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-   -   Investing long term - buying a rental property vs trading index funds vs? (https://www.englishforum.ch/finance-banking-taxation/239854-investing-long-term-buying-rental-property-vs-trading-index-funds-vs.html)

saiya-jin 03.09.2015 21:22

Investing long term - buying a rental property vs trading index funds vs?
 
Hi,
I am considering buying some rental property in French alps. I would use it only in cases there is no rental for it. Found something interesting to me, and for the price I would need to take a 25 years loan for amount that I can comfortably afford to pay, and rental would be helping to lower the payments (in winter paying them easily for given month). To make things easy let's say lowered would cost me 1000 chf/month on average, and property is 600k chf.
After those 25 years, I would have paid 300k directly, plus some upfront cash, I would end up with property of probably higher value, but there is risk prices might also go down.

When I put into calculator 3% net income (fictional amount, but maybe achievable) over 25 years, result is over 2x. Compound interest my ass.

Any ideas what else to do in a relatively safe way, ie some Vanguard continuous investment? Not into too risky stuff

Mullhollander 03.09.2015 21:57

Re: Investing long term - buying a rental property vs trading index funds vs?
 
Comparing your 3% expected return to a 10-year PostFinance CD, currently paying 0.00%, the rental property option looks more attractive:

https://www.postfinance.ch/en/priv/p...ion/offer.html

Enohzee 03.09.2015 22:17

Re: Investing long term - buying a rental property vs trading index funds vs?
 
Depends how much risk you want but theres always mutual funds... you can decide what risk / return you want to aim for.

roegner 03.09.2015 22:39

Re: Investing long term - buying a rental property vs trading index funds vs?
 
And depends what is your long term view. I have bought a house because simply in the end I will have that house. And if I wait (especially with the interest rates and market volatility right now) I may end up with no fund portfolio and no house.

saiya-jin 03.09.2015 22:43

Re: Investing long term - buying a rental property vs trading index funds vs?
 
indeed it's pretty safe bet something valuable remains in hands, and this one property really ticks whole list of my requirements and more. so emotions come into game, hence public question :)
one benefit of continuous investing is, when you hit harder financial times, you postpone investing till its more convenient. could be useless or very handy, one never knows

Enohzee 03.09.2015 22:59

Re: Investing long term - buying a rental property vs trading index funds vs?
 
Well the advantage of funds / stocks / bonds is you have more liquidity...buy and sell whenever you want, however much you want (could also be a bad thing if you're prone to emotional decisions). Also you should expect higher returns from the stock market than a property. I believe rental yields are pretty low here in Switzerland also, though maybe the low interest rate makes up for it.

Also it can take a long time to sell a house and you have to do some upkeep.

Me personally, I like investing in the stock market, and I'm gradually increasing my exposure. I can't see myself wanting to buy a house in the next 5 years.

Remember you can also invest in stocks that pay a dividend and then you have additional income

saiya-jin 04.09.2015 14:33

Re: Investing long term - buying a rental property vs trading index funds vs?
 
for that property, I wouldn't consider selling unless a massive SHTF. rather keep it in family for further generations, and they can decide what to do with it.

question - how would that affect my taxation here in Suisse? if I took french (CHF based) mortgage, swiss tax office probably wouldn't know about it.
if swiss mortgage would be taken (requiring 20% of cash upfront), then I guess I would have to declare it.

fatmanfilms 04.09.2015 15:33

Re: Investing long term - buying a rental property vs trading index funds vs?
 
Quote:

Originally Posted by saiya-jin (Post 2444519)
for that property, I wouldn't consider selling unless a massive SHTF. rather keep it in family for further generations, and they can decide what to do with it.

question - how would that affect my taxation here in Suisse? if I took french (CHF based) mortgage, swiss tax office probably wouldn't know about it.
if swiss mortgage would be taken (requiring 20% of cash upfront), then I guess I would have to declare it.

The CH tax office will only know what you tell them.
You will have a French tax liability on the rental income & possibly a Swiss one in addition.
I don't think you have calculated the Heating costs, Service Charges & taxes in owning a property in the French Alps.

amogles 04.09.2015 15:38

Re: Investing long term - buying a rental property vs trading index funds vs?
 
Quote:

Originally Posted by saiya-jin (Post 2444133)
indeed it's pretty safe bet something valuable remains in hands, and this one property really ticks whole list of my requirements and more. so emotions come into game, hence public question :)
one benefit of continuous investing is, when you hit harder financial times, you postpone investing till its more convenient. could be useless or very handy, one never knows

However, when hard times hit, its often that the markets are down and that's whan you should be mobilizing every last penny to buy while cheap.

I know that's easier said than done.

Quote:

Originally Posted by saiya-jin (Post 2444519)
for that property, I wouldn't consider selling unless a massive SHTF. rather keep it in family for further generations, and they can decide what to do with it.

question - how would that affect my taxation here in Suisse? if I took french (CHF based) mortgage, swiss tax office probably wouldn't know about it.
if swiss mortgage would be taken (requiring 20% of cash upfront), then I guess I would have to declare it.

I have two foreign properties that I both declare.

I once ran the figures just out of interest to see how much taxes I could save by having a brief lapse of memory but the difference was pretty insignificant.

Mind you, one is a holiday property and the other inhabited by a family member, so no rental income or excessive wear and tear to account for.

saiya-jin 04.09.2015 21:43

Re: Investing long term - buying a rental property vs trading index funds vs?
 
Quote:

Originally Posted by fatmanfilms (Post 2444561)
The CH tax office will only know what you tell them.
You will have a French tax liability on the rental income & possibly a Swiss one in addition.
I don't think you have calculated the Heating costs, Service Charges & taxes in owning a property in the French Alps.

Yeah I did, roughly 500 eur/month together, will hopefully get a better quote tomorrow.

jacek 01.10.2015 10:47

Re: Investing long term - buying a rental property vs trading index funds vs?
 
Some interesting prospective in terms of currency long term investments that may be worth sharing.

http://m.futuresmag.com/2015/07/08/7...vestors?page=7

With increased disclosure in Switzerland, Singapore has become the new global center of hidden money and a favored tax haven. As income inequality increases along with the increased rates and enforcement of taxation, foreign capital inflows will continue to increase in Singapore that puts upward pressure on the currency. Singapore also has an 18%.6 current account surplus and has been the greatest beneficiary of the growth of Asian economies and Asian tourism. As seen in the chart, the Singapore dollar has one of the most stable paths of appreciation against the U.S. dollar of any currency.

fatmanfilms 01.10.2015 11:10

Re: Investing long term - buying a rental property vs trading index funds vs?
 
Quote:

Originally Posted by jacek (Post 2458643)
Some interesting prospective in terms of currency long term investments that may be worth sharing.

http://m.futuresmag.com/2015/07/08/7...vestors?page=7

With increased disclosure in Switzerland, Singapore has become the new global center of hidden money and a favored tax haven. As income inequality increases along with the increased rates and enforcement of taxation, foreign capital inflows will continue to increase in Singapore that puts upward pressure on the currency. Singapore also has an 18%.6 current account surplus and has been the greatest beneficiary of the growth of Asian economies and Asian tourism. As seen in the chart, the Singapore dollar has one of the most stable paths of appreciation against the U.S. dollar of any currency.

I don't believe that the majority of hidden money in Swiss Banks was actual CASH held in CHF. Foreigners holding numbered accounts never got any interest & had charges on top 'to hold mail' etc. Most of the 'money' was assets such as stocks & bonds in whatever domination those assets were. The Swiss banks never were interested in holding accounts worth just 10k, they attracted 'sophisticated' investors.

Pretty much the same will be true for Singapore, what happens to the local currency is irrelevant.

jacek 01.10.2015 11:16

Re: Investing long term - buying a rental property vs trading index funds vs?
 
Quote:

Originally Posted by fatmanfilms (Post 2458672)
I don't believe that the majority of hidden money in Swiss Banks was actual CASH held in CHF. Foreigners holding numbered accounts never got any interest & had charges on top 'to hold mail' etc. Most of the 'money' was assets such as stocks & bonds in whatever domination those assets were. The Swiss banks never were interested in holding accounts worth just 10k, they attracted 'sophisticated' investors.

Pretty much the same will be true for Singapore, what happens to the local currency is irrelevant.

I agree but I refer to Singapore dollar that, according to the author, seems to be on stable path to exceed the US dollar.

fatmanfilms 01.10.2015 11:25

Re: Investing long term - buying a rental property vs trading index funds vs?
 
Quote:

Originally Posted by jacek (Post 2458678)
I agree but I refer to Singapore dollar that, according to the author, seems to be on stable path to exceed the US dollar.

We were all being told the US Dollar was toast less than 10 years ago & the EURO would become the new reserve currency of choice. That prediction looks pretty stupid today. Betting against the US economy at any point in the last 200 years has been a poor bet, Japan & China both once high flyers don't look appealing to me.

Singapore is no 36 in the GDP league & the GDP fell 4.6% in Q2 15, I won't be placing any large bets there.

USA tha the largest GDP in the world some 30 times greater than Singapore............

jacek 01.10.2015 11:33

Re: Investing long term - buying a rental property vs trading index funds vs?
 
Quote:

Originally Posted by fatmanfilms (Post 2458689)
We were all being told the US Dollar was toast less than 10 years ago & the EURO would become the new reserve currency of choice. That prediction looks pretty stupid today. Betting against the US economy at any point in the last 200 years has been a poor bet, Japan & China both once high flyers don't look appealing to me.

Singapore is no 36 in the GDP league & the GDP fell 4.6% in Q2 15, I won't be placing any large bets there.

USA tha the largest GDP in the world some 30 times greater than Singapore............

It could be that emerging markets in Asia are trying to lure more capital inflow to the continent.

However, if I'm looking at the depreciation of emerging markets currencies like e.g. ZAR which lost significantly to the US dollar lately, it might be a good time to buy it, just in case the trend changes next year. :)


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