Calculate gross rental yield, net rental yield, and net yield after the 10 percent rental tax in Israel. Enter property value, monthly rent, and annual costs.
Calculate gross and net rental yield on your Israeli investment property. See yield before and after the 10 percent rental income tax option.
Net rental yield (after costs)
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Gross yield
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Net yield (after costs)
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Annual rent
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Net yield after 10 percent tax
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How gross and net rental yield are calculated
Gross rental yield is annual rent divided by property value, expressed as a percentage. It ignores all costs and taxes and is used mainly for quick comparisons between properties or markets. Net rental yield subtracts annual costs (maintenance, insurance, Arnona, management fees, building committee fees) from annual rent before dividing by property value. Net yield after tax further subtracts the 10 percent rental tax that applies when monthly rent exceeds the 5,650 ILS exemption threshold. The net after-tax yield is the most accurate measure of the annual cash return from a fully paid-off property. For leveraged purchases, the return on equity differs significantly and should be calculated separately.
Typical costs for Israeli rental properties
Annual costs for a rental apartment in Israel typically include Arnona (500 to 3,000 ILS per year depending on size and city, paid by landlord when vacant), building committee fees (2,000 to 6,000 ILS per year), maintenance and repairs (1 percent of property value is a common rule of thumb, so 20,000 ILS on a 2,000,000 ILS property), property insurance (1,500 to 3,000 ILS per year), and management agency fees if applicable (8 to 10 percent of annual rent). A 2,000,000 ILS property rented at 6,000 ILS per month (72,000 ILS annual) could easily incur 20,000 to 28,000 ILS in annual costs, bringing net yield down from 3.6 percent gross to 2.2 to 2.6 percent net before tax.
Yield versus appreciation as the investment case
Israeli residential real estate investment decisions are usually driven more by expected capital appreciation than current rental yield. Historical price appreciation in central Israel has been significantly above the yield, making the total return (yield plus appreciation) much more attractive than yield alone suggests. However, appreciation is not guaranteed and past performance does not predict future results. With Israeli government bonds yielding around 4 to 5 percent in 2025 and mortgage rates at similar levels, a net rental yield below 3 percent means a leveraged property investor is effectively paying out of pocket each month (negative carry) and relying entirely on appreciation to make a positive return. This is a risk worth quantifying before purchasing an investment property.
Frequently asked questions
What is a good rental yield in Israel in 2025?
Rental yields in Israel are among the lowest in developed markets because property prices are very high relative to rents. In Tel Aviv and the Gush Dan metropolitan area, gross rental yields typically range from 1.5 to 3 percent annually. In Jerusalem, yields are similar. In the periphery, such as Beersheba, Hadera, or Kiryat Shmona, yields can reach 3 to 5 percent because prices are lower and demand for rentals remains. Net yields after costs and tax are considerably lower. Many Israeli landlords accept sub-3 percent net yields because they are primarily investing for long-term capital appreciation, which has historically been strong, rather than for current income. Comparing Israel with markets like the UK (gross yields of 4 to 7 percent) or Germany (3 to 5 percent) shows how compressed Israeli rental income is relative to asset values.
What costs should I deduct when calculating net rental yield in Israel?
The main recurring costs for a residential landlord in Israel include: Arnona (municipal property tax) paid by the landlord when the property is vacant, building committee fees (va’ad bayit), maintenance and repairs (a typical budget is 1 percent of property value per year), property insurance, and property management fees if using an agent (typically 8 to 10 percent of annual rent). Mortgage interest, if applicable, is also a cost but is excluded from yield calculations because yield is measured against the full property value, not just equity. Periods of vacancy reduce effective annual rent below the headline monthly rent. Israeli landlords often overlook the compounding effect of these costs. At a gross yield of 2.5 percent on a property worth 2,000,000 ILS, total annual rent is 50,000 ILS. If annual costs are 25,000 ILS, net yield falls to 1.25 percent, which is below the risk-free rate available on Israeli government bonds in 2025.
How does the 10 percent rental tax affect net yield in Israel?
If monthly rent exceeds the 5,650 ILS exemption threshold for 2025, the landlord must pay tax on the full rental income. The 10 percent flat option (Option B) applies a 10 percent charge to gross annual rental income with no deductions for costs. This directly reduces net yield by approximately 10 percent of the gross yield figure. For example, a 2 percent gross yield becomes an approximately 1.8 percent gross yield after the 10 percent tax. On a 2,000,000 ILS property with 40,000 ILS annual rent, the 10 percent tax costs 4,000 ILS per year. After adding typical annual costs of 20,000 to 25,000 ILS, net yield after all costs and tax can fall to under 1 percent, which makes the rental purely a capital appreciation play.
How do I improve the rental yield on my Israeli investment property?
Several strategies can improve rental yield. Buying in areas with lower price-to-rent ratios, such as the periphery, produces higher yields but may come with lower appreciation and higher management complexity. Renovating an older apartment to command a higher rent increases revenue without changing the asset price (though the renovation cost affects total return). Minimising vacancy periods through professional property management and flexible lease terms protects income. Keeping maintenance costs low by making preventive repairs rather than emergency repairs reduces costs. Some landlords rent rooms individually rather than the whole apartment to achieve higher total rent per square meter, though this requires more active management. Using the 10 percent tax option rather than the marginal rate option where applicable preserves more income.