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Old 28.05.2017, 18:00
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Raising the rent according to interest rate

Hi all,
we're thinking to buy an apartment to rent it out.
With the current interest rates (on the mortgage) it seems a good idea, but if the interest rates rise...
I know there is an official 'cost of money' rate issued yearly from Swiss authorities which allows to raise the rent, anyone has more knowledge on this? Probably won't cover my costs if interest rates go up a lot?

Thanks all
Mike
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Old 28.05.2017, 18:09
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Re: Raising the rent according to interest rate

What nationality are you and what permit do you hold?
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Old 28.05.2017, 18:10
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Re: Raising the rent according to interest rate

Rents are tied to reference rate = average rate of all outstanding mortgages:
https://www.bwo.admin.ch/bwo/de/home...szinssatz.html

It works both ways. Drop in reference rates authorizes the tenant to demand a rent decrease and the current reference rate is still pretty high above market realities and has a long way to go down.

If reference rate rises, you have a right to raise the rent, but there's no guarantee that you'll actually be able to get it. The tenant can just walk out on you and you might not be able to re-rent at a higher rate at all. In practical terms rents are limited by economic factors - how much people are able to pay and salaries aren't exactly rising recently.
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Old 28.05.2017, 18:14
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Re: Raising the rent according to interest rate

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What nationality are you and what permit do you hold?
I'm Italian and hold a B permit, but already checked and I'm ok buying, just trying to understand all the details.
Thanks
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Old 28.05.2017, 18:17
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Re: Raising the rent according to interest rate

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Rents are tied to reference rate = average rate of all outstanding mortgages:
https://www.bwo.admin.ch/bwo/de/home...szinssatz.html

It works both ways. Drop in reference rates authorizes the tenant to request a rent decrease and the current reference rate is still pretty high above market realities and has a long way to go down.

If reference rate rises, you have a right to raise the rent, but there's no guarantee that you'll actually be able to get it. The tenant can just walk out on you and you might not be able to re-rent at a higher rate at all. In practical terms rents are limited by economic factors - how much people are able to pay and salaries aren't exactly rising recently.
Thanks Ivank,
I see your points.
Just for my knowledge how this is supposed to work? Starting from the apartment's value, applying the official rate I get the theoretical yearly rent?
thanks again
Mike
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Old 28.05.2017, 18:28
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Re: Raising the rent according to interest rate

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I'm Italian and hold a B permit, but already checked and I'm ok buying, just trying to understand all the details.
Thanks
There was a time when buying was restricted to C-permit holders but this was relaxed a while back and now it seems to be a free-for-all...
When we bought I was already on a C-permit so it was not an issue.

Nowadays I think even some L-permit holders buy, though they need approval. I have even heard that you can buy if you have a G-permit!
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Old 28.05.2017, 18:32
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Re: Raising the rent according to interest rate

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Just for my knowledge how this is supposed to work? Starting from the apartment's value, applying the official rate I get the theoretical yearly rent?
No, you're pretty much free to set the initial rent and yield yourself, based on the market situation. There are some rent control laws (Art. 269-270 OR, Art. 15 VMWG), but a market-level rent is a typical exception to them. However, if your tenant chagnes, an increase of rent to next tenant would be subject to these laws.

After initial rent is set, reference rate and consumer price index are then only used for relative adjustments to the rent, when the rate changes. Main relevant law here is Art. 13 VMWG - an increase of 0.25% in reference rate authorizes a rent increase of 3%. Conversely a similar drop allows the tenant to demand a decrease of 2.91% (=1-100/103). Additionally you can index 40% of the rent by CPI index (basically, the law assumes you finance property with 60% mortgage, 40% cash).

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There was a time when buying was restricted to C-permit holders but this was relaxed a while back and now it seems to be a free-for-all...
He's EU.

B EU have been always allowed to buy unrestricted just like a C permit holders and Swiss.

Last edited by ivank; 28.05.2017 at 18:56.
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Old 28.05.2017, 18:41
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Re: Raising the rent according to interest rate

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He's EU.

B-EU have been always allowed to buy unrestricted just like a C permit holders.
We were told that we needed a C-permit to buy and I am EU! I was in the process of upgrading to a C-permit at the time of house-hunting anyway, so it was not an issue. I had assumed from what I was told that even EU B-permit holders could not buy years ago.
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Old 28.05.2017, 18:43
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Re: Raising the rent according to interest rate

You've been misinformed.

https://www.admin.ch/opc/de/classifi.../index.html#a5 - swiss residents with an EU passport are not subject to buying restrictions. Non-EU must generally have C, otherwise with a B they can only buy primary residence unrestricted.
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Old 28.05.2017, 18:48
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Re: Raising the rent according to interest rate

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You've been misinformed.

https://www.admin.ch/opc/de/classifi.../index.html#a5 - swiss residents with an EU passport are not subject to buying restrictions.
It could be what I was told back then was already incorrect, but what you have quoted is current law, right? We purchased around 15 years ago when I was changing from B to C.

I think that there was a time when property purchase was restricted to CH citizens and C-permit holders only.

Last edited by koblenz; 28.05.2017 at 18:50. Reason: add
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Old 28.05.2017, 18:51
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Re: Raising the rent according to interest rate

This is the current law, yes, I don't know and don't care what the situation was 15 years ago, I don't live in the past. In business world you need to be forward looking, leave past to historians
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Old 28.05.2017, 18:54
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Re: Raising the rent according to interest rate

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B EU have been always allowed to buy unrestricted just like a C permit holders and Swiss.
My query pertained to your post where you said that EU B-permit holders have always been allowed to buy unrestrictedly.
I was just saying that I think there was a time that you needed a C-permit, whatever you nationality, to be able to buy.
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Old 28.05.2017, 18:55
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Re: Raising the rent according to interest rate

Ok, ignore that I said "always", that may be wrong then
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Old 28.05.2017, 19:20
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Re: Raising the rent according to interest rate

You are free to charge whatever you like for rent.

Whether someone will pay it is another matter.

Tom
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Old 07.06.2017, 09:37
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Re: Raising the rent according to interest rate

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You are free to charge whatever you like for rent.

Whether someone will pay it is another matter.

Tom
Quite often in CH you'll find someone! Especially in larger towns and cities where there is a housing shortage. It will be harder in more rural areas.
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