You have finally invested in real estate in Israel and now you are ready to earn some money by renting out the property. The following tips can help you protect his investment:

• The rental agreement must be drawn up by a lawyer. It’s easy to get sample rental agreements, but these standard contracts are often not complete and are usually not written specifically with your own situation in mind.
• In addition to the rent, it is customary for the tenant to pay municipal taxes, homeowners association dues, property running costs and any expenses related to property maintenance. The tenant must also pay for civil liability, fire and theft insurance. Building structure insurance is paid by the landlord.
• It is to your advantage to collect rent in advance. Leases can be written to include a clause requiring rent to be paid every three months in advance, every six months, or even a full year in advance. This way of collecting rent gives you more protection.
• To protect your money, you should request a security deposit from your tenant to use in case the tenant fails to meet all of their obligations. You can also request a bank guarantee that will cover the cost of the apartment during the term of the lease. In addition, your tenant must obtain two guarantors to ensure tenant compliance with the lease. These guarantors must be Israeli residents with means of payment. It is customary to obtain from the tenant a promissory note (“shtar chov”) that can be deposited in the enforcement office for collection in case of breach of contract by the tenant. It is also accepted practice to obtain blank checks from the tenant that can be used to pay outstanding utility bills after the tenant vacates the apartment.
• The lease must include provisions in case the tenant breaches the lease and refuses to vacate the apartment. For example, the lease must allow the landlord to turn off utilities without having to obtain a court order to do so.
• Utilities must be registered in the tenant’s name for the duration of the lease. That way, if the tenant leaves debts, they are not his debts but the tenant’s debts. Upon termination of the lease, utilities may be registered in the name of the new tenant.
• It is important to note in the contract that the object of the lease is solely residential and that the property cannot be sublet without the consent of the landlord.
• It is the responsibility of the tenant to take care of the apartment and to fix anything that breaks as a result of negligence or a willful act. Anything that breaks as a result of normal wear and tear is the responsibility of the lessor. Therefore, it is important to have a representative in Israel who takes care of everything that needs repair.
• Part of the income earned from the rental is exempt from Israeli income tax. The Israel Income Tax Authorities collect income tax on rent received by a landlord. On residential property, the first $1,000 per month is exempt from income tax. Any amount greater than $1,000 per month is subject to tax. The landlord can choose from several methods to calculate the tax. He should have his accountant crunch the numbers to see which method is best for his situation.

Commercial property rentals are taxed at a rate of 30% of income (including the first $900 per month), less recognized deductible expenses.

The above, of course, is subject to change and an Israeli accountant should be consulted regarding your liability for income tax as a result of renting out your property.