Home Upgraders: How to Manage the Move from Your Old Apartment to the New One the Right Way
Upgrading your home is one of the most significant financial moves in a family’s life. Unlike buying a first apartment, the equation here is more complex: there’s an existing property to sell and a new property you want to buy, and the goal is to synchronize the two in the smartest and most cost effective way.
At RS Nadlan, a real estate agency in Ramat Aviv HaYeruka, we accompany many families through this process. Experience shows that the key to success isn’t just finding the most beautiful apartment, but building a clear financial and logistical strategy. The first question to ask is: what is the right order for you?
Approach A: Sell, Then Buy (Financial Certainty)
With this approach, you start by marketing your current apartment, and only after signing a sale contract do you move on to buying the new apartment.
- The main advantage: you know exactly what budget you have available. There’s no guessing about the sale price, and you don’t take on commitments before you have money in hand.
- The challenge: the need to coordinate timing. From the moment of the sale, an “alarm clock” starts ticking until the move out date.
- The common solution: asking the buyers for a “long move out period” (for example 8 to 12 months). This period lets you search for the new apartment calmly, knowing you have enough time to get organized.
Approach B: Buy, Then Sell (Focus on the Property)
With this approach, you identify an opportunity or a specific apartment that fits your needs, buy it, and only then sell the old apartment.
- The main advantage: you don’t miss opportunities. In a market where the supply of quality apartments is limited, this approach ensures you move only to the home you truly wanted, without compromising because of time pressure.
- The challenge: managing cash flow and the need for interim financing (“bridging”).
The Financial Tool: A Bridging Loan
For those who choose to buy before they have sold, the banking system offers a solution known as a “bridging loan” (or a balloon/bullet loan). This means the bank provides you with the money to buy the new apartment based on the value of the old apartment (which hasn’t been sold yet).
- How does it work? During the loan period (usually up to two or three years), you pay only the interest on the loan each month, or pay nothing at all (full payment deferral). You repay the principal in a single payment as soon as the money from selling the old apartment comes in.
- Who is it right for? Those who have a stable repayment capacity and want breathing room until the sale.
Tax Aspects: The 18 Month Window
From the Israel Tax Authority’s perspective, home upgraders are entitled to significant relief, on the understanding that this is a replacement of a property and not an additional real estate investment. The law allows you to hold both apartments at the same time for a defined period (currently 18 months, but it’s recommended to verify the latest figure when carrying out the transaction). As long as you sell the old apartment within this time frame:
- You won’t pay purchase tax (Mas Rechisha) at the second apartment (investor) rate, but according to the single apartment brackets.
- You will be entitled to an exemption from capital gains tax (Mas Shevach) on the sale of the old apartment (subject to the usual exemption conditions).
Questions and Answers (FAQ)
What happens if I haven’t found a new apartment by the move out date?
This is a situation that can be avoided with proper planning, but if it happens, the common solution is moving into a temporary rental, or putting your belongings in storage and staying with family for a short period. To avoid this, we at RS Nadlan recommend starting the search at the same time as marketing the apartment.
How do you synchronize the payments?
In the sale contract and the purchase contract, the attorney makes sure to create a parallel structure (“back to back”). In other words, the payment you receive from your buyers goes directly toward paying for the new apartment, which reduces the need for outside financing.
The Path to a Smooth Move
Moving homes doesn’t have to be a stressful event. With professional guidance, you can plan the timeline, the financing and the move in an orderly way. At RS Nadlan we specialize in managing combined (“chain”) transactions, and we ensure full synchronization between the sale and the purchase, so you can focus on the excitement of your new home.
[Errors and omissions excepted: The information in this article is for general knowledge only and does not constitute legal, tax or financial advice. Every transaction is unique, and it is recommended to consult qualified professionals before taking any action. Errors and omissions excepted.]
