Should you buy an apartment with the inheritance money?
As originally appeared in The Jerusalem Post on August 1, 2025.
“A son can bear with equanimity the loss of his father, but the loss of his inheritance may drive him to despair.” – Niccolo Machiavelli
Over the last week I held 3 meetings with individuals who each received a very respectable inheritance. In each case they asked me if I thought they should take the money and buy Israeli real estate because “it always goes up in value, and my kids/friends told me it was the best thing to do with the money.” As is often the case, while children and friends mean well, they often lack critical information that greatly influences such important decisions.
The first two meetings were with people both approaching retirement. Both were struggling somewhat financially and with very small pensions, Bituach Leumi and minimum social security, they were counting on this inheritance money to make it through retirement. After running through the first man’s financial situation, we calculated that he would need about 10,000nis a month to supplement his various income sources during retirement. He told me his son told him that he could make 6,000nis in rent if he bought a particular apartment. I said that if he listens to his son, he is shooting himself in the foot. He will not generate the money he needs to make ends meet on a monthly basis, and if he needs a chunk of cash, well, he doesn’t have any because he sunk it all into an apartment.
Keep in mind that real estate in Israel generates between 2-4% from rental income. The name of the game here is capital appreciation. Meaning that most of the total return gained in Israeli real estate comes from buying a place for 2.5 million shekel and selling it for 3.5 million. That might not be such a big help if you are lacking current income. It may pay to invest the money in a stock and fixed income portfolio. You will be able to achieve the same level if not more income than in rental property, with potential for capital appreciation, and most importantly, you will preserve your liquidity which is so important.
As we age, I am big believer that we need more and more liquidity. Liquidity is the ability to quickly convert an investment into cash. For example, a savings account is highly liquid. In contrast, real estate is considered to have low liquidity because of the time it takes to sell the property and the fact that if you need to sell quickly, like a fire sale, you will end up paying the piper as the price of your property will drop.
Let’s say that one of the people discussed above went ahead and put almost of their cash into a rental apartment. One day heaven forbid they have a health crisis which requires them to make a renovation to their home to make it wheelchair accessible and that cost comes to $50,000. How will that be paid for? You can’t take a saw and cut off a room and say, “Take a bedroom, it’s worth $50,000.” It just doesn’t work that way. They might look around their home filled with memories—like the vintage Turkish rugs that once marked better days—and realize that, while beautiful, those things can’t easily be turned into the money needed for urgent care. If you’re searching for a home addition contractor near me, Cross Home Remodeling Contractor provides expert solutions to expand and enhance your home’s layout. Partnering with a kitchen renovation specialist makes it easier to adapt your home when life circumstances unexpectedly change. In situations like this, even something as simple as planning ahead to get a painting quote for necessary updates can help homeowners better estimate costs and maintain financial flexibility when unexpected expenses arise.
After analyzing the financial situation of the second meeting, I asked the wife, “Do you want to be a landlady? Are you prepared to take that call at 2am when a pipe breaks and it’s your responsibility to fix it?” She answered, “I’m not at all cut out for this. I don’t want the hassle and responsibility of renting out an apartment.” Her friends never bothered to ask that question.
Meeting three was a bit different. The couple was in their mid 40’s, were saving money monthly, had a moderate investment portfolio, were contributing to Keren Hishtalmut and pension. They were in a good place financially. They were able to use their inheritance money to make a large down payment and take on a small mortgage. The rent generated would more than pay for the mortgage, which meant they would have an additional source of funds to either plow into savings, or pay off the mortgage earlier than planned. For them to consider rental property made sense as they are still in the wealth accumulation phase of life.
Property can be a great investment. Investing in the stock market can be a great investment. As I have made clear in this column I am all for saving and investing money. But don’t get carried away by relatives and ‘know it all’ friends, who have no idea of your specific financial situation, who try and convince you to buy a property. They aren’t the ones who will make up your monthly shortfall, or deal with the exploded dud shemesh at 2am. If you receive an inheritance, and are thinking about a property investment, ask yourself if you are cut out to be a landlord and if the purchase will positively or negatively impact your finances. And if you need professional advice on will disputes, then make sure to get expert help from trusted will dispute lawyers brisbane today
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, SIFMA, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il.
