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Old 01.11.2018, 15:14
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Financing a new build + 1

So here is the situation why I turn to the collective EF wisdom:

A nice piece of land just became available in our area. The land (ca. 1400cm2) would be ideal for building 2 single family homes.

Our idea is to buy the plot and build 2 houses, keep one and sell the other. The high level math is like this:
Land ca. 2mil
Construction costs for 2 houses (each ca. 500m3): 1.5 mil
Selling price of one house 2.5 mil.
End cost for our house: 3.5-2.5=1 mil

The question is of course FINANCING. We already have an apartment (worth roughly 1.3 mil) so we do not have an additional 20% of 3.5mil.

The other problem would be that during the build we would have a over 4 mil of mortgage which would go beyond our sustainability (if calculated with the standard 5+1% < 1/3 of income). Once we sell the current place and the 2nd house we would be well in the green again. So we need a sort of bridging solution.

Before I ask my bank, I would like to know what financing options are there in CH in general. Has anyone here done something similar.


Thanks in advance for all replies
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Old 01.11.2018, 15:20
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Re: Financing a new build + 1

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So here is the situation why I turn to the collective EF wisdom:

A nice piece of land just became available in our area. The land (ca. 1400cm2) would be ideal for building 2 single family homes.

Our idea is to buy the plot and build 2 houses, keep one and sell the other. The high level math is like this:
Land ca. 2mil
Construction costs for 2 houses (each ca. 500m3): 1.5 mil
Selling price of one house 2.5 mil.
End cost for our house: 3.5-2.5=1 mil

The question is of course FINANCING. We already have an apartment (worth roughly 1.3 mil) so we do not have an additional 20% of 3.5mil.

The other problem would be that during the build we would have a over 4 mil of mortgage which would go beyond our sustainability (if calculated with the standard 5+1% < 1/3 of income). Once we sell the current place and the 2nd house we would be well in the green again. So we need a sort of bridging solution.

Before I ask my bank, I would like to know what financing options are there in CH in general. Has anyone here done something similar.


Thanks in advance for all replies
You won't get a normal mortgage until completion, just a building financing loan. AKB said we had to use cash for the land & would only finance the build. Interest rates are higher than a normal mortgage as it's a commercial bridging loan.
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Old 01.11.2018, 16:12
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Re: Financing a new build + 1

Have you seen this?
https://www.englishforum.ch/finance-...r-lending.html
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Old 01.11.2018, 17:46
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Re: Financing a new build + 1




Buy the land and sell in advance the house you intend to sell "as per plans" and the bank may be more interested in financing you.


Alternatively find somebody who could finance it, but it will be quite expensive interest rate i guess, for the amount you plan to profit.


By the way circa 500m3 is SMALL.....and Chf 1.5 for two houses that you reckon will be worth Chf2.5 mio is totally idealistic. My guess is it would need to cost ar least Chf 1mio/house + land Chf 1mio to make it a Chf 2.5mio house after building



If it was this easy, everybody woild be doing it !
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Old 01.11.2018, 17:58
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Re: Financing a new build + 1

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By the way circa 500m3 is SMALL.....and Chf 1.5 for two houses that you reckon will be worth Chf2.5 mio is totally idealistic. My guess is it would need to cost ar least Chf 1mio/house + land Chf 1mio to make it a Chf 2.5mio house after building
Is 500m3 really that small?

And, the house price surely depends on the location?

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If it was this easy, everybody would be doing it !
It's not unknown here. I know someone who did it.

Less people would be renting if they saved for a deposit rather than spend their earnings on the latest Audi (other German cars are available).
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Old 01.11.2018, 19:53
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Re: Financing a new build + 1

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Buy the land and sell in advance the house you intend to sell "as per plans" and the bank may be more interested in financing you.
But I still need 2 mill to do that.

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By the way circa 500m3 is SMALL.....and Chf 1.5 for two houses that you reckon will be worth Chf2.5 mio is totally idealistic. My guess is it would need to cost ar least Chf 1mio/house + land Chf 1mio to make it a Chf 2.5mio house after building


If it was this easy, everybody woild be doing it !
500m3 is about 200m2 I would not say that is small. And the cost of building, I read is between 1000-1500CHF/m3. So I took the higher number.

As for the value: houses of 200m2 in the same village do sell for 2.5 mil.

I read somewhere that the calculation is often: Price= 1/3 land , 1/3 construction costs, 1/3 profit
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Old 01.11.2018, 20:42
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Re: Financing a new build + 1

That's just a surefire way into bankruptcy.

Fifteen years ago, that might have been a good idea (before the PFZ - the housing boom really only started after 2005).

These days, it's just gambling.

There are 10s of thousands of unrented apartments in the country and more being built.

Even a small disruption in the influx of immigrants (or a reversal) and the market would be totally toast. Or rather "will be", because it's really only a question of time. Apart from the to or three larger metropolitan areas, prices for apartments and houses are treading sideways, at best, with some areas even showing a negative trend.

If you think this might work, just buy the land and sell half of it. If it doesn't work, you're not totally ruined.

As for "houses of 200m2 in the same village do sell for 2.5 mil" - do you know they actually sell for 2.5m - or are they just advertised as such?
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Old 01.11.2018, 22:08
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Re: Financing a new build + 1

On the costs you're quoting the profit sounds rather high. I feel you are somewhat underestimating construction costs - people paying 2.5m for a house expect high end fitting out. Also don't neglect financing costs...could easily be several 100K by the time you're done.

1400cm2 for the whole plot might be a bit tight

Are you able to increase borrowing on your current flat? Would be much cheaper than a Baucredit....
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Old 01.11.2018, 22:17
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Re: Financing a new build + 1

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Is 500m3 really that small?

And, the house price surely depends on the location?



It's not unknown here. I know someone who did it.

Less people would be renting if they saved for a deposit rather than spend their earnings on the latest Audi (other German cars are available).

500m3 i think you'll find is rather small for a Chf 2.5mio house


Sure price depends on location, Odile will tell you where she lives you can buy half the canton for this money ! Chf 2.5mio outside Zurich (big canton) maybe expensive, especially if the actual building, without land cost only Chf 750k.....For Chf 2.5mio, i would need some very nice (expensive) fittings.


Sure it is possible, but you need a deposit to do this or find somehow the money. A lot of people manage because they own the land via family and this is then considered as the 20% deposit, but to do from scratch maybe hard work.....


The OP already owns his own flat and paid his 20% deposit so he already knows how to save


As for buying the latest car.....it is chicken feed when you are thinking of a Chf 4mio housing project really.
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Old 01.11.2018, 22:37
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Re: Financing a new build + 1

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Has anyone here done something similar.
Not myself, but I know people doing it. Personally I think it's a great risk. What happens if during the build the house market collapses. We might have a market top, the prices are only sustained by people going massively into debt, I mean 10 times or more the income.

If you really plan to do it, I would first sell the house you have and rent until the houses are finished.
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Old 02.11.2018, 10:17
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Re: Financing a new build + 1

By the time the building is finished it will cost substantially more than the expected building costs, I am currently doing a small additional floor extension & finished costs will be 60% above what I expected.

I think the plot is too small for 2 luxury houses, on the build I was going to do in CH the land was 2200m2, only 800m2 being building land plus a large garden of farm land overlooking a lake, no possibility to ever build in front. I pulled out as I believed costs would exceed market value, I was expecting a 30% profit margin.

I can't believe people spending 2.5 million will want a plot smaller than 1000m2
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Old 02.11.2018, 10:24
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Re: Financing a new build + 1

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By the time the building is finished it will cost substantially more than the expected building costs, I am currently doing a small additional floor extension & finished costs will be 60% above what I expected.

I think the plot is too small for 2 luxury houses, on the build I was going to do in CH the land was 2200m2, only 800m2 being building land plus a large garden of farm land overlooking a lake, no possibility to ever build in front. I pulled out as I believed costs would exceed market value, I was expecting a 30% profit margin.

I can't believe people spending 2.5 million will want a plot smaller than 1000m2
Don't know exactly where the OP lives but perfectly possible. See this just as a relatively random example:
https://www.homegate.ch/buy/108937252?3
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Old 02.11.2018, 11:12
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Re: Financing a new build + 1

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Don't know exactly where the OP lives but perfectly possible. See this just as a relatively random example:
https://www.homegate.ch/buy/108937252?3
The house has neither been built nor sold so can not be used to accurately predict the future sale value, merely todays kite flying fantasy.

The volume is also 50% bigger than proposed by the OP, basement space is volume but not habitual space.
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Old 02.11.2018, 11:25
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Re: Financing a new build + 1

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There are 10s of thousands of unrented apartments in the country and more being built.
It's lucky that the OP wants to build houses and not apartments then, isn't it?

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I can't believe people spending 2.5 million will want a plot smaller than 1000m2
It depends on the location surely. In the middle of nowhere perhaps not but in a prime location with good transport links, perhaps not.

I was talking to my wife about this last night and she reminded me of other people who have done the same . I'm not sure how they all financed them though as these things don't tend to get discussed.

In one case, as an example, the people we know bought the second house.

It's one of two, built on a steep slope, basically North facing so nut much sun, and about a metre strip of garden on one side (it's semi-detached with the other house), and a very small garden at the back.

The house is big as they built upwards so there are three above-ground floors.
It's the location and proximity to a station and schools etc which could have made a difference.

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Once we sell the current place and the 2nd house we would be well in the green again. So we need a sort of bridging solution.


We tried to get a bridging loan a couple of years ago. It's quite possible in the U.K. but apparently is just not done here.
We had found a new place but hadn't sold the old place. We ended up paying rent on the new place with the condition that if we our old place and could formally purchase the new place, the rental money would be deducted from the purchase price. There was a time limit of six months too.
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Old 02.11.2018, 13:08
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Re: Financing a new build + 1

A random idea - build a nice row house with 2 or 3 units.

I know, it's not stand-alone and not necessarily going to command millions, but it might be a more reasonable goal instead of 2 stand-alone luxury houses.



Agree with what was said above - if it was that easy, everyone would be doing it.
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Old 02.11.2018, 13:33
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Re: Financing a new build + 1

From what I see usually the land price factors in the future total price, also in case of old houses where the price usually reflects mostly the land price as the house needs to be built anew).
To be on the safe side it would be good to find some construction industry data on its profit margins and assume that one cannot do better, especially that a construction enterprise profit margin will eat a large chunk of it.
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Old 02.11.2018, 13:55
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Re: Financing a new build + 1

A lot of families/people own land or inherit land, this is why some people you couldn't imagine could afford a deposit let alone build, do build.


The land is easily worth 40% which is the deposit well and truly covered
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Old 02.11.2018, 16:17
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Re: Financing a new build + 1

Back to the original question:

I bridged for a number of months and the bank simply started a second mortgage at the same rate etc as my current one. No 20% required. They were quite disappointed when I cleared the new mortgage when we eventually moved.

Ask your current lender what the can do...
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Old 02.11.2018, 16:51
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Re: Financing a new build + 1

I have a lot of experience in this and can confirm 500 cbm is VERY small. I assume 2 floors, sloped roof and a basement / cellar. Footprint per house of 100m2 x average height of 2.5m + basement and you're at +- 1,650 cbm and no calculation yet for a garage.

Average build cost for a standard house in Switzerland is chf 1000
Architects fee: sia norm is 8 - 11% = (say 10% = 165,000
Construction demand + all other fees allow chf 25,000
Construction engineers: CHF 100,000

Construction Finance likely at 3% from a bank for an 18 month build and assuming you have bought the land would cost about chf 50,000 over the period. Day 1 borrowing starts small then goes up to the maximum at the last day.

You could have some economies of scale building 2 houses assuming both are identical so let's run with the average:
Finance: 50,000
2 single garages = chf 100,000 (I'm being very optimistic here)
Landscaping = chf 25,000
Unforeseen: CHF 100,000
Total build cost: chf 2,215,000


Total chf 2,215,000 + vat 168,000 +land at chf 2m = 4,383,000
or chf 2,191,500 per dwelling

Sales price 2,300,000 (and let's assume you achieve that) less 3% sales commission leaves you with 2,231,000 or a profit of chf 40,000 less all legal costs for buying and selling.

If you obtain 2.5m then you have another chf 180,000 in your pocket.

Whoever is selling the land has done his calculations very carefully and left very little for a developer.

If any of your costs go above this, and it's likely they will, you will lose money.

Should also be noted, that chf 9,000 / m2 depending on location, view etc is achievable but as others have said it depends entirely on location and what other houses of a similar size are selling for.

Hope this helps.
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Old 02.11.2018, 17:47
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Re: Financing a new build + 1

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I have a lot of experience in this and can confirm 500 cbm is VERY small. I assume 2 floors, sloped roof and a basement / cellar. Footprint per house of 100m2 x average height of 2.5m + basement and you're at +- 1,650 cbm and no calculation yet for a garage.

Average build cost for a standard house in Switzerland is chf 1000
Architects fee: sia norm is 8 - 11% = (say 10% = 165,000
Construction demand + all other fees allow chf 25,000
Construction engineers: CHF 100,000

Total chf 2,215,000 + vat 168,000 +land at chf 2m = 4,383,000
or chf 2,191,500 per dwelling
At these prices I would rather consider importing a prefabricated house from Germany. For the land I see no solution, but the savings on the house should be huge.

I would also run away from some talking about m3. I guess the price for the air makes it so expensive.
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