How ownerhood works
Ownerhood is a game-changing savings alternative that gets you closer to the house-ownership dream. Can’t or won't buy a whole property? Buy a slice, and hedge your savings to your dream house price. No more going backwards!
Buy and own a slice of a property
Property leased and managed for you
SELL YOUR SLICE AND REALIZE CAPITAL RETURNS
Buy and own a slice of a property
Choose a property that interests you
- This can be the kind of property that you are planning to buy when you save enough funds for a full property or for the equity needed to take a mortgage.
Buy a slice in that property starting from 50,000 NIS
- You decide how much to invest. Your share in the property ownership will be determined by dividing your investment by the full property price. If you invest 100,000 NIS in a 2,000,000 property, you will own 5% of the property.
We perform the purchase and register you as a direct owner at the land registrar
- The purchase will be performed by an external attorney that will represent the group and handle the legal process – contracts with the seller, registration at the land registrar, reporting to the tax authorities, collecting the investment money in a designated trust account, handling legal process when selling the slices on the secondary market or at the safe exit point.
- All paperwork to make the investment will be sent to you be email, and you will be invited to a one-time meeting at the attorney’s office for signing.
- After signing the documents, you will receive the trust account details and will be asked to transfer your investment to the trust account. This can be done by bank transfer or check.
We report to you when the purchase is complete and you are registered as an owner of the property
A one 2% one-off fee is paid at the time of signing to cover legal and real estate professionals
Property leased and managed for you
We make the property ready for rent
- If repairs or renovation is needed to maximize the properties’ value (offered in advance as part of the funding target) we bring professionals to have the job done and supervise the project.
We lease the property
- This includes advertising the property, showing it, screening potential tenants, and signing a contract with the tenant.
We collect the rent income
- You will receive your share according to you ownership rate.
We manage the property
- This includes all communication with the tenant, calling professionals to make repairs, communication with the building association , communication with authorities, releasing, insurance.
We report to you regularly and on all events related to the property
- Income and expense reporting for tax purposes will be available
10% of rental income is taken to cover leasing and management
Sell your slice of a property
Every owner can sell his investment at any time by offering it on the platform’s secondary market. Selling of a slice of a property on the platform is subject to price and demand.
Every property has a “safe exit point” 5 years from the purchase date. At the safe exit point – if any of the owners wishes to sell his slice and there is no demand, neither from the other owners or other buyers on the secondary market, the whole property will be sold on the free market. This guarantees a definite selling opportunity.
Selling lets every owner realize capital gains, according to his share in the property value rise.
The external legal attorney will process the sale.
No fees for selling.
|"Only property" buyer||All other buyers|
|Investment||Investment in property||100,000||100,000|
|Individual Purchase Tax||1,620||8,000|
|Management and repairs||-500||-500|
|Net rent income||2,500||2,500|
|Net income for 5 years||12,500||12,500|
|End of period||Capital gain at 5% annual price rise||27,628||27,628|
|Capital gain tax||-5657|
|Net return at sale||127,628||121,971|
|Total return||Net return for 5 years (capital gain + rent income)||36,508||24,471|
|% Total return||% Net return for 5 years (capital gain + rent income) after taxes and fees||35%||22%|
|% Net return for 5 years (capital gain + rent income) after taxes and fees||6.2%||4.1%|
Frequently Asked Questions
- What types of properties are offered on the platform?
We see the main purpose for investing with Ownerhood as hedging your savings to the type of property that you see yourself buying in the future or the type of property you believe in. If the property’s price rises, the value of your investment rises too, and if the property’s price decreases, so does the value of your investment.
Therefore, we are looking for solid low risk properties, in high demand areas at city centers. Areas where the supply for new properties is limited, and the demand for properties, both for buying and renting, is stable.
Low risk means lower rent yield and lower potential for price rise.
The average rent yield in Israel is around 3.5% per year and in high demand areas like Tel Aviv it goes lower to around 2.5%. The average property price in Tel Aviv increased by 28% during the last 3 years, with a rise of 11% for just the first 9 months of 2016 (data of Madlan site).
- How much can I invest and how is the investment registered?
A specific minimum investment would be set for each property, starting from 50,000 NIS.
The property is purchased without external financing.
You would be registered as a direct owner of the property (on the property’s title at the land registrar) at a share according to your investment. For example – if you invest 100,000 NIS in a property that is sold at 2,000,000 NIS, you would be the owner of 5% of the property.
Even if Ownerhood is closed – you are the owner of the property and the agreement between you and the other owners is valid. You are not dependent on our success.
- What are my alternatives for this investment?
You can buy stocks in REIT funds but these would diversify your investment in properties across the country, not necessarily the type of properties that are relevant for your lives. You will not own the properties directly. The price of these stocks is highly volatile and influenced by changes in the stock market more that by the changes in property prices. As an example have a look at the price of REIT1 and look at its’ price volatility for the past year, while property prices just kept rising.
You could organize a group of friends to make this kind of purchase together, but then you would have to spend weeks and months looking for properties, structuring the relations between the owners to avoid conflicts of interests and managing the property together – not a simple task for one owner and surely not to a group when different decisions have to made by all owners, some of the owners need to sell, and many more situations. Also, the cost of professional services for one such deal is very high and not efficient.
You could invest in a share of a real estate project abroad, but those investments usually bear high risk (development projects), and any problem that may rise in the project like difficulties of the contractor, rise of building material prices, new authorities demands etc may highly influence the profit or loss of the project. In those projects you are not the direct owner of the property. You could also directly buy a single property abroad, but there would be no correlation between the property price and the price of the property you would like to live in, in the future.
All alternatives are valid and each serves a different purpose. If you are looking for a personal investment in a real property here in Israel, in a city you believe in, because you want your family to be able to keep living here, Ownerhood is your answer.
- What taxes apply to this investment?
Here are some general tax implications of this activity in Israel, based on a consultation with Israeli tax professionals. You should consider your personal tax implications with your own tax adviser. General implications herein are not to be considered as tax advice. We will be happy to connect you with the tax professionals we are in contact with.
Property tax - When you buy a slice in a property, just like when you buy a full property, owners must pay property tax.
For those who do not own another property, and purchase less than a third of the property, a reduced tax is paid according to the tax brackets defined by law. For the property value of NIS 0-1.6 million - 0%, for NIS 1.6-1.9 million - 3.5%, for NIS 1.9-4.9 million - 5%, and for above NIS 4.9 million - 8%. The brackets are defined by the property value, not by the slice value. Tax would be proportionate to your share.
It is also important to add that a purchase of under one third of a property would not “label” you as a property owner for your next property purchase, and therefore would not waste your tax benefit for your next purchase.
For those who have another property – 8% tax is paid, according to your share in the property. This tax payment is deducted from your future capital gains tax.
Tax on rent income - Individuals are exempt from tax on rent income up to NIS 5,000 per month. If you have no other rent income or if you do not exceed this amount, you are exempt from tax. If you do not qualify exemption, you will have to pay the tax according to your personal tax track. We can help and guide you regarding the reporting required, but the actual tax payment responsibility will be yours, because we do not manage the rest of your real estate holdings
Capital gains tax - When selling your property slice or the whole property, capital gains tax are paid on the rise in property value. This tax currently amounts to 25%. Property tax paid upon purchase can be deducted from this tax, as well as the CPI value rise. For those using the rent income tax exemption, capital gains would also include the depreciation component of the property.
For those who do not own another property, an exemption from capital gains tax would be possible in some cases, according to personal terms.
- Can there be additional costs to the property that will need further capital?
We are keeping a dedicated deposit at an amount of two month rent income, to deal with needed repairs. We also purchase insurance to deal with major events. We will always use the deposit first to cover any expenses, and will complete the deposit from the monthly rent income.
However, it is your property and property ownership comes with responsibility. There may be cases when an extra investment is needed (for example if the whole building decides to renovate the common areas of the building). In such cases, if the deposit is not sufficient – an extra investment will be collected from the owners. It would be your decision and your responsibility to invest.
We would help your with the group decision making and implementation, but the responsibility would be yours as the owners. Our shared-ownership agreement defined the mechanism for making group decisions.
- How will I receive my rent income?
Rent income is divided between owners every quarter, net from expenses for that period and our management fee. Payment is made from the shared trust account to your personal bank account.
At selling, you receive your share of the balance in the trust account including the deposit.
- What happens after I choose a property to invest in?
After you choose a property and how much to invest in, and you fill the contact form on the property page, you will receive an email with a link to an investment form. The form will include 4 sections:
1. filling in the information we need to prepare the contracts.
2. Sending us a scan of your ID
3. Transferring an advance at 5,000 NIS in order to block your share and not offer it to others. This advance would be deducted from your total investment. If the purchase would not be performed due to reasons caused by the seller or if there would not be enough buyers – the advance would be return to you.
4. Setting up a meeting with a lawyer to sign the contracts.
- Contracts and payments at the signing meeting
At the meeting with the lawyer you will review and sign the following documents:
Shared ownership agreement – This agreement sets the legal framework for the shared ownership of the property. The agreement defines the way decision would be made, the nomination of the management company, the mechanism for selling property slices and the whole property, the limitations and restrictions on the owners regarding the property, and more. The purpose of this agreement is to protect the group from an owner that may harm the shared interests, and to protect the one owner from the power of other owners.
Services and management agreement – Since none of the owners can live in the property, the property would be leased and managed. The purpose of this agreement is to define the responsibilities of Ownerhood as the management company towards the owners.
Legal representation agreement - Between you as the owners and the lawyer that would be representing you with the purchase and sale of the property, being a trustee to the property funds until purchase, and implementing the shared ownership agreement.
Forms for the law office, tax authorities, and bank Know your client form, Property tax forms, bank forms for the trust accounts.
Four checks are to be prepared to be given in the signing meeting:
1. A check for the first payment for the property (usually 30%), net from the advance of 5,000 NIS, to the date of the meeting.
2. A check for the rest of the investment, to the date of the keys transfer.
3. A check for your share of the management deposit (2 month rent), to the date of meeting.
4. A check for our transaction fee, 2% of your investment + tax, to the date of the meeting.
Your funds would be kept in a segregated trust account for the purpose of purchasing the property only, and you as the beneficiaries of the account. If the purchase is not completed, funds in the account can be transferred to the beneficiaries only. The trust account would be managed by the trustee – the lawyer representing you in this transaction.
It should be noted that once you sign the contracts, the purchase is taxable and you are committed to complete the transaction, even if the funds have not yet been fully transferred. Selling your share in the property to others would be possible only after completing the purchase and registration of your ownership.
- What happens after the signing meeting?
Once 100% of the purchasers signed their agreements, the lawyer will perform the transaction, and you will become the proud owners of a property.
From this time on, we report to you when the property is leased and on every event in the property. We also send you periodic reports regarding the income and expenses of the property.
If there weren’t enough purchasers to fund the property, all funds are returned and no obligations apply.