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  #41  
Old 28.04.2020, 11:28
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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Ignore him or alternatively read some of his other posts and then decide to ignore him.

You've done very well to get to your capital position with that level of income by your age. It sounds like you have sacrificed a lot. I would caution that life should be about balance.
Of course! I just wanted to make the best out of the luck I had to live with my parents until I was 28, so I saved everything!

Now, also the reason I live in a modern apartment that costs me almost 2k per month, is because my only "passion" where I can splurge money in, is having a nice place to live! That's the main reason I saved, not for a car or for designer clothes, but for having a nice place above my head for the rest of my life!
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Old 28.04.2020, 11:50
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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He needs to work with a stock advisor. Agreed, by himself he may lose money unless he spends lots of time studying the topic.

Rental flat is also an option (not rental house).
Is someone going to that with him and charge less than a bank either directly via fees or indirectly via inducements? I've not heard of such a service outside of a bank.
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  #43  
Old 28.04.2020, 12:03
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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Of course! I just wanted to make the best out of the luck I had to live with my parents until I was 28, so I saved everything!

Now, also the reason I live in a modern apartment that costs me almost 2k per month, is because my only "passion" where I can splurge money in, is having a nice place to live! That's the main reason I saved, not for a car or for designer clothes, but for having a nice place above my head for the rest of my life!

a nice place above my head for the rest of my life!

Wow. You sound like a pensioner
Yes you have a good bank balance and a good job. Take a year off and see the world!
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  #44  
Old 28.04.2020, 12:42
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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Is someone going to that with him and charge less than a bank either directly via fees or indirectly via inducements? I've not heard of such a service outside of a bank.
Usually big banks promote their investments (not stocks but mutual funds, ETFs, structured notes etc.) you pay 3.5%-4% fee the moment you buy these. An advisor can charge 1% annually therefore same money gets you 3.5-4 years of advise. Of course it varies but this is to give you an idea. Stock advisors are popular in the US, not so much in Europe but the business model is good I think.
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Old 28.04.2020, 12:48
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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I 'm trying to figure out if it does really make sense to buy a property compared to rent and invest the capital! That is my big question mark!
That depends on personal circumstances and portfolio.

I just bought a house. I treat it as a 'bond-like' component of my portfolio giving me a 'safe' return equal to rent so I don't need to generate that income from other sources. It makes sense for me and my income, age, life situation and portfolio mix.

In your situation, paying $1m definitely doesn't make sense. $300k for a place, yes. $400k-$600k maybe.
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  #46  
Old 28.04.2020, 13:55
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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Usually big banks promote their investments (not stocks but mutual funds, ETFs, structured notes etc.) you pay 3.5%-4% fee the moment you buy these. An advisor can charge 1% annually therefore same money gets you 3.5-4 years of advise. Of course it varies but this is to give you an idea. Stock advisors are popular in the US, not so much in Europe but the business model is good I think.
A big bank will do what you are suggesting for 1% annual fee, to cover safekeeping and advice. If you tell them that you are only interested in direct equity investments, they will respect that. What will cost you with them is the commissions on purchase and sale, which is what the OP has highlighted. However, a 3.5-4% fee on an investment is extremely rare (and the only case I can think of wasn‘t a suitable investment for retail clients). Any mutual fund and the vast majority of ETFs have management fees regardless of whether they are an in-house fund or not.

I work for a big bank, so am aware both as a staff client and as part of my job what we offer and how it is priced.
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  #47  
Old 28.04.2020, 14:00
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

I would invest in property, but

1. please don't assume that this will be the only property that you would buy for the rest of your life. You would more likely end up buying 2-3 properties.
2. therefore start small as you can always upgrade later. So aim for what you can actually afford right now (around 600k property) and get that 1m one later.

I really struggled to buy my first one because culturally I was just brought up not to spend my money on rent. So I took a lot of risk i.e., I needed the combine income with my then-girlfriend (luckily now still my wife) to get the mortgage, and we used up almost every single cent of savings we had and still have to borrow almost 30% of the downpayment from my in-laws. The investment paid off for me, and very luckily we didn't need any huge expenditure for anything else. When the kids came we sold our original place for double the price and from then it was easy for us to upgrade. Now our annual interest payments is less than what the monthly rent for our place should be!

With our first property, we just made sure that if we had to rent it out, we would have a market for it, so yes location, but more importantly, public transport, assuming that a small flat will attract young professionals but not families who tend to have cars.

Later when you find a partner then your joint income will allow you to upgrade, not to mention you would have saved even more money from not having to pay rent! With a small investment now, your downside risk is not huge, but there is room for some decent upside if you choose well.

And congratulations, your savings sounds like it is enough for you to be jobless for about 4-5 years and still maintain your current lifestyle.
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  #48  
Old 28.04.2020, 16:00
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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A big bank will do what you are suggesting for 1% annual fee, to cover safekeeping and advice. If you tell them that you are only interested in direct equity investments, they will respect that. What will cost you with them is the commissions on purchase and sale, which is what the OP has highlighted. However, a 3.5-4% fee on an investment is extremely rare (and the only case I can think of wasn‘t a suitable investment for retail clients). Any mutual fund and the vast majority of ETFs have management fees regardless of whether they are an in-house fund or not.

I work for a big bank, so am aware both as a staff client and as part of my job what we offer and how it is priced.
I used to work at an investment bank and we issued billions of EURs of retail products and the fees were at least 3.5%-4% (depending on the product). I know because I have seen the pricing details. Then again you need to have some knowledge how the products work since many fees are build in the product.

There is absolutely no way that a bank is more cost effective. If you just want to trade stocks fees are 10x comparing to fees of a discount broker. Banks have the benefit or the retail branches some people feel more comfortable to invest with the local bankers.
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  #49  
Old 29.04.2020, 01:05
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

A house might be too big and too much work for you now.

Well done on saving up 200k - you would be surprised how many people can't do that, even on higher salaries. There are many things you can do with it. Do you pay into your Pillar 3 account? You could invest it in an index tracker fund, DIY on Interactive Brokers, or buy a smaller apartment that you could then rent out for a side income when you need a bigger place.

Personally, would put the 200k down on an apartment or 2 apartments that could generate a side income. By your age I had a handful of rental flats generating more than my salary. I've scaled that back now i'm in my 40s.

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I also read people suggesting buying a property to rent it out, but then, what are the numbers there? is there a calculator or guide to check how much would be worth renting out something, considering the price of the estate, interest rate and so on.
You pay around .95% interest yearly, 5 year or 10 year fixed on the amount you borrow, simple interest in Switzerland. Look at similar properties and what they rent for. Take off expenses: communal building fees and agency fees and that's what you make before taxes and repairs and maintenance expenses. Tenants pay charges like water usage and fire service in CH.
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Old 29.04.2020, 08:40
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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A house might be too big and too much work for you now.

Well done on saving up 200k - you would be surprised how many people can't do that, even on higher salaries. There are many things you can do with it. Do you pay into your Pillar 3 account? You could invest it in an index tracker fund, DIY on Interactive Brokers, or buy a smaller apartment that you could then rent out for a side income when you need a bigger place.

Personally, would put the 200k down on an apartment or 2 apartments that could generate a side income. By your age I had a handful of rental flats generating more than my salary. I've scaled that back now i'm in my 40s.



You pay around .95% interest yearly, 5 year or 10 year fixed on the amount you borrow, simple interest in Switzerland. Look at similar properties and what they rent for. Take off expenses: communal building fees and agency fees and that's what you make before taxes and repairs and maintenance expenses. Tenants pay charges like water usage and fire service in CH.
Thank you for the answer!
If I don't go with the House buying route, the idea of buying 1/2 properties to rent out seems the most appealing one.
Could I ask you more informations about this, or a pointer where I can find more info?
Mainly about:
-how can I know if the price of the property is right, based on how much it would rent out for? Is there a magic number I need to look for?
-what are some hidden expenses? Or the ones that you talk about are all I can expect? and if you talk numbers, could you show me a classic example, for a flat that costs X to buy, and rents for Y, with yearly Z expenses, so I have an idea of the return.

Thank you very much
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Old 29.04.2020, 08:56
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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Thank you for the answer!
If I don't go with the House buying route, the idea of buying 1/2 properties to rent out seems the most appealing one.
Could I ask you more informations about this, or a pointer where I can find more info?
Mainly about:
-how can I know if the price of the property is right, based on how much it would rent out for? Is there a magic number I need to look for?
-what are some hidden expenses? Or the ones that you talk about are all I can expect? and if you talk numbers, could you show me a classic example, for a flat that costs X to buy, and rents for Y, with yearly Z expenses, so I have an idea of the return.

Thank you very much
rule of thumb is that the property should not cost more than 200 times the monthly rent. preferably not more than 120 times the monthly rent. obviously, at current valuations, there are few properties suitable for rental investment.
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  #52  
Old 29.04.2020, 09:18
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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rule of thumb is that the property should not cost more than 200 times the monthly rent. preferably not more than 120 times the monthly rent. obviously, at current valuations, there are few properties suitable for rental investment.
Does this rule of thumb apply for countries where a bank credit for a property is completely paid out within 25-30 years? Or also for Switzerland?
Because if you count 2000 CHF x 200 = 400,000 CHF it is hard to think that the same property that you rent for 2000/mo can be purchased for 400k CHF.
Or the other way round.

IMO buying to rent in Swizerland is not the same as buying to rent in other countries. As a hypothek credit owner you basically bear all the risks and as an owner have all the costs of maintaining the property.

example in Luzern: found a 40-year old 51/2 room apartment, about 800K. You could rent it for 2000-2500 probably.
have found that water plumbing will need replacement, 16K, building cover and insulation 36K. These will need to be done together will all other owners in the block. How will you scrap 16K + 36K + probably later 20K to change the kitchen?

Add sitting on a credit at the minimum historical interest rates, which will need to be renegotiated when you renew it. At the interest rates from then.

add the risk of purchasing property that maybe your future wife won't like...

Last edited by memihai; 29.04.2020 at 10:11.
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  #53  
Old 29.04.2020, 09:24
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

In short buying my own place was the best advice I ever had.

Bear in mind all the Swiss property market rules - capital gains tax especially. Use the principle not ‚can i buy it?‘ but ‚can I sell it‘ when looking at properties - and you‘re in it for the long run...
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Old 29.04.2020, 10:09
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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In short buying my own place was the best advice I ever had.

Bear in mind all the Swiss property market rules - capital gains tax especially. Use the principle not ‚can i buy it?‘ but ‚can I sell it‘ when looking at properties - and you‘re in it for the long run...
agree. always have the "exit" (sell) in mind.
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Old 29.04.2020, 10:27
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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Does this rule of thumb apply for countries where a bank credit for a property is completely paid out within 25-30 years? Or also for Switzerland?
Because if you count 2000 CHF x 200 = 400,000 CHF it is hard to think that the same property that you rent for 2000/mo can be purchased for 400k CHF.
Or the other way round.
It's sort of worldwide.

But it all depends what your idea is, if your main gamble is on real estate prices going up it does not matter so much and the rent is just an extra. But if you want some sort of return to have an extra buck a.s.a.p. it is simply not worth it to buy a house of 800K to rent it out for 2K, if the price of the house stays the same it be years before the first Franc profit has been made. Imagine 40K additional costs on buying and than steady costs of taxes, insurances, maintenance, interest payments.
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Old 29.04.2020, 10:46
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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a nice place above my head for the rest of my life!

Wow. You sound like a pensioner
Yes you have a good bank balance and a good job. Take a year off and see the world!
Don't do this. Save that for when you are 60 , newly retired and minted as a result of making good choices in life.
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Old 29.04.2020, 11:42
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

OP,

well done on accumulating decent savings.

Once you decide or would even encourage to do it before you decide is to meet some bankers.
When I started looking in the market, Some bankers were not very keen and some others were extremely helpful.

At same time some friends got good bankers with the bank not keen with me.
so, in the end it will depend on banker if they can stretch even if income is perceived to be low at the moment .
Before Covid, there were few instances where banks or rather bankers were stretching a little due to completion.
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Old 29.04.2020, 11:48
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

where is fmf? I have to take over.

Forget real estate. Why:
  1. Too much hassle (maintenance, management)
  2. All your eggs in one basket (no diversification)
  3. No liquid. You can sell stocks and have the money in less than a day. Try that with RE.
  4. Low returns (compared to stocks)
  5. Highly leveraged (3-5x)

Just invest in an broad index ETF or a fund (fundsmith) and forget about it for 10 years.

IMHO: real estate is about sentiment and not about economics. While I do own an apartment and currently building a house, I still believe real estate is fun, it gives you a nice feeling, it gives you a place to be happy, but not a good FINANCIAL investment.

If really want to invest in real estate than choose a REIT or some other product which avoids all the above disadvantages expect for low returns.
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Old 29.04.2020, 13:33
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

30 something, no family, fed up with paying rent...

https://www.swissinfo.ch/eng/micro-h...rland/45714316
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Old 29.04.2020, 13:34
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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where is fmf? I have to take over.

Forget real estate. Why:
  1. Too much hassle (maintenance, management)
  2. All your eggs in one basket (no diversification)
  3. No liquid. You can sell stocks and have the money in less than a day. Try that with RE.
  4. Low returns (compared to stocks)
  5. Highly leveraged (3-5x)

Just invest in an broad index ETF or a fund (fundsmith) and forget about it for 10 years.

IMHO: real estate is about sentiment and not about economics. While I do own an apartment and currently building a house, I still believe real estate is fun, it gives you a nice feeling, it gives you a place to be happy, but not a good FINANCIAL investment.

If really want to invest in real estate than choose a REIT or some other product which avoids all the above disadvantages expect for low returns.
You forgot their about living in a tent...
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