, or to a narrower audience.
I think about this a lot, because it isn't a mistake of ignorance. Yoav is a smart man, he read, he asked, he checked documents. His mistake was somewhere else entirely - he made the purchase decision with his heart, and then went on making all the decisions after it with his heart as well. Designing the apartment is not a technical act that comes after the investment. It is part of the investment itself.
I have seen this many times among Israeli investors in particular: the visit to the property becomes an emotional experience, almost like choosing a home to live in for themselves. And that is exactly the problem. An apartment you buy to live in - you design to your own taste. An apartment you buy to rent out - you design to the taste of whoever will rent it. Two completely different kinds of decisions, and usually nobody stops the investor and tells him so in time.
The question I would ask in your place
- The last time I bought an investment property, did I make a design or renovation decision based on my own taste, and not on what the local tenant is looking for?
- Did I actually check who the rental target audience is in this area, or did I assume that a beautiful apartment will always get rented?
- How much of the value I attribute to this property comes from the yield it will actually produce - and how much from the fact that I love it?
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית