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Old 18.06.2019, 13:48
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Meadow Meadow is offline
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Re: investing in real estate vs buying property

6% annual rental yield in Switzerland? According to Numbeo statistics, the average is 3.5%. That means something like 3% for expensive property and 4% for cheap property.

6% is realistic in countries like Poland, but if you take exchange rate / inflation into account, the real return is much lower.

Btw, I guess for your comparison to make sense, both options should be similarly leveraged. In your Option B, you invest 250k and take a loan for 750k. That's a 3:1 debt-to-equity ratio. I wonder what is the leverage in Option A to get these 6%.

Also, not sure if it makes sense to count amortisation as cost? You pay back the loan, so the loan get's smaller. I think maybe for the sake of simplicity, you should consider a scenario where your LTV is low enough that you don't have to amortise (65%). That would put your debt-to-equity closer to 2:1.
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