I would have a good look at yours and your wifes 2nd pillar to see what happens when one you dies/gets invalid → in my opinion the highest risk. Unfortunately this is not standardized.
That’s a very good point, thanks for bringing it up.
I haven’t looked into the exact details of our 2nd pillar coverage in that scenario yet, but I agree that this is probably one of the biggest risks.
We’re also considering taking out a term life insurance to cover the mortgage risk. My financial advisor actually strongly recommended this, especially if we go ahead with increasing the leverage.
Yeah, that’s likely true — the value should be higher after the renovations.
But from what I understand, banks tend to be quite conservative in how they account for that. A lot of what we’re doing (roof, facade, etc.) is more maintenance than pure value creation, so I’m not sure they’ll fully reflect it in the valuation.
So for now I’m still assuming a more conservative LTV, just to be on the safe side.
Consider term life insurances (for both you and your wife!) with an insured capital decreasing over the duration of the contract. This significantly reduces premiums.
The rationale is that at the beginning, you need a high capital insured. But with time, your other savings will build up and the capital required decreases.
Some questions. What does “potential attic expansion” mena in practice? Sounds like it could be a good deal. 130k for the ground floor renovation instead sounds like a splurge → can a smaller amount also lead to a better house? How long is this renovation supposed o last? Make sure to account for quite a bit of buffer on top of the initial estimates (both time and money).
Only advice I’d feel like giving is to take out the 3d pillar money.
By “potential attic expansion” I mean adding an additional floor, with one large room covering about ~70% of the space and a storage/attic area (around ~30%).
The ground floor renovation budget of 130k will likely end up closer to 100–110k, depending on what we decide to cut or simplify.
For timing, we estimate around ~3 months for the building envelope renovation (roof/facade), and about 1.5–2 months for the ground floor renovation.
We wouldn’t do both in the same year though, mainly for tax optimization reasons.
We didn’t know about it when we bought the house. But given that it’s from the 1970s, we assume there is asbestos in certain areas.
We already renovated the main bathroom in 2023 and discovered that during the previous renovation (around 2000), tiles had simply been placed over the old ones on both the floor and the walls. During our renovation, we had to remove asbestos there.
The guest toilet is still in its original 1970 condition. We only painted over the tiles for now, but we assume there is likely asbestos in the adhesive behind them.
For the kitchen, we’re not entirely sure. It was also renovated around the 2000s, but it’s possible that tiles were just placed over the original ones again.
We also still have the original chimney, where there could potentially be asbestos in the adhesive as well.
Financial side: Job risk: I think you need to emotionally nuance that risk. The risk is not from 180k to 0 but rather 180k to maybe 140k if you need to find something else when the job market is thight. 90% LTV: You just need a good plan to deleverage → maybe take a portion of SARON that you can pay back annually if you feel better deleveraging as time goes by - (NOTE I: If the value of your real estate goes up you are kind of deleveraging - NOTE II: you can use your 3A to deleverage if needed) Renovations in bulk: Once you start doing some renovations, it may bring you synergies to do all there is to do and you will benefit from the tax incentives
Other aspects: Insurance: Check your insurances and 2nd Pillar aspect of it as mentionned by Patirou Unsollicited Input: Your biggest risk is a divorce I think, given the constellation you mentionned (young kids, work situation, and now renovations during a few years) You are probably going to argue with your wife during the renovations and if something unexpected happen (which is often the case by renovations) you might have increased stress levels to deal with. I mention this because a very good friend of mine is doing large renovations (larger than yours) and consider this project to be the most testing times of the relationship (young kids around as well).
If you want to go into that, but afaik a vendor had to tell you if there is asbestos ( without you asking) in the house if he knows about it. Covering it up by paint or tiles is a strong indicator that he knew about it and can therefore be considered as a “hidden defect”, which has been maliciously hidden. The statute of limitation is 10 years. (“arglistig verdeckter Mangel”)
tiling over tile isn’t necessarily a sign that they knew asbestos was there. people do this also to save time/money on removing tiles and prepping the walls.
I would not be comfortable with 90% ltv - too vulnerable in case of a string if bad luck (eg losing job plus market crash plus interest rate increase at same time).
Set that aside… you’de be pouring a lot of money into a relatively cheap place. Would you not be MUCH better off reducing investment in the place, expanding your equity portfolio (capture the gains!) and living cheap and in due course selling it and buying a new place? Or some other optioj (like renting it out).
Any building constructed or renovated before at least the year 2000 (2010 to be on the safe side) is almost guaranteed to have some asbestos-bearing components in it. This should always be assumed when you buy, even if the building is sold as asbestos-free. It is the absolute exception to find a pre-2000 building that does not contain at least some asbestos components. There is no Swiss law that I know of that obliges sellers to cite this as a problem.
Here’s my personal opinion.
From a financial point of view, the only real questions here, are:
What does the property market in your area look like?
How long will it take for the investment to yield a return?
If demand for property is strong and the renovation would result in your immediately being able to resell the property at a profit, after accounting for renovation costs, I couldn’t really find a strong argument against renovating.
With regards to increasing the LTV, the cost (mortgage interest) is the major factor. Otherwise reducing the portion of your assets invested in real estate, compared to your other investment positions, would generally be a positive.
Asbestos (sales, production and usage) was forbidden in Switzerland in 1990.
In Geneva (and Vaud I think, don’t know about other cantons) it is required to carry out asbestos tests before starting works in buildings built before 1991.
1991 for Valais/Wallis (it’s later than many other places in Switzerland). Before that, asbestos should be assumed from a buyer point of view (from an investment perspective, I am taking no stance on the legal one).
Edit: that being said, if they had advertised some rooms as having been renovated in 2000, what had actually been done was just adding a new layer on top of the previously existing one and that had not been disclosed, I could see that as a potential hidden defect. I personally probably wouldn’t bother pursuing legal remedies, though, but that’s because I assign a very high value to my peace of mind.
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Situation
Planned investments
Worst case: 300k+ total
Financing (this is the controversial part)
Income / Assets / Risk
The real dilemma
The blunt question
What I’d love your take on
My gut feeling
You are probably going to argue with your wife during the renovations and if something unexpected happen (which is often the case by renovations) you might have increased stress levels to deal with. I mention this because a very good friend of mine is doing large renovations (larger than yours) and consider this project to be the most testing times of the relationship (young kids around as well).