Mortgages for Acquiring Yielding Properties
Achieving a property portfolio which would be as extensive as possible is the natural aspiration of any household / company / business. The portfolio’s stability and profitability are affected to a large extent from its level of distribution. Such portfolio often consists of financial market investments (securities, deposits and savings accounts) as well as other types of investments, such as real estate (what is commonly called “yielding real estate”).
In addition to its capital value, yielding real estate generates income cash flow throughout the period it is owned by the investor, from the time it is acquired to the time it is sold. In other words, yielding real estate is a property that generates income. This category includes apartments, houses, commercial buildings, offices, event venues, gas stations, shops, parking lots, shopping malls, hotels, etc., and they can be located in Israel and overseas.
Yielding real estate is highly important as an investment channel, as the yields attained are some of the highest available (if you compare it to investments with a similar risk level, which for yielding real estate is relatively low).
Recently, the trend of accumulating many properties within short time periods is gaining popularity. This is done through the correct utilization of financial leverage provided by mortgage banks and insurance companies. In spite of the Israeli system’s relative conservatism, one can benefit from higher financing rates (which means lower equity requirements) than before.
Although monthly mortgage payments are normally funded by the rental fee, you should still take the process of obtaining the mortgage very seriously, and plan ahead the income / expense ratio. This will assist in preventing a “leverage crisis”. Correct, professional use of the mortgage tool will allow you after several years to be the owner of properties that are free from any lien (mortgage), and benefit from a high, stable flow of income.