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Old 20.04.2020, 23:35
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Sell or not to sell

I've been quite panici last month as I just bought a house with 2 units in February and than the unfortunate corona situation started. As I was advertising one of the unit for rent(don't need both units to live in) the neighbour approached me that he seen the unit advertised for rent and if I would sell it to him? We had some discussion and he came up with 70k extra over the purchase price which after tax, "early sale speculation" punishment cost and Handanderungsteuer yields around +45k CHF still.

So far it's good story, but now I'm in an indecisive brain freeze if I should sell or not as in general houses slowly increase in price(it's getting to be a cliché I realised) but who knows what this recession brings:
  • seems like interest rates are going down again after a slight jump in March
  • house ads are frozen(one new add in week in certain areas whereas in 2019 been observing much more) so that's not much of an indicator
  • last price drop in Switzerland has been at 1991-1993 mainly caused by government action to limit speculation by raising rates, extra regulations for investors and construction companies see reference so it wasn't caused by a recession
  • short-time work keeps everyone floating no defaults on mortgage or rent is expected heard from my bank contact
  • construction activity is also halted by the virus
Could be that the government steps in and ease the economy till it gets started again as it happened in the 80s in Switzerland, but who knows can't get a crystal ball because every store is locked down. On one side I'm grateful to have the opportunity to have this house on the other side I still have quote some dept on it so I wouldn't really wan't to pay for a potential price drop.

The house is build in the 90s following good standards and isolation, in it's current condition don't need much renovation in the next 10 years except regular maintenance and a window frame replacement(water damage on the weather side window).

Do you have any data/advice maybe I could look at?
Subjective personal opinions are also welcome.
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Old 20.04.2020, 23:51
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Re: Sell or not to sell

- Why did you buy it?
- What else would you do with the money?
- How long would you have to rent it out to earn that same 45K?

Being able to choose your own neighbours and no negotiations in future for renovations, roof repairs and such is also worth something imho.

Nobody can predict the future but to my opinion there is still a large shortage of houses for sale in this country and a truckload of people willing to buy one, so things must become incredible bad for the prices to substantially drop a lot.
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Old 21.04.2020, 00:30
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Re: Sell or not to sell

Thanks for the quick answer and relevant questions.

"Why did you buy it?"
Several reason:
1. Has been observing the market for years and it was something I liked for a fair price, not a fenomenal deal but a relatively okay one.

2. Wanted to have a place called home been in relatively many countries and could have could have bought a place 3rd, 4th of a price in Norway, California(different quality) or Canada

In Switzerland housing is quite high, minimum 50% higher than surrounding countries, that's why been thinking about that a larger price adjustment is quite possible but just speculation at this stage.

"What else would you do with the money?"
Well, have some not so solids plans, been into some greenhouse and alternative energy topics lately, nothing really solid.

"How long would you have to rent it out to earn that same 45K?"
4 years
a possible price adjustment of 35% could mean also a loss of 300k
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Old 21.04.2020, 09:38
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Re: Sell or not to sell

"A bird in the hand"! What is there to think about?

The property market, like many others, is in suspended animation. With the need to inspect properties in detail and show parties round, I don't imagine it will start again till very late this year or even next.

If you can actually sell now to someone you know and like and make a profit - what's to question??
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Old 21.04.2020, 11:43
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Re: Sell or not to sell

Here's another subjective opinion...since you are not desperate on debt suggest you take macro view considering following points.
1. Governments worldwide are printing money like crazy to counter Covid-19 economic effects, so higher inflation in future is probable.
2. People will always need places to live regardless if they rent or buy. So demand will be there, what changes is how they will finance the need.
3. If you rent out, you will save property management fees other landlords have so slightly better profit for you vis-a-vis competition. Also, regardless of market price, it's only a loss if you sell (which you won't since you live there.)
4. What would you rather have, an extra CHF 45k pile of depreciating cash or a hard asset which will likely provide income for the rest of your life with minimal extra work?
IMHO - having the rental unit looks pretty good.
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Old 21.04.2020, 11:53
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Re: Sell or not to sell

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Here's another subjective opinion...since you are not desperate on debt suggest you take macro view considering following points.
1. Governments worldwide are printing money like crazy to counter Covid-19 economic effects, so higher inflation in future is probable.
2. People will always need places to live regardless if they rent or buy. So demand will be there, what changes is how they will finance the need.
3. If you rent out, you will save property management fees other landlords have so slightly better profit for you vis-a-vis competition. Also, regardless of market price, it's only a loss if you sell (which you won't since you live there.)
4. What would you rather have, an extra CHF 45k pile of depreciating cash or a hard asset which will likely provide income for the rest of your life with minimal extra work?
IMHO - having the rental unit looks pretty good.
Remember Demand is the ABILITY TO PAY, in CH the amount you can spend on rent is governed by your earnings. Ability to pay is currently a huge risk for landlords going forward.

Net return of property is appallingly low after repairs & refurbishment, probably negative cash flow over time as rents don't go up if the Tennant stays. The tenant could be paying the same as 25 years ago or even less as interest rates were over 3.5% back then.
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Old 22.04.2020, 12:38
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Re: Sell or not to sell

Thank you for your opinion Kaloid123, much appretiated.
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Here's another subjective opinion...since you are not desperate on debt suggest you take macro view considering following points.
1. Governments worldwide are printing money like crazy to counter Covid-19 economic effects, so higher inflation in future is probable.
All "news-trend" suggest we still going to experience deflation. Although as you mentioned in a macro view we still could have a large inflation in 2-3 years.
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2. People will always need places to live regardless if they rent or buy. So demand will be there, what changes is how they will finance the need.
That's true however home prices in some countries like Switzerland are very high compared to others in similar economic situation, which could suggest Switzerland will adjust.

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IMHO - having the rental unit looks pretty good.
Yes that's quite a plus, that's also one of the reason why I don't really wan't to let this house go, haven't seen any affordable houses with two units in this area which are in a good shape.
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Old 22.04.2020, 12:49
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Re: Sell or not to sell

Thank you for sharing your view fatmanfilms!
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Remember Demand is the ABILITY TO PAY, in CH the amount you can spend on rent is governed by your earnings. Ability to pay is currently a huge risk for landlords going forward.
-this is not necessarily the problem in CH, currently government show a lot of support for employees(no reference)
-all people who came to visit for renting out the unit had quite stable essential jobs

On the other hand Zurich's economic activity is also in the downturn for some years, large companies downscaled or left the country overall and not many companies setting up workforce here anymore thus employment of huge companies are decreasing year by year. (don't have reference to support that, just an observation, please correct me if I'm mistaken)
Migration is also tightened year by year.

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Net return of property is appallingly low after repairs & refurbishment, probably negative cash flow over time as rents don't go up if the Tennant stays. The tenant could be paying the same as 25 years ago or even less as interest rates were over 3.5% back then.
True, net return in case I would rent out both units would be around 2%/annum. Assuming price of the property won't change in 10 years and spend around 5% of the value for renovation in 10Y.
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Old 22.04.2020, 14:18
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Re: Sell or not to sell

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Thank you for sharing your view fatmanfilms!

-this is not necessarily the problem in CH, currently government show a lot of support for employees(no reference)
-all people who came to visit for renting out the unit had quite stable essential jobs

On the other hand Zurich's economic activity is also in the downturn for some years, large companies downscaled or left the country overall and not many companies setting up workforce here anymore thus employment of huge companies are decreasing year by year. (don't have reference to support that, just an observation, please correct me if I'm mistaken)
Migration is also tightened year by year.


True, net return in case I would rent out both units would be around 2%/annum. Assuming price of the property won't change in 10 years and spend around 5% of the value for renovation in 10Y.
Property prices in CH are bordering on bubble territory, prices could easily be 20% less in 10 years time than they are today. People have forgotten what happens when interest rates rise, as the concept has not existed in a very long time.
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Old 23.04.2020, 11:02
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Re: Sell or not to sell

You did well to buy, and while we may see a small dip in the current crisis as people who are desperate to sell take lower offers, long term you'll be fine, even if interest rates rise. the fact you can lock in 15 year mortgages at just 1.5% indicate no rate rise for some time to come.

The ones to suffer are those holding commercial portfolios as more people switch to the internet for buying. A couple of shop owners I speak to by phone nowadays, tell me their online business has more than overtaken their retail business, and with the corresponding savings from rent, taxes, services etc they will not renew their leases.

Your question as to whether you should sell one unit or not. Again i advise against this. You will be forever in negotiations with the other owner and not free to make improvements etc without his permission, and vice versa.

Usually in the case of multi ownership the square metres (millesime as we know them) determine the degree of financial responsibility. If you have more you pay more, but if he has more he then controls the majority. Even if you have a clause you are 50/50 as I said, he can block you. Maybe you want to chnage the heating, put up solar panels, do something to the common areas, you will always have to ask him and he can say no and it's then a fight. Your quick gain will soon be dwarfed by legal fees.
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Old 23.04.2020, 20:49
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Re: Sell or not to sell

If you do not need second and just purchased to rent. Then it is better to sell it now as your are getting some profit also. Having all egg in one basket is not good. To me it seems that correction in real estate is pending. And now due to Covid-19, it may take long time to gets things normal. And during this time there will be uncertainty and potential job loss due to which may be there is 20%-30% correction in property price.
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Old 23.04.2020, 21:22
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Re: Sell or not to sell

Check out the hefty profit tax you'll have to pay if you sell so quickly.

https://www.hausinfo.ch/de/home/fina...innsteuer.html

Grundstückgewinnsteuer im Kanton Zürich

Ein Wohneigentümer verkauft sein Einfamilienhaus mit einem Reingewinn von Fr. 75'000. Dafür muss er Fr. 20'650 Grundstückgewinnsteuer zahlen.

Für die ersten CHF 4'000 10 % CHF 400 (10 % von CHF 4'000)
Für die nächsten CHF 6'000 15 % CHF 900 (15 % von CHF 6'000)
Für die nächsten CHF 8'000 20 % CHF 1'600 (20 % von CHF 8'000)
Für die nächsten CHF 12'000 25 % CHF 3'000 (25 % von CHF 12'000)
Für die nächsten CHF 20'000 30 % CHF 6'000 (30 % von CHF 20'000)
Für die nächsten CHF 50'000 35 % CHF 8'750 (35 % von CHF 25'000)
Für alle Gewinnanteile über CHF 100'000 40 % CHF 20'650
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Old 24.04.2020, 11:32
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Re: Sell or not to sell

I'd keep the place. First off 45k is roughly 2 years rent income, so it doesnt take that long to get the 45k anyway. But the main reason, I would not want to be tied to another owner when it comes to maintenance etc. If youre the sole owner you can do maintenance when you want, else you might be pushed into things you think are not yet necessary... you'd have to negotiate about everything...

Also, as you are living in the other apartement yourself it might be nice that you get to choose the renter of the other half. If you have a renter that plays loud music or what not, you can throw them out (with the 3 months notice of course). Else the other owner gets to decide and he may keep the noisy renter...
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Old 24.04.2020, 12:08
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Re: Sell or not to sell

I agree that there is much more value in having full control of the asset. Owning full control over the asset is worth much more than the immediate 45k gain, which is just a spike that will be forgotten in a few years if not months.
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Old 24.04.2020, 12:47
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Re: Sell or not to sell

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I'd keep the place. First off 45k is roughly 2 years rent income, so it doesnt take that long to get the 45k anyway. But the main reason, I would not want to be tied to another owner when it comes to maintenance etc. If youre the sole owner you can do maintenance when you want, else you might be pushed into things you think are not yet necessary... you'd have to negotiate about everything...

Also, as you are living in the other apartement yourself it might be nice that you get to choose the renter of the other half. If you have a renter that plays loud music or what not, you can throw them out (with the 3 months notice of course). Else the other owner gets to decide and he may keep the noisy renter...
Agree. I'd sell it all, or keep it all. Having a 'co-owner' is not worth the hassle.
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Old 24.04.2020, 13:24
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Re: Sell or not to sell

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Agree. I'd sell it all, or keep it all. Having a 'co-owner' is not worth the hassle.
Absolutely agree, times 1 million. I would also say that it is worth min. 15% of the purchase price of a residential asset in Switzerland not to have to share running costs. The first time there is a large expenditure, say just 5K chf, invoices, tax receipts, comparative quotes, accountants, tax returns, choice of service providers, relatives/friends helping with works. Not to mention noise, parking, smells, loud music, parties, and plain old fun. You lose so much control.
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Old 24.04.2020, 16:11
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Re: Sell or not to sell

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The ones to suffer are those holding commercial portfolios as more people switch to the internet for buying. A couple of shop owners I speak to by phone nowadays, tell me their online business has more than overtaken their retail business, and with the corresponding savings from rent, taxes, services etc they will not renew their leases.
Thank you for sharing your view LuganoPirate. Media also support it, commercial buildings will take a larger hit than residential, if they do at all.
In light of that wondering if a response to that is "mass" conversion from commercial property to residential, hmmm which is not very likely cities need commercial buildings I suppose.

The neighbour would be interested only in the whole house, same plan as I had buy the house rent one unit and live in the other.
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Old 24.04.2020, 16:14
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Re: Sell or not to sell

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Check out the hefty profit tax you'll have to pay if you sell so quickly.
Oh yes,that's correct, as originally stated in the opening questions, from 70k could only make 45k max.
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Old 24.04.2020, 16:16
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Re: Sell or not to sell

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Check out the hefty profit tax you'll have to pay if you sell so quickly.
Wasn't planning to sell, but now that we are in this situation I would rather make 45k for sure probability 100% than 50/50 200k loss or win in 10 years.
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Old 24.04.2020, 16:22
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Re: Sell or not to sell

I agree with those that say keep it all or sell it all.

But honestly, when one makes a purchase as an investment they need to be thinking long-term. You bought this with the long-term in mind and now you're thinking short-term.

You wanted a place to live and a place to rent out for some extra income and you've got that. What's the plan after you sell?
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