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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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