How to Set the Price of Rent?

Clients who purchased apartments in a new Ashkelon complex approach me and ask me to find them a tenant. Obviously, the landlord wants the highest rent possible. They hear about other apartments that fetched high prices and assume that they will also obtain similar rents. But not all the rumors are correct and sometimes there are reasons why an apartment was able to be rented at a higher amount. As new units become available, prospective tenants have a wide choice of rentals at competing prices.

The owners, who are carrying a mortgage have to decide if they should hold out for a higher rent or take a tenant at a lower price.

Here are our assumptions for our sample calculations:

• Property purchase price: 2,500,000₪
• Mortgage: ~50%  1,250,000₪
• Estimated monthly mortgage: ~ 6,000₪–7,000₪
  Let’s use 6,500₪/month as a reasonable midpoint
• Fixed non-mortgage costs: 1,100₪ (Vaad Bayit, Arnona)
• Total monthly carrying cost (vacant):
  7,600₪/month
• Rent requested by landlord: 6,500₪
• The going rent in the building ~5,800₪

Having the vacant apartment isn’t just “opportunity cost” … it’s real cash out of pocket.

Price difference:

6,500₪ − 5,800₪ = 700₪/month

1-year lease:

700 × 12 = 8,400₪ total gain from higher rent

Break-even vacancy

8,400₪ ÷ 7,600₪ ≈ 1.1 months

If you wait more than ~1 month, you lose money

With a mortgage waiting is VERY expensive.

This scenario compares a landlord who keeps the rent at 6,500₪ vs 5,800₪

Rent at 6,500₪

• Expected vacancy: ~4.5 months
• Cost: 4.5 × 7,600 ≈ 34,200₪
• Rent: 78,000₪

Net revenue: 43,800₪

Rent at 5,800₪

• Vacancy: ~1.6 months
• Cost: 1.6 × 7,600 ≈ 12,160₪
• Rent: 69,600₪

Net revenue: 57,440₪

Result

Pricing at ₪5,800 is better by about 13,600₪

Keep in mind that every scenario is different, but based on experience landlords have been dropping the rents in order to get a paying tenant into their apartments.

Bottom Line

Without a mortgage waiting can make sense if apartments are actually renting at 6,500₪. If the market is flooded with similar units, expect to lower your price.

Optimal strategy NOW

Much more aggressive:

• Week 0 to 2: List at 6,000₪–6,100 ₪max
• If no traction within 2–3 weeks → drop to 5,800 ₪
• Don’t wait more than ~1 month total

Remember every month that the apartment does not have a tenant, your costs are ~7,600 ₪

Experienced landlords tend to do the following

In leveraged situations, they aim for:

• “Slightly under market” pricing
• To create:
  • multiple applicants
  • faster closing
  • lower risk

Because:

A fast deal at 5,800₪ beats a “perfect” deal that can take four months