@James Wise I'm not an authority on the Israel RE market by any stretch, but there are a number of major differences to US RE. And I would invite anyone else with a better knowledge of the Israeli market to correct me or add to the below.
For starters, in the major cities (Jerusalem, Tel Aviv, Haifa, Modiin etc.), there are very few houses. It is 95% apartment living (but not multifamily - multifamily is almost non existent - it's almost all single-owned apartments). And the pricing (especially in Jerusalem and Tel Aviv) is out of this world. Where you can find a 1,500 SF house, say a fixer-upper, in many major markets in the US for less than $100k, you'd be hard-pressed to find a 1,000 SF apartment in Jerusalem or Tel Aviv, even in pretty bad condition, for less than $500k. And while renting is not cheap, the cash flow returns that you can make at this pricing from rentals income is very low. The people who are making money now in these markets are those that bought property 15-20 years ago, or inherited property from family and have no loan to payoff.
In the peripheral areas, things are a bit cheaper, but the rental income is lower too, and your probably making around the same margins. The periphery also usually offers larger units and sometimes houses, but again, because of the location, it's still very difficult to charge rents that make sense for a cash flow investor. Every now-and-then you can find a good deal, but Brrrring can be an issue as the fixer-uppers are harder to find and the eventual cash flow is not very high (I'm guesstimating 5% max).
Often there are new development projects that offer attractive opportunities, but they come with their own baggage - you might get a discounted purchase price, but you have to pay periodical down payments during construction years (which can take as long as 3-4 years since they're building apartment buildings or a series of duplexes/triplexes, not single houses), and so essentially you start paying off a mortgage years before you can see any rental income. Your asset may go up in value from the discounted "off-the-plan" price, so you can maybe exit at a nice profit in 4-5 years, but in the meantime you've earned no cash flow and been paying off a loan. Also, often these projects have other restrictive conditions, such as requiring you to live in the apartment for a minimum 3-5 years after construction (for various reasons which I won't go into here). Basically, I think investing in Israeli RE is more of a longer term appreciation play. You can do well, but need to be very patient. Also, for the last year or so now, things seem to be at a peak in terms of pricing, so even if you were buying for appreciation, I'm not sure now is the time. Aside from Jerusalem and Tel Aviv (especially Jerusalem) where prices only ever seem to increase or at worst stay flat, and this has a lot to do with foreign capital (people who can afford it, buying apartments at high prices and leaving them empty so that on their annual vacation they have their own place to stay, or to offer to friends for their trips to Israel etc.).
A good example of difficulty in earning cash flows is the new city being built up north, Harish. The government released tracts of land to developers basically for free, (so the developers can "reasonably price" the apartments) and a "new" city is now being built almost from scratch. Thousands of units are going up in one go. People only started moving in a year or two ago to the first complete units, but construction is ongoing. In Harish, you can buy today a new 1,200-1,400 SF unit for around $250k-$300k (off-the-plan). But the build time is around 2-3 years, in which you start to pay off a loan. If you manage to put a tenant in (in 3 years), rents are not going to be higher than around $800/month. Compare that to a property you can buy in Atlanta or Jacksonville or Charlotte, for example, where you can probably get $800/month today on a house (as opposed to apartment) which you bought for $100k and put in another $50k to renovate (random numbers, but you get the idea). That said, there were people who bought off-the-plan in Harish 3 years ago for $200k and are now selling their brand new units for $300k-$320k.
In terms of flipping, it doesn't happen so much here, and I think taxes are part of the issue. Also, financing is more difficult - I'm not sure about hard-money lenders and how that works in Israel, but for a standard bank loan for an investment property or a flip, you'd be hard-pressed to get more than 50% LTV.
A bit of a ramble, but maybe that gives some color into the market here and why the US market can be more attractive to Israeli investors than investing locally.
