Are Buying Groups the Real Deal?

Happy New Year! 2010 was a great year, and I look forward to working with you all in 2011. Over the past week I’ve been getting a number of phone calls and emails regarding the “change in status” regarding what are known in Israel as “Buying Groups”. Not surprisingly, most of those calling had no clue whatsoever as to what a Buying Group, Kvuzat Rechisa, in Hebrew, entails. With the increase of over 50% in regards to the average price of a home here in Israel over the past few years, and many of those who want to buy finding it increasingly difficult to do so, many in my business, including myself, have turned to organizing Kvuzot Rechisa (plural). How does it work? For a full explanation with the nitty gritty, please check out my friends article here, for a fun, thorough, yet quick explanation, read on!

Basically, we start with a group of people getting together with the intention of buying a piece of land and building, together, one or two buildings on said piece of land. The group decides who will build, how much everyone will put down, how the organization of the project will be, etc. Typically, the prices in conjunction with the tax structure (though this is changing) come out in favor of the group. Essentially, you receive a brand new apartment for about cost + land. Sounds pretty basic, though obviously it can become more complex than this. Some in the Real Estate industry here in Israel (including this blogger) have made a business of organizing the logistics of such groups, a task, you can imagine, is not always so simple.

Are they worth it? It all depends on the exact structure of your deal. Sometimes yes, often times no. I’m happy, as always, to field your questions and comments.