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-   -   investing in real estate vs buying property (https://www.englishforum.ch/finance-banking-taxation/291296-investing-real-estate-vs-buying-property.html)

fatmanfilms 17.06.2019 14:15

Re: investing in real estate vs buying property
 
Quote:

Has property actualy fallen by 20% in Switzerland ever ?
.
Yes from 1989 over the next 10 years, see the graph the OP has posted.

user137 17.06.2019 14:22

Re: investing in real estate vs buying property
 
Quote:

Originally Posted by fatmanfilms (Post 3076314)
Yes from 1989 over the next 10 years, see the graph the OP has posted.

in which case you just need to move against the market and buy more properties over time... problem solved. :msnnerd:
(unless you run out of money first and still need to cash out... then one's initial strategy was not appropriate)

Guest 17.06.2019 14:40

Re: investing in real estate vs buying property
 
Quote:

Has property actualy fallen by 20% in Switzerland ever ?


It may drop a bit, maybe 10% as happened back in the mid 90's but it climbs back up again.


The main problem with property is it is not really a very liquid asset and you maybe forced to sell at a time that is not good for you....
I only answered a question, and the 20% was not my idea ;)

fatmanfilms 17.06.2019 14:41

Re: investing in real estate vs buying property
 
Quote:

Originally Posted by user137 (Post 3076319)
in which case you just need to move against the market and buy more properties over time... problem solved. :msnnerd:
(unless you run out of money first and still need to cash out... then one's initial strategy was not appropriate)

As you will have cash calls on your existing loans thats something you will be unlikely to do, normally it's easier in a rising market as you can increase existing mortgages & can fund new purchases out of thin air rather than add fresh cash..

user137 17.06.2019 15:42

Re: investing in real estate vs buying property
 
Quote:

Originally Posted by fatmanfilms (Post 3076323)
As you will have cash calls on your existing loans thats something you will be unlikely to do, normally it's easier in a rising market as you can increase existing mortgages & can fund new purchases out of thin air rather than add fresh cash..

You seem to ignore the fact (or just like to troll around) that banks do not sell your properties any time they feel like. First because they can't, second because they are rather interested in keeping you on the line forever, even with a higher rate mortgage, which actually is happening in Switzerland to pretty much everything.

Those who miscalculate their financial power to jump into real estates will eventually get burnt/foreclosed, or you can finance your losses if you can/want. Same as with any miscalculated investment.

p42 17.06.2019 15:42

Re: investing in real estate vs buying property
 
Isn't real estate property? :msnsarcastic:

I have been burnt by real estate schemes with guaranteed yield funded by top high street banks. Basically you have no control. Switzerland is a fantastic place to buy property. My advice it to buy the largest stand alone pile of poo, 1920s built or earlier, that the bank will lend on, within a 30 to 90 minute commute of work.

It might be a tiny derelict house somewhere for 300K. Or a huge pile. Just make sure it is not too expensive for what it is.

Move in, live, rent out the spare rooms to anyone with a permit. Refugees, Credit Swiss and UBS employees are your friends. Repair everything to project minimum standard. Compared to the UK, France and Germany where I have owned, the older Swiss stuff is awesome quality. Huge stone walls made of granite, hardwood timbers where normal people use softwood. Hand forged door hinges, hand made nails. Beats typical 70s Wickes stuff for longevity. Go to comparis, reverse search on price, enjoy. Urs Max is completely right on this. Believe me.

user137 17.06.2019 16:40

Re: investing in real estate vs buying property
 
Quote:

Originally Posted by p42 (Post 3076338)
Isn't real estate property? :msnsarcastic:

oops. :)

Quote:

My advice it to buy the largest stand alone pile of poo, 1920s built or earlier, that the bank will lend on, within a 30 to 90 minute commute of work.
and then let it get renovated by the Swiss for Swiss prices... right :)
on the other hand: 90 minutes commute to work... u crazy? We are not SFO, thanks God...

Quote:

Move in, live, rent out the spare rooms to anyone with a permit. Refugees, Credit Swiss and UBS employees are your friends. Repair everything to project minimum standard.
come to think of it, I want to do nothing of the sort, actually.

Quote:

Compared to the UK, France and Germany where I have owned, the older Swiss stuff is awesome quality. Huge stone walls made of granite, hardwood timbers where normal people use softwood. Hand forged door hinges, hand made nails.
the attached prices are also ridiculous, you can easily pay 100k+ for a kitchen+bathroom makeover, which might actually be the price for an actual flat somewhere in Western-EU. But even if you do invest in your own property, you still are living in the middle of the nothing (on the price tags of the properties I could currently afford), or in areas with subpar community in terms of EU standards. Not very keen on either of those.

p42 17.06.2019 17:37

Re: investing in real estate vs buying property
 
Quote:

Originally Posted by user137 (Post 3076357)
oops. :)


and then let it get renovated by the Swiss for Swiss prices... right :)
on the other hand: 90 minutes commute to work... u crazy? We are not SFO, thanks God...


come to think of it, I want to do nothing of the sort, actually.



the attached prices are also ridiculous, you can easily pay 100k+ for a kitchen+bathroom makeover, which might actually be the price for an actual flat somewhere in Western-EU. But even if you do invest in your own property, you still are living in the middle of the nothing (on the price tags of the properties I could currently afford), or in areas with subpar community in terms of EU standards. Not very keen on either of those.

Something has to give. If you have low buying power you need to be willing to work (DIY and/or letting) to make up, or have high income and pay for the services offered.

I bought in 2012, prices have not moved that much since, and was 20 mins or less from major employers like CS, and rent from 1 flat covered the mortgage on the block of 3.

You can still buy a house in Switzerland for 100K. People might spend 100K on a car or smth but not usually on a kitchen renovation, that sounds be extreme to me.

user137 17.06.2019 22:15

Re: investing in real estate vs buying property
 
Quote:

Originally Posted by p42 (Post 3076380)
and rent from 1 flat covered the mortgage on the block of 3.

so you're basically doing the same as Crowdhouse, only smaller? :-p

I was thinking about this, but not much to get in Kt ZH where I would actually live and can afford. Until then, I'm happy to rent in the middle of Oerlikon, where there's nothing for sale, but everything is 5 minutes walk or less... :o

fatmanfilms 18.06.2019 07:22

Re: investing in real estate vs buying property
 
Quote:

Originally Posted by user137 (Post 3076336)
You seem to ignore the fact (or just like to troll around) that banks do not sell your properties any time they feel like. First because they can't, second because they are rather interested in keeping you on the line forever, even with a higher rate mortgage, which actually is happening in Switzerland to pretty much everything.

Those who miscalculate their financial power to jump into real estates will eventually get burnt/foreclosed, or you can finance your losses if you can/want. Same as with any miscalculated investment.

You are incorrect, Banks do foreclose especially in a falling market to reduce their losses. They have to increase tier 1 capital depending of the 'status' & quality of their loan book or they could get closed down by the regulator. If a payment is late or at loan renegotiating a Bank can recall the loan, thats in 5 years time if you took out a 5 year fix.

user137 18.06.2019 10:00

Re: investing in real estate vs buying property
 
Quote:

Originally Posted by fatmanfilms (Post 3076502)
You are incorrect, Banks do foreclose especially in a falling market to reduce their losses. They have to increase tier 1 capital depending of the 'status' & quality of their loan book or they could get closed down by the regulator. If a payment is late or at loan renegotiating a Bank can recall the loan, thats in 5 years time if you took out a 5 year fix.

my experience is completely different. If a bank has a problem, there are others out there that don't. There's always a solution, even if it's not economical to take. But we're straying far off topic, so I'll just leave it like that.

gipfelisturmer 18.06.2019 10:59

Re: investing in real estate vs buying property
 
Quote:

Originally Posted by user137 (Post 3060725)
look at crowdhouse.ch

Have a read and see why such an investment is a bad choice.
https://lebijou.com/insights/crowdho...-alternatives/

p42 18.06.2019 12:39

Re: investing in real estate vs buying property
 
Quote:

Originally Posted by fatmanfilms (Post 3076502)
You are incorrect, Banks do foreclose especially in a falling market to reduce their losses. They have to increase tier 1 capital depending of the 'status' & quality of their loan book or they could get closed down by the regulator. If a payment is late or at loan renegotiating a Bank can recall the loan, thats in 5 years time if you took out a 5 year fix.

This is true. Also if a bank sees that you have taken a lifestyle change, got divorced, they can recall the loan at the end of the period. Even if rates are lower, and it is more affordable in real terms, if you don't meet their income tests, etc. You need to keep looking good on paper for them to stay your lender.

It took me a couple of years to find something "good" in ZH. I have seen several potentially good properties in ZH since, of those I know that 2 of them actually turned out to be really good deals at the time. Both just under 20 mins from Zurich HB and very near stations. One of those got over redone at great expense so negating the benefit of the initial shrewd purchase. The other is ongoing, still being over done in my view, but the purchaser is doing a lot of the work themselves, labour of love style. Hopefully that doesn't end in divorce/unfinished project.

Phil_MCR 18.06.2019 13:25

Re: investing in real estate vs buying property
 
Quote:

Originally Posted by p42 (Post 3076575)
This is true. Also if a bank sees that you have taken a lifestyle change, got divorced, they can recall the loan at the end of the period. Even if rates are lower, and it is more affordable in real terms, if you don't meet their income tests, etc. You need to keep looking good on paper for them to stay your lender.

It took me a couple of years to find something "good" in ZH. I have seen several potentially good properties in ZH since, of those I know that 2 of them actually turned out to be really good deals at the time. One of those got over redone at great expense so negating the benefit of the initial shrewd purchase. The other is ongoing, still being over done in my view, but the purchaser is doing a lot of the work themselves, labour of love style. Hopefully that doesn't end in divorce/unfinished project.

how good is good (in terms of gross rental yield)? i only found 3 good deals in my 10 years of looking:

1. I bought
2. I was out-bid
3. Was out of my price range

Still looking and for the specific area I want, the prices are just unreal.

EDIT:

actually, there was #4 which was amazing, but was off the market again within 2 minutes as it was such a good deal. I was too slow.

Meadow 18.06.2019 13:48

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.

Guest 18.06.2019 16:48

Re: investing in real estate vs buying property
 
I'll give you some actual figures from one of my rental properties.


Purchased 2013 for Chf 265k + $13k notary fees + Chf 15k renovation costs, total Chf 300k


Rental income Chf 1'400.--/month = Chf 16'800.--

PPE Charges : Chf 5'720.--/annual including renovation account

Hypoteque Chf 175k @ 0.7% = Chf 1'320.--/ annual



Income before tax Chf 9'760.--/annual on investment of Chf 125k


ROI before tax = 7.808%


Some are a bit more, some a bit less, nothing under 5.5% or it goes or gets changed.

Phil_MCR 18.06.2019 16:57

Re: investing in real estate vs buying property
 
Quote:

I'll give you some actual figures from one of my rental properties.


Purchased 2013 for Chf 265k + $13k notary fees + Chf 15k renovation costs, total Chf 300k


Rental income Chf 1'400.--/month = Chf 16'800.--

PPE Charges : Chf 5'720.--/annual including renovation account

Hypoteque Chf 175k @ 0.7% = Chf 1'320.--/ annual



Income before tax Chf 9'760.--/annual on investment of Chf 125k


ROI before tax = 7.808%


Some are a bit more, some a bit less, nothing under 5.5% or it goes or gets changed.
this is why i don't like flats: PPE eating up 1/3 of gross rental income! :eek:

bigblue2 18.06.2019 17:16

Re: investing in real estate vs buying property
 
Quote:

Originally Posted by fatmanfilms (Post 3076502)
You are incorrect, Banks do foreclose especially in a falling market to reduce their losses. They have to increase tier 1 capital depending of the 'status' & quality of their loan book or they could get closed down by the regulator. If a payment is late or at loan renegotiating a Bank can recall the loan, thats in 5 years time if you took out a 5 year fix.

what he said I know a guy where the bank called in their loan just a couple of months ago, never missed a payment, personal circumstances haven't changed etc etc he tried to fight them and just lost.

Guest 18.06.2019 18:10

Re: investing in real estate vs buying property
 
Quote:

Originally Posted by Phil_MCR (Post 3076646)
this is why i don't like flats: PPE eating up 1/3 of gross rental income! :eek:


Not as such because i think this PPE in question my apartment is 44/1000, budget is Chf 130k of which Chf 20k is for an extraordinary event an Chf 60k is for the renovation fund.


As such the real amount is Chf 70k for the PPE which is considerably less, arguably Chf 50k as Chf 20k is not a repeat item


But i do see where you coming from, but the return of 7.8% on MY investment is not so bad really, better than Woodford, that's for sure !:D:D

Meadow 18.06.2019 18:58

Re: investing in real estate vs buying property
 
Quote:

Purchased 2013 for Chf 265k + $13k notary fees + Chf 15k renovation costs, total Chf 300k

Rental income Chf 1'400.--/month = Chf 16'800.--
These are some sweet numbers, but where do I find a 300k flat that will rent for 1400? Is "PP&E" Nebenkosten? So I assume it's more like 1000 Kaltmiete + 400 Nebenkosten?


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