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Old 30.05.2020, 09:12
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Flipping Houses in Switzerland

In the UK its common to buy a house, do it up and sell a few years later at a profit. This is how people 'climb the property ladder'. How does this work in Switzerland?
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Old 30.05.2020, 09:18
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Re: Flipping Houses in Switzerland

Most of the profit will be go to taxes, so it doesn't work here.

Tom
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Old 30.05.2020, 09:19
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Re: Flipping Houses in Switzerland

Capital Gains Tax (Grundstückgewinnsteuer) on property transactions is structured to make this unattractive for private individuals.

Edit: st2lehmans beat me to it.
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Old 30.05.2020, 09:24
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Re: Flipping Houses in Switzerland

Switzerland has a specific tax on gains from property sales, presumably to curtail the buying and selling of houses for profit, as this would further drive up prices. The longer you own the property before selling it, the smaller the tax burden. So you would have to factor in the tax burden following the sale into your pricing.

I'm not aware of anyone flipping houses, at least not in the Zurich area. If there is a property in need of repair, people typically buy it to use it themselves/for family.
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Old 30.05.2020, 09:39
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Re: Flipping Houses in Switzerland

Iirc the tax on a property you own for less than 5 years could be between 50-75% so not really worth it unless you can buy somewhere for a REALLY low price and sell it for a REALLY high one. The tax wipes out most of your profit.

What is more likely to work here I think is to buy an old farmhouse for example and then turn it into several apartments you could rent out.
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Old 30.05.2020, 12:21
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Re: Flipping Houses in Switzerland

The capital gains tax is not payable if you're "climbing the property ladder" though, ir rather it's deferred. As long as the house is your primary residence and you buy another of equal or higher price you don't actually pay any tax on the increase in value.
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Old 30.05.2020, 12:28
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Re: Flipping Houses in Switzerland

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The capital gains tax is not payable if you're "climbing the property ladder" though, ir rather it's deferred. As long as the house is your primary residence and you buy another of equal or higher price you don't actually pay any tax on the increase in value.
This is how it is in BL also.
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Old 30.05.2020, 13:40
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Re: Flipping Houses in Switzerland

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The capital gains tax is not payable if you're "climbing the property ladder" though, ir rather it's deferred. As long as the house is your primary residence and you buy another of equal or higher price you don't actually pay any tax on the increase in value.
Yes, but flipping houses, as is done by various relatives of mine in the US, does not normally involve primary residences.

And here, you also need to move into one of equal or greater value within a certain time frame.

Tom
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Old 30.05.2020, 16:09
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Re: Flipping Houses in Switzerland

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The capital gains tax is not payable if you're "climbing the property ladder" though, ir rather it's deferred. As long as the house is your primary residence and you buy another of equal or higher price you don't actually pay any tax on the increase in value.
As I understand it, the capital gains tax is rolled up with each sale and when you finally sell up (even to downsize) and do not invest the full proceeds in a replacement property, it then becomes payable. This is important as you reach the end of your working life and move on to retirement, because the banks still apply strict criteria when assessing your ability to sustain the mortgage payments, possibly forcing a sale. It is also important for your estate because the inheritors may also inherit a latent tax liability.
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Old 30.05.2020, 16:12
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Re: Flipping Houses in Switzerland

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In the UK its common to buy a house, do it up and sell a few years later at a profit. This is how people 'climb the property ladder'. How does this work in Switzerland?
It doesn’t. There is no policy to encourage people to take on enormous debt or rely on social services to put a roof over one’s head. Nor does the idea that renting is a waste of money hold much sway except among Anglo Saxon expats.

The preferred policy is to encourage wealth accumulation via savings and investing, hence no CGT etc...

Of the 8 houses on my road 7 including my is at least a second generation inheritance. In the other case, the family died out and the new owners were in their mid 40s and it is their first home.
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Old 30.05.2020, 17:14
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Re: Flipping Houses in Switzerland

In some apartment buildings, the other owners must approve of a new potential owner, before the sale can go through. Whenever this is the rule, it places an additional hurdle in the way of anyone who hopes to flip an apartment, both in buying and later in selling. (I know someone who has been trying to sell for several years, but the other owners won't approve any potential buyer.)

Another factor to consider is that flats don't - generally - tend to get into a terrible run-down condition (that is sometimes the delight of a flipper in other countries), for as long as they have tenants in them. This is because the law prescribes that any tenant who leaves is liable for any damages caused. That makes tenants cautious about trashing a place (and the general culture of being clean and neat helps, too) and it also empowers the owner to fix anything that is broken, to paint the place if necessary, and so on. Therefore, a new owner will have, so to speak, much less to do to upgrade the place to make it sellable... it is already sellable.

A buyer hoping to flip an apartment would search for a long time to find a truly run-down place (for example, when one messie owner has lived there), to re-vamp and sell for a great profit.
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Old 30.05.2020, 22:02
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Re: Flipping Houses in Switzerland

Also, if you buy a property and then invest heavily in extending it (increasing its value) the amount spent achieving this will be deducted from your taxable gain. So perhaps if you own a firm which does the renovation you get to keep that money...
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Old 01.06.2020, 00:16
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Re: Flipping Houses in Switzerland

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As I understand it, the capital gains tax is rolled up with each sale and when you finally sell up (even to downsize) and do not invest the full proceeds in a replacement property, it then becomes payable. This is important as you reach the end of your working life and move on to retirement, because the banks still apply strict criteria when assessing your ability to sustain the mortgage payments, possibly forcing a sale. It is also important for your estate because the inheritors may also inherit a latent tax liability.
Yes, but I'd expect that only the laddering of the last 20 years or so count.

After father died we were considering selling our parents' house. They had owned it for 50+ years, however the computed purchase price would have been the tax value from ~20 years before (the base year). In addition and as usual, we could have deducted value-increasing investments from the computed capital gain that happened after the base year.
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Old 01.06.2020, 08:16
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Re: Flipping Houses in Switzerland

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It doesn’t. There is no policy to encourage people to take on enormous debt or rely on social services to put a roof over one’s head. Nor does the idea that renting is a waste of money hold much sway except among Anglo Saxon expats.

The preferred policy is to encourage wealth accumulation via savings and investing, hence no CGT etc...

Of the 8 houses on my road 7 including my is at least a second generation inheritance. In the other case, the family died out and the new owners were in their mid 40s and it is their first home.
Buying a house is a good idea overall if you plan to live in it. We are very happy with our decision. We don’t invest in the stock market much but buying and renovating a family home has been both financially sensibility and also hugely personally rewarding for us.
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Old 01.06.2020, 09:41
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Re: Flipping Houses in Switzerland

Anti-speculation tax policies aside, a reason why flipping houses is not so common here is that there are so few houses available. Sure, as a seller that's a good thing for you... but will you be able to buy your next house?

The Swiss property market is not dynamic as in many other countries. There isn't the concept of a starter home, move-up home, dream home, empty nest home cycle that is common where I come from. There really isn't a property ladder here, rather people tend to leave their homes feet first.

As an example:

I made the mistake of buying a compromise house in order to get out of the rental house on schedule. I was thinking with my American hat, thinking I could get rid of this house fairly easily. Which I probably could... but in 15 years I have not been able to find the second house I'd need before I could sell this one.

I'm no stranger to renovation, I've bought and sold several houses back home, and it's not an issue of capital tied up. There simply are so few houses available - and I lack the 'Vitamin B' that is so often needed in the areas where I am looking. Over these 15 years I've bid on many, and lost, more often for reasons other than the amount I'm willing to pay. I've even been rejected because I already own a house. Yes, people do think like that.

So... before you start thinking of house flipping, do take some time to study the Swiss property market. it is nothing like what I was used to back home.

Also - are you planning on doing the renovations yourself (as in, qualified to do so) or are you planning on using professionals? Do make sure you understand the cost of renovation here. And make sure you understand zoning and construction regulations. We gutted and renovated the compromise house we are still in - cost and bureaucracy was an eye opener, to say the least.
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Old 01.06.2020, 11:33
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Re: Flipping Houses in Switzerland

In Ticino the tax starts at 31% in Year 1, reducing to 4% by year 30. At year 8 it's 20% and year 12, 10%. It is deferred if buying another home within a year but only if buying in Ticino. Someone wanting to move to say Bern would not get this exemption, which i think is quite wrong.

If you really want to buy to renovate and flip, then consider creating a company, as you can deduct so much more and I believe it is taxed differently, that is corporate tax on profit, not on capital gain. However, do the sums carefully, as unless this is to be your prime business, it can turn out to be more expensive.
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Old 01.06.2020, 16:38
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Re: Flipping Houses in Switzerland

We flipped unintentionally:

When the kids came we decided to go for a house. it was about 12 years old, was mostly ok and at most needed new paint, but it was below our budget and so we decided to spend the rest of the budget by doing about 200k of renovations. New bathrooms, kitchen, flooring, etc. etc.

It was a hell of a 4 months for my wife to manage the project, but the house looked fantastic afterwards. But once we moved in, we realized that the house was simply too big, had too many floors, and I was travelling too much to maintain it myself and for my wife to feel completely secure in it. And we couldn't get used to the neighbourhood.

Suddenly we found our dream place, and thus decided to move out exactly 5 years later.

So the implications:

Tax - as the house was relatively "new" we could sometimes decide how to treat the various items. Things that are replacing old stuff can be written off straightaway from your income tax of that year. Things that add value will be deducted from the the capital gains tax when you sell. We wrote off most of it early because we didn't think about selling it at that time. That year of renovations, I paid almost no income tax. The Zurich tax people will have a list of items that can be deducted when and how. Some items have % of possible deductions based on how old they were. Eg., cost of replacing the garden patio can be deducted 30% now, and 70% from the capital gains tax. Something like that. You should really study this before deciding which renovation work to do.

In Zurich, the capital gains tax is about 50% if you sell it within 2 years. We paid just under 40% after 5 years. The tax is deferred if you buy something more expensive, but we didn't. So we had to pay some sort of pro-rata tax. In the end we did make a small profit, but my wife said that if that was her salary for managing the project, she would not do it again.
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Old 01.06.2020, 18:13
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Re: Flipping Houses in Switzerland

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Yes, but I'd expect that only the laddering of the last 20 years or so count.

After father died we were considering selling our parents' house. They had owned it for 50+ years, however the computed purchase price would have been the tax value from ~20 years before (the base year). In addition and as usual, we could have deducted value-increasing investments from the computed capital gain that happened after the base year.
The experience is interesting because that is the dilemma many face under such circumstances, but that is not a classic case of house flipping. However, it amply demonstrates the pressure to keep a house in the family for many years. The capital gains tax diminishes significantly, in some cantons to nothing, after many years (range: 20 to 25 years) of ownership.
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Old 02.06.2020, 07:55
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Re: Flipping Houses in Switzerland

I think it is a good thing the property market here isn't like the UK. The prices here are already stupid, can you imagine house flippers in the market. Case in point my place is insured for half the price it cost to build it. No the land isn't included, but it didn't cost that much.

The mortgage is with a Swiss bank and they don't care where the money comes from as long as they have a cut; surely most of you living here must have realised that why the Swiss banking industry does so well, it certainly got nothing to do with customer service.

We didn't buy to sell, we purchased to live there; and still would if my job hadn't taken me to Zurich at the time. I would have moved back when the job folded, but we had tenants and be quite frankly they were paying the mortgage and some money that helped a great deal when I had no job. [Again the bank didn't try to exploit the situation, demand I sell the place, they got their cut and minded their own business].

As long as President Trump is in power interest rates aren't going anywhere, he is business man who owns a lot of property with much debt, no he wants to keep interest rates on the floor. He doesn't like banks much either. I think that is the reason he does such stupid things sometimes like declaring the capital of Israel is Jerusalem when he has running short of distractions to upset the market/banks.
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Old 02.06.2020, 08:37
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Re: Flipping Houses in Switzerland

I think that most of the answers here are very good and explain it quite well. A couple more points that I think impact the real estate market are...

1. Because there are so few properties on the market, people are very willing to take on the risks/costs of renovation when looking at properties and then get into bidding wars. This means that there won't be houses available that are overlooked due to being in poor shape.

2. A very good investment (at least if you are an institution) is tearing down (or gutting) a property and then putting in the maximum number of new apartments. This is ongoing and must be extremely profitable, but it is a kind of real estate investment for institutions (and wealthy individuals). Often the money is made, not by 'flipping', but from the long term rental income.
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