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  #21  
Old 30.11.2020, 17:39
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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At least CHF is a "hard" currency whereas GBP has a fall in value like a third world currency
Even so London property has outperformed Swiss real estate since 1990 in CHF. It's been impossible to raise rents to existing tenants over more than 10 years in CH, their rents have even fallen.
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  #22  
Old 01.12.2020, 12:21
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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4.8% pa - a poor investment ??
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As it's leveraged and thus high risk and an administrative nightmare I'd say yes it is quite poor.
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unleveraged it is only 12/850 = 1.41% return
And you pay income tax on it, so you might easily end up with less than 3.5%

And you are also taxed on appreciation (if you sell).

All this is not the case for stocks.
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  #23  
Old 01.12.2020, 12:32
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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that is 6% on CHF, inflation exposed central bank money
No it isn't, it's 6% on the value of a bunch of companies which also have some intrinsic worth.

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4.8% is on inflation protected real estate.
Protected by whom exactly? And can I sue them for the huge drop in value my UK property experienced in 2008?

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At least CHF is a "hard" currency whereas GBP has a fall in value like a third world currency
a. utterly irrelevant to the value of your property
b. even less relevant if you're in Switzerland
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Old 01.12.2020, 17:42
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

Its amazing how it's so commonly held that buy to let is a high return low risk investment when the reality is the exact reverse.

I wouldn't touch it with a bargepole. We will be disposing of one our properties in 2021 (we used to live in it not bought as btl) - and the other one (I lived in it further back still) whenever the current tennant leaves.
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  #25  
Old 01.12.2020, 18:10
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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Its amazing how it's so commonly held that buy to let is a high return low risk investment when the reality is the exact reverse.

I wouldn't touch it with a bargepole. We will be disposing of one our properties in 2021 (we used to live in it not bought as btl) - and the other one (I lived in it further back still) whenever the current tennant leaves.
BTL was interesting for a cash investor when yields in London were 12% & London Property sold below 2.5 times average UK earnings so below £100k rather than today where the property is £567k or 14.5 times average earnings.

Interest rates were too high to borrow more than 50% as you would not cover your expenses.
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  #26  
Old 01.12.2020, 18:37
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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Its amazing how it's so commonly held that buy to let is a high return low risk investment when the reality is the exact reverse.

I wouldn't touch it with a bargepole. We will be disposing of one our properties in 2021 (we used to live in it not bought as btl) - and the other one (I lived in it further back still) whenever the current tennant leaves.
I wouldn't say it that strongly.

I know (indirectly) of several people who have buy-to-let properties as a large part of their pension income.

In that scenario, where they need a reliable regular return, very little effort to manage/monitor, and don't need access to the capital, it's probably better than an annuity.
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  #27  
Old 01.12.2020, 21:14
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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Its amazing how it's so commonly held that buy to let is a high return low risk investment when the reality is the exact reverse.

I wouldn't touch it with a bargepole. We will be disposing of one our properties in 2021 (we used to live in it not bought as btl) - and the other one (I lived in it further back still) whenever the current tennant leaves.
property has generally benefited from the secular decline in interest rates which reduced the cost of financing and at the same time boosted asset prices on what is typically a leveraged investment. combined with strong tax advantages (in the past for the UK) property was a great investment.
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  #28  
Old 01.12.2020, 22:14
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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I wouldn't say it that strongly.

I know (indirectly) of several people who have buy-to-let properties as a large part of their pension income.

In that scenario, where they need a reliable regular return, very little effort to manage/monitor, and don't need access to the capital, it's probably better than an annuity.
Well that "large part of pension income" comes from a high risk low return investment. Nothing wrong with that as long as one is aware of it and not living in an illusion.
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  #29  
Old 01.12.2020, 22:18
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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Well that "large part of pension income" comes from a high risk low return investment. Nothing wrong with that as long as one is aware of it and not living in an illusion.
The risk to the capital of poor or negative growth is high, but the risk of total loss is fairly low as long as the leverage doesn't trigger the bank to ask for more funds.

The rental income is relatively secure.
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  #30  
Old 01.12.2020, 22:27
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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The rental income is relatively secure.
I disagree, there will be plenty of people unemployed, voids will become common & new tenants will pay less than the previous.

I also believe BTL finance is significantly underpriced, if interest only it's essentially a bridging loan & no research has been done into the solvency of the renter by the Bank.
I suspect plenty of UK BTL 'investors' will go bust due to the changes in taxation which are about to bite in full. For years they took cash 'tax free' by extending the mortgage as prices rose, the problem if they now need to sell they will gave a CGT bill to pay. The lender did not factor the increased likelihood of a forced sale when giving the loan, as the cashflow could easily be negative.
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  #31  
Old 01.12.2020, 22:28
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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I disagree, there will be plenty of people unemployed, voids will become common & new tenants will pay less than the previous.

I also believe BTL finance is significantly underpriced, if interest only it's essentially a bridging loan & no research has been done into the solvency of the renter by the Bank.
I suspect plenty of UK BTL 'investors' will go bust due to the changes in taxation which are about to bite in full. For years they took cash 'tax free' by extending the mortgage as prices rose, the problem if they now need to sell they will gave a CGT bill to pay. The lender did not factor the increased likelihood of a forced sale when giving the loan, as the cashflow could easily be negative.
I agree with that in the context of the UK where anyway loans are simply too high relative to the property value.

Not so sure in Switzerland where property availability is much more constrained, and the rental market much more mature.
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Old 01.12.2020, 22:35
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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Not so sure in Switzerland where property availability is much more constrained, and the rental market much more mature.
This greatly depends on the Swiss economy & how many jobs will ultimately be lost due to COVID & A.I. going forward. If remote working is viable, no need for so many Swiss based office jobs. IT salaries have fallen significantly over the last 20 years as the CHF has risen.
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  #33  
Old 01.12.2020, 22:38
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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This greatly depends on the Swiss economy & how many jobs will ultimately be lost due to COVID & A.I. going forward. If remote working is viable, no need for so many Swiss based office jobs. IT salaries have fallen significantly over the last 20 years as the CHF has risen.
True - although people needing more space for WFH could push up property/rental demand.

As usual, so many variables... which is why I personally invest in funds and don't try to work it out myself...
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  #34  
Old 02.12.2020, 08:09
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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True - although people needing more space for WFH could push up property/rental demand.

As usual, so many variables... which is why I personally invest in funds and don't try to work it out myself...
As the Swiss are strict with affordability, I don't think there is much 'demand' which is the ability to pay, not desire to have.
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  #35  
Old 02.12.2020, 10:06
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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switching back to Switzerland - does it make sense to invest in rental property here in Switzerland?
my quick insights so far : bank will need your own equity of say 25% to even 30%
you can not bring your 2nd or 3rd pillar chf for this

so wondering for example for a property of 850k , with potential rent 2200 chf/month would it even make a reasonable investment? (considering no major renovations in the coming 5 yrs at least... and assuming other (if any) criteria as normal... at least not extremely odd
There is no black and white answer for this as personal circumstances play part on (estimated) returns. There is generally an intrinsic emotional involvement in purchasing real estate whether for "investment" or to live in, similar to cars (otherwise we would all be driving old BMWs or Nissan Qashqais!) which colours what and where we look for property. In other words we buy where we know which may not give the best return whereas with equities we look at the rate of return first regardless of knowledge (or lack thereof) of the equity and then look at risk/potential.

So in your case, you are buying into a flat/low return market for a low/no maintenance property which in capital terms is going to follow the market prices. Whereas 10 years ago pretty much any punter would get a capital return on real estate.

An alternative scenario.
You have an income of Chf250k and want to live a low tax/desirable area which means property prices are artificially inflated (pricing you out of the market) due to disposable income of people wanting low tax. You rent in this area a property (by your calculations) is only returning 2/3% which means "cheap" living. You also have the time, energy and appetite for renovation.
You buy an old apartment in the mountains for Chf650k (knowing average market price is Chf850k in great condition) in October, you spend Chf150/200k on renovation spread evenly over 2 years which gives you a tax deduction of Chf22/28k per year. You rent it out as a holiday apartment and use it the rest of the time for yourself. You sell it in the third year for Chf885k (assuming 2% compound on property prices) which gives you a tax liability of Chf285k (before any deductions) which is taxed at 5 to 11% in Canton Graubunden. Depending on how many weeks you choose to rent it out, rent should cover all Neben costs and interest, even breaking even means Chf50k in tax deductions and a free mountain apartment.

*Disclaimer, I have a vested interest in promoting renovations and the figures above were estimates for a recent client.
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Old 02.12.2020, 14:14
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

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switching back to Switzerland - does it make sense to invest in rental property here in Switzerland?

so wondering for example for a property of 850k , with potential rent 2200 chf/month would it even make a reasonable investment?

Yes it does. But be prepared to sit with it for the long term. Think of it as a pension. Assuming a 30% down-payment, your gross yield on capital invested is +-6.25% after bank interest.


When it comes to taxes, it's important to separate out the "nebencosten"which falls due to the tenant. Also separate the parking space as this is not subject to any ROI. If it's an apartment you can also deduct from taxes your share of the contribution to the renovation fund.


If you're looking to buy, renovate and flip, then consider creating a company for this.
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