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Old 26.07.2021, 18:36
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Re: Investing - Buying small flat for renting?

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... Oh well, what a boomer, I had high hopes to be able to buy a small flat in valais or so for 170k-ish to then rent it and let it pay by itself
Bummer I think, though could be both.

I don't know Sion that well but having looked elsewhere in Valais: My guess is that 170k wouldn't buy you much square meters, views and amenities, or durability. Then, if this is in a tourism area, you have to think about how the climate may change the attractiveness of the place over 20-40 years. There were mostly worse prospects for winter and summer seasons, in the places I looked at, though there could be some plays in the right places.
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Old 26.07.2021, 19:01
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Re: Investing - Buying small flat for renting?

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Problem is that the stock market now its a bubble about to * pop *

The safer products are:
- Gold
- Silver
- Real State

... Oh well, what a boomer, I had high hopes to be able to buy a small flat in valais or so for 170k-ish to then rent it and let it pay by itself
You think the stock market is a bubble, but you don‘t think that CH real estate is? IMO both are over-priced and for the same reasons QE/negative rates has to find a home somewhere and I don‘t see that changing anytime soon.

This for me is the problem with property as an investment… no one seems to have any qualms using 5x leverage to buy a property and even at the top of the market and then they say that an unleveraged stock purchase is risky. If I had 34k (20% of 170k) to play with in Switzerland, property would be the last place I would be looking. If you‘re desperate to get into the property game that would still buy you something outright in parts of the UK that would generate a yield (but you‘d be at the undesirable tenant end of the market). I assume that‘s the case in much of Europe too.

You‘ve answered your own question anyway… if you think it‘s all overvalued and gold or silver is where it‘s at, buy some bullion and sit on the sidelines until you think the stock market isn‘t overheated anymore. Some fun figures for you though with my last three investments:
Gold bullion purchased 1st April +0.1%
Fundsmith (FMF will love this) bought 8 June +8%
VEA bought (admittedly on a COVID news dip) 20 July +3.2%
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Old 26.07.2021, 19:27
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Re: Investing - Buying small flat for renting?

If you want to buy somewhere that you want to use for yourself and only let out when you're not there – i.e. a quality-of-life investment – with a very long-term (30-year) view of a financial return, then I'd say go for it. But as a purely financial investment, I'm not sure it makes sense.

Firstly, you'll need to stump up 40% deposit for a property that is not your principal residence; secondly given the fact you won't be on the ground to manage the property, you'll need a managing agent. For holiday lets, agents tend to take 25%; even if you were on the ground, local websites and booking.com etc. take 12-13% and even AirBnB takes 3%. For permanent lets, the revenue is much lower (e.g. 1 month long-term = 1 week high season), and you'd still need someone who can deal with repairs, tenant issues etc.
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Old 26.07.2021, 20:29
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Re: Investing - Buying small flat for renting?

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for you though with my last three investments:
Gold bullion purchased 1st April +0.1%
Fundsmith (FMF will love this) bought 8 June +8%
VEA bought (admittedly on a COVID news dip) 20 July +3.2%
Hey Eyebeebe!

Thanks for your answer! And all the others too!

Sorry for my lack of knowledge in the topic, but what is FMF? Tried to google it but no luck

Same goes for VEA
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Old 26.07.2021, 20:32
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Re: Investing - Buying small flat for renting?

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Firstly, you'll need to stump up 40% deposit for a property that is not your principal residence.
Thanks! Jeez, i didnt knew that fact! thanks! I thought it would still be 20% and thats it...

Most likely then i will end up diversifying and buying a cheaper property somewhere else... And hopefully build from there
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Old 26.07.2021, 20:40
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Re: Investing - Buying small flat for renting?

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Hey Eyebeebe!

Thanks for your answer! And all the others too!

Sorry for my lack of knowledge in the topic, but what is FMF? Tried to google it but no luck

Same goes for VEA
I‘d love to see googling FMF getting the right answer. It‘s closer to home than you think. FMF = Fatmanflims aka Fundsmith‘s biggest cheerleader
VEA is a very low cost ETF that covers developing markets excluding the US (I have plenty of US coverage in other investments). Google should have brought it up. https://investor.vanguard.com/etf/profile/VEA
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Thanks! Jeez, i didnt knew that fact! thanks! I thought it would still be 20% and thats it...

Most likely then i will end up diversifying and buying a cheaper property somewhere else... And hopefully build from there
I think you might get it with 33%, but certainly not 20%.
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Old 26.07.2021, 20:43
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Re: Investing - Buying small flat for renting?

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but what is FMF? Tried to google it but no luck
The friendly member now a mod who mentioned Fundsmith on the forum in 2014 & it's turned €100 to roughly €350 in 7 years.
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I‘d love to see googling FMF getting the right answer. It‘s closer to home than you think. FMF = Fatmanflims aka Fundsmith‘s biggest cheerleader
It's been my most profitable investment ever, making more money tax free than I earned in the previous 10 years before tax.

Not sure if this was my first comment https://www.englishforum.ch/2134108-post55.html

15.04.14 Price £1.6193 €15.4156
26.07.21 Price £6.6895 €55.17

The earliest € contract note I can find is dated 7 Feb 13 €13.0195, so I may have mentioned it earlier on the forum

Last edited by fatmanfilms; 26.07.2021 at 21:11. Reason: adding link with prices
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Old 26.07.2021, 20:44
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Re: Investing - Buying small flat for renting?

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Hello everyone!

I have this - sort of - crazy idea of investing (probably next year) in real state in switzerland and i was wondering if it make sense or not... Someone with experience in this topic?

I was thinking of buying a small new flat somewhere near Sion, Vaud (pay upfront 20% + loan) for then renting it and making the rent pay at least most of the monthly loan payment.

Thanks in advance, and sorry if it sounds crazy
I own rental property in London and in Switzerland. I have bought and sold over the years. Made a gain on the UK property in £ but the collapse of the £ after Brexit changed the arithmetic: a 20% loss on the sale of 90% mortgaged Swiss property (typical in some regions) could yield a big CGT bill in the UK because (unlike the US tax on foreign rental property) there is no exception for the phantom gain on the mortgage. (Per the Quijano case -- it's online -- that tax on phantom mortgage principal gain applies in the USA to any property that is not rented out or otherwise of commercial use.)

By and large the rental yield was similar to London (2.5% gross) but mortgage rates were better in Switzerland until recently (one of our UK property's mortgage rate is keyed to bank rate and so is just over zero (under 0.5%). Swiss mortgage rates depend on the bank. 1% to 1.5% is common on BTL).

Last time I was there, and last time I paid my Valais income tax, Sion was in Valais. But never mind, except that Valais taxes are a fraction of the taxes in Vaud which I was glad to get out of as soon as I lost diplomatic immunity.)

At my age I am trying to disinvest, selling off assets and giving the proceeds to my many children and grandchildren. I have managed to rid myself of every UK asset except a car and a small bank account to receive my State Pension. I would like to rid myself of one of my 2 remaining Swiss flats as well -- even though it makes little economic sense -- but the mortgagee doesn't like 80-something mortgagors and having to deal with succession (probate). Especially when the borrower has made himself insolvent by paying for all his grandchildren's school fees. (I was a bankruptcy lawyer once: no fraudulent conveyance (action paulienne, in French) there.)
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Old 26.07.2021, 22:56
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Re: Investing - Buying small flat for renting?

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Problem is that the stock market now its a bubble about to * pop *

The safer products are:
- Gold
- Silver
- Real State

... Oh well, what a boomer, I had high hopes to be able to buy a small flat in valais or so for 170k-ish to then rent it and let it pay by itself
Real estate is probably more risky in the medium to long term. All it takes is a decent rise in interest rates.
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  #30  
Old 28.07.2021, 11:33
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Re: Investing - Buying small flat for renting?

A friend of mine did exactly that, but in the suburbs of Zurich. She bought an apartment in good shape that already had a tenant. The tenant stayed and the rent is more than her mortgage so that's basically her gain.
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Old 28.07.2021, 13:02
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Re: Investing - Buying small flat for renting?

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A friend of mine did exactly that, but in the suburbs of Zurich. She bought an apartment in good shape that already had a tenant. The tenant stayed and the rent is more than her mortgage so that's basically her gain.
Repair & maintenance costs have not been accounted for. The fixtures & fittings are depreciating over their useful life
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Old 28.07.2021, 14:05
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Re: Investing - Buying small flat for renting?

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Repair & maintenance costs have not been accounted for. The fixtures & fittings are depreciating over their useful life
True, but I didn't feel like telling her this, when she so excitedly told me she purchased her first real estate
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  #33  
Old 29.07.2021, 00:42
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Re: Investing - Buying small flat for renting?

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True, but I didn't feel like telling her this, when she so excitedly told me she purchased her first real estate
Is this the equivalent of taxi drivers giving stock tips?
As in: time to get out of the market?
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Old 29.07.2021, 17:50
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Re: Investing - Buying small flat for renting?

A colleague from work has well to do parents who migrated here in the late 80s with nothing. So I asked how they got rich - seems the dad managed to save enough money to buy the first property, and managed to rent it out without the bank knowing ( otherwise the required down payment would be much higher and unaffordable). Then he sold it for a good profit after a few years, bought the next bigger apartment and did the same thing. I think the 3rd apartment was bought and declared properly with the bank, but after that the next purchase was a building with multiple apartments that could be rented out. I said the math does not sound right, but she said that for the first 20 years, they saved aggressively and lived off very little money and everything they had went into the properties. Her recollection of her childhood is of growing up poor and only started to feel rich in the past 10 years.
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Old 29.07.2021, 18:08
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Re: Investing - Buying small flat for renting?

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A colleague from work has well to do parents who migrated here in the late 80s with nothing. So I asked how they got rich - seems the dad managed to save enough money to buy the first property, and managed to rent it out without the bank knowing ( otherwise the required down payment would be much higher and unaffordable). Then he sold it for a good profit after a few years, bought the next bigger apartment and did the same thing. I think the 3rd apartment was bought and declared properly with the bank, but after that the next purchase was a building with multiple apartments that could be rented out. I said the math does not sound right, but she said that for the first 20 years, they saved aggressively and lived off very little money and everything they had went into the properties. Her recollection of her childhood is of growing up poor and only started to feel rich in the past 10 years.
I think if I could invent a time machine, I could come up with better ways of making a fortune.
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  #36  
Old 30.07.2021, 07:26
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Re: Investing - Buying small flat for renting?

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I think if I could invent a time machine, I could come up with better ways of making a fortune.
I’m with you there. I’ve done ok buying property to live in myself, i.e., I could not afford my current place right now had I not made the initial investment in a smaller property some years ago. With a time machine I can go back and tell myself not to go on nice holidays, don’t eat out once a week, buy a second hand Hyundai instead of new BMWs, tell the wife to quit shopping, and invest in more properties instead. But naaah.. no way…. I choose to live my life now rather than later.

So OP, to get rich in the property business in Switzerland requires a lot of patience and risk taking, and there are other options. High deposit requirements, capital gains tax etc works against you here.
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Old 30.07.2021, 13:56
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Re: Investing - Buying small flat for renting?

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So OP, to get rich in the property business in Switzerland required a lot of patience and risk taking, and there are other options. High deposit requirements, capital gains tax etc works against you here.
Small edit in bold.

Maybe I‘m wrong, but I can‘t see how there will be the same capital appreciation as there has been in the last 15-20 years. Typically the yields on rental properties are tiny and are flattered by the leverage, which is great until there is a market correction.
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  #38  
Old 30.07.2021, 14:32
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Re: Investing - Buying small flat for renting?

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Real estate is probably more risky in the medium to long term. All it takes is a decent rise in interest rates.
True.

But how likely is such a significant rise?

There is so much money tied up in property and so many people have bet their entire life's savings into it, that any government that allows the property market to crash deeply and without generating an immediate recovery is going to be chased out of power at the earliest opportunity.
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Old 30.07.2021, 14:35
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Re: Investing - Buying small flat for renting?

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I’m with you there. I’ve done ok buying property to live in myself, i.e., I could not afford my current place right now had I not made the initial investment in a smaller property some years ago. With a time machine I can go back and tell myself not to go on nice holidays, don’t eat out once a week, buy a second hand Hyundai instead of new BMWs, tell the wife to quit shopping, and invest in more properties instead. But naaah.. no way…. I choose to live my life now rather than later.
On the contrary.

If I had a time machine I would use it to pick the right stocks. I could probably be doubling my money every 6 months or so.

Probably more if I borrowed all I could, even at rates of 6% and more I could be raking in the profits.

Then I would have much more money to burn and live the easy life.
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Old 30.07.2021, 15:11
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Re: Investing - Buying small flat for renting?

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True.

But how likely is such a significant rise?

There is so much money tied up in property and so many people have bet their entire life's savings into it, that any government that allows the property market to crash deeply and without generating an immediate recovery is going to be chased out of power at the earliest opportunity.
Well all mortgages were stress tested at 5% or more, so nothing to worry about except capital value falling substantially if they were to hit 5%, long fixes would likely be higher! A minority are home owners in CH, so little to worry about especially as they would be considered wealthy by the non home owners.
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