Asset allocation and diversification are two of the most important keys to the long-term growth of your investment portfolio, forming the basis of a stable yet profitable financial strategy. A diversified investment strategy typically includes a mix of asset classes, such as real estate, business investments (including stocks), and cash. In this article, I’d like to discuss how real estate fits into your investment plan and how you should look at that equity.

Buying a home is generally one of the largest business transactions that people make over the course of their lives. By owning a home and paying off a standard mortgage, no matter the size or duration, you create equity, which is, in essence, a long-term savings plan, with both you and the bank profiting in the long run. But because most people do not buy and sell their property every year, the value of your home is generally not the critical factor. It’s more important to ensure that you can afford to live in your home than to worry about whether its value has appreciated.

In general, I recommend that people discount the value of their home when looking at their investment portfolio. Your home is not an asset that is easily liquidated and will not provide funds that can be accessed for emergencies. Since you need to live somewhere, your home should be considered your castle and not a way to raise money for other investments.

Investors are often convinced to borrow against their property in order to buy additional properties to generate more income. While this investment strategy can work in certain investment environments, such as during a real estate bubble, it isn’t always successful. This strategy also raises your risk level by increasing financial leverage, as your equity remains steady while your debt grows.

Real estate, like all assets, is always in equilibrium, with sellers receiving what buyers are willing to pay right now. Prices can move in unexpected directions for many different reasons. While you might be convinced that real estate is going up, you always risk continued or additional losses in the value of your property the longer you hold on to it.

According to statistics published by the Taub Center for Social Policy Studies in Israel, housing in Israel is more expensive than in 174 out of 175 large American cities. The comparison was based on the number of years of work needed to purchase a home.

Housing prices in Israel have been increasing almost continuously over the past two decades, rising roughly 118% (82% in real terms) between 2006 and 2017 alone, with high growth continuing into the 2020s. The increases began to moderate in 2023 and 2024 due to rising interest rates, market caution, and geopolitical events.

By early 2026, the housing market began to stabilize, showing slight year-over-year decreases, including a 1.7% decrease in January 2026, although pricing in some areas remained resilient.

If your home shouldn’t be considered part of your standard investment portfolio, where does real estate fit into your portfolio? There are several ways for individuals to consider Israeli real estate investments.

• Buy apartments to rent out. This has been a favorite investment vehicle for decades in Israel. While rent-to-value ratios, i.e., the amount of money you earn as a percentage of the value of your property, are low in Israel, earning between 2% and 4% of the value of the property per year, consistent appreciation in real estate has made it worthwhile. As a comparison, in many Western countries, the rent-to-value ratio can range between 6% and 10% annually. Rental income is also made more attractive by the rental income tax exemption in Israel, currently NIS 5,654 per month. But being a landlord is not for everyone, as it can take time, energy, and money to manage a property, with no guarantee that its value will appreciate.
• Partner with others to buy a property. While some might contribute more money, others can often compensate by doing more of the day-to-day management.
• Invest in real estate through the Tel Aviv Stock Exchange (TASE). There are many real estate companies and even some real estate investment trusts (REITs) traded on the exchange that allow you to invest in real estate for very small sums of money, as little as a few thousand shekels. A financial investment in real estate companies avoids much of the bureaucracy of real estate investing, such as contracts, negotiations, maintenance costs, and management fees. The high level of liquidity means that you can buy and sell your interest on a daily basis, and the investment is generally not correlated with a standard stock and bond portfolio.

Whether you look to the property market to buy your primary residence, a second home, or an investment property, ensure that your investment meets your personal investment needs and fits into your overall portfolio strategy.

Baruch (Brent) Labinsky, MBA, TEP, founder of Labinsky Financial, is an independent Financial Planner and Israel Securities Authority licensed Investment Portfolio Manager. He has devoted his professional career to helping individuals and organizations realize their financial and investment goals. His book, A Financial Guide to Aliyah and Life in Israel, published by Mosaica Press, is available in bookstores in Israel, via www.labinsky.com! by contacting Labinsky Financial at [email protected] or 02 991 0029.

* Last updated: August 25, 2026 *