Rent it or BNB it?

I receive many questions from property owners about buying apartments to make into BNBs. Does it make sense from a financial point of view? This article addresses the various options and does the math for you.

We have two scenarios; renting on an annual basis or furnishing the apartment and making it into a BNB. In each scenario, there are two possibilities: buying with cash or with a mortgage. While this article can’t recreate every scenario, we are trying to give you the general picture. In our model the tenant in an annual lease pays the Vaad and Arnona as is customary in Israel.

Before making a decision, anyone thinking of investing should consult their financial advisor and lawyer.

OPTION A — LONG-TERM ANNUAL RENTAL

Income

• Monthly rent: 6,000 ₪
• Annual rent income: 72,000 ₪

Landlord Expenses

• Repairs and maintenance: 4,000 ₪
• Insurance: 1,800 ₪

Taxes

• Estimated effective rental tax: 6,000 ₪

Net Annual Result (Long-Term Rental)

• Income: 72,000 ₪
• Expenses + tax: 11,800 ₪

Net annual income: 60,200 ₪

Return on Property Value

• 60,200 ÷ 2,500,000 = 2.4% annual yield

OPTION B — BNB / SHORT TERM RENTAL (ASHKELON REALISTIC)

Income

• Weekly rate: 3,000 ₪
• Occupancy: ~26 weeks/year
• Gross annual revenue: 78,000 ₪

Operating Costs

• Cleaning (weekly turnover): 6,000 ₪
• BNB platform fees (~10%): 7,800 ₪
• Electricity: 15,000 ₪
• Water + internet: 2,000 ₪
• Building fees (Va’ad bayit paid by owner in BNB model): 13,200 ₪
• Repairs and appliance wear: 8,000 ₪
• Furniture depreciation: 16,000 ₪
• Accounting and tax reporting: 3,000 ₪

Total Operating Costs

71,000 ₪

Profit Before Tax

• 78,000 − 71,000 = 7,000 ₪

Taxes (Business Income)

• Income tax (~25%): 1,750 ₪
• Bituach Leumi (~12%): 840 ₪

Net Annual Result (BNB)

4,400 ₪

Return on Property Value

• 4,400 ÷ 2,500,000 = 0.18% yield

FINAL COMPARISON

Long-Term Rental

• Net income: 60,200 ₪
• Yield: 2.4%
• Stable, passive income

BNB / Weekly Rental

• Net income: 4,400 ₪
• Yield: 0.18%
• High effort, high variability

KEY INSIGHT

• Long-term rental improves significantly in profitability
• BNB remains structurally constrained by:
  • unconstrained electricity usage
  • depreciation
  • taxes
  • low Ashkelon demand ceiling

FINAL CONCLUSION

In this scenario:

• Long-term rental = clearly superior financial outcome
• BNB = lifestyle-driven, not return-driven

Adding a mortgage to the calculation

With a 50% mortgage (about 1,250,000 ₪ at ~4.5% interest), the monthly financing cost alone is roughly 6,500 ₪ (~78,000 ₪ annually), which fundamentally overwhelms the rental income potential of an Ashkelon Marina apartment. A long-term rental at around 6,000 ₪ per month generates about 72,000 ₪ per year, which is already below the mortgage cost before even accounting for maintenance, insurance, and tax, leading to a negative cash flow. A short-term or BNB model does not improve the situation because, even with higher gross income, it introduces higher operating costs (especially electricity, turnover, and depreciation) and higher tax/Bituach Leumi burdens, while Ashkelon’s limited tourism demand caps occupancy and pricing. As a result, in a leveraged scenario the property produces a structural annual loss under both rental strategies, with BNB performing significantly worse due to higher variable costs and volatility.