Hello community, I need advice. Currently, I’m still in school and working part-time. I don’t have significant savings and I’m trying to build a financial safety net. My dream is to become a homeowner, but given my current situation, I know it won’t be possible for at least 10 years. However, I’ve heard about a rent-to-buy concept for a building that will be constructed. The idea is to contribute 20,000 CHF as a down payment with a purchase promise to be signed at the notary (which goes into your equity), and then 40% of your rent goes towards your equity. After 10 years, you’re supposed to buy the apartment based on the previously signed purchase agreement by bringing the remaining amount (which, according to my calculations, would be about 50,000 CHF). But I’m unsure if this is a good idea. It’s a 4.5-room apartment with a garden and an included parking space for a total of 780,000 CHF. Is this a good idea?
it depends on the numbers and location, but why the heck would you want to buy a 4.5 room apartment now when you’re single and in school with no assets?!
rent. share a flat and invest the money saved. heck, live with your parents for a while.
i’d only recommend real estate for people with a lot of capital and a lot of life experience (and property maintenance experience).
tying yourself down while still at school seems extremely limiting.
Great advice. I lived for 12 years in a small studio with a rent between 870 and 930 a month. This was a key factor to save money to become a homeowner.
Plus. There’s something seriously wrong with the numbers.
Cost of apartment is 780k. Deposit of 20k. Remainder after 10 years to pay is only 50k?! Or should that be 500k?
If 50k, that implies around 14’800 per month in rent. Or more likely, this is just some elaborate scam.
If 500k, it is a more plausible, but still implies an expensive 5’417 per month in rent.
Maybe you forgot to multiply by 12 and the payment after 10 years is 600k?
Thank you for the advice, but maybe I’ll provide more context. I am a 32-year-old woman who has decided to resume her studies. I work part-time and study the other part of the time. I currently don’t have children, but I would like to have them after completing my studies in 2 years. I am currently pursuing a bachelor’s degree, and after graduation, I can expect a salary between 95K and 100K per year. So, in fact, the apartment costs 780K. We can either buy it, requiring a 20% down payment, which is approximately 160K (a sum I don’t have and won’t be able to save for a long time).
In the case of a lease-to-buy arrangement, I would contribute 20K as a personal down payment, leaving me with 140K to provide. Each month, I pay a rent of 2300, of which 40% goes towards my personal down payment (knowing that at any time, if I have the sum, I can buy the apartment). So, if I pay this amount every month for 10 years, I would accumulate a down payment of approximately 110,400. Adding the initial 20K, I would reach about 130K, leaving me with a remaining 40K. It’s worth noting that they are not allowed to increase the rent during this period throughout the contract duration.
If, in any case, I have to pay rent every month, why not take the opportunity to acquire an apartment? The contract states that I can buy the apartment at any time, but I have a maximum of 10 years to make the purchase. As for the remaining 40K, I can take them from my second or third pillar.
I forgot to mention that for the remaining amount, I will indeed get a mortgage, but at least I will have been able to gather the necessary down payment (160k) amount calmly by paying my rent.
Why not just save the part of the rent that goes into the downpayment and put it in a savings account or invest it? This way you at least get your money working and are highly likely to have more at the end of 10 years.
I mean who knows, maybe you don’t like this apartment anymore in 10 years, or you move to another country or it is too small. In 10 years a lot changes.
It might be a suitable way to achieve your dream.
If you haven’t already, I’d still spend some time writing down what appeals to me in homeownership. A big appeal to me is that I get to do whatever I want with my property (well, not really since the Gemeinde and my neighbors would still get a say on things), which is something I don’t really find in owning an appartment: the other co-owners of the building get a say on general investments and rules regarding the building.
I’ve worked in a local administration where I’ve encountered co-owners who had trouble getting basic maintenance on their buildings done because some of their co-owners just wouldn’t spend a buck that they weren’t forced to. I’d rather rent in that context, but that’s me, your reasons to seek homeownership may differ from mines and your threshold for dealing with the impact other people can have on your own assets may be higher.
Ah. OK! 
When I read the OP, it sounded like you were a 16 year old schoolkid!
I guess, it is a way to buy property if you want to do so. I guess for me the downsides are:
- You are buying more property than you need right now (and at a time when your life may change after you finish your studies e.g. what happens if you get a dream job offer that is elsewhere/overseas?)
- You are locking in prices as at today (price could fall)
- You have uncertainty over the future mortgage rates you can have. Combined with the point above, you could have the worst of both worlds situation where rising interest rates cause falls in house prices, but you end up paying the higher old prices but not benefiting from the older low interest rates.
- Now if it really is just an option and not an obligation, then you lose only the 20k downpayment and perhaps something on the rent if it is an above market rate rent.
For sure consider it, but also run the numbers on how much you would save if you rented a smaller place that is suitable for you and invested the savings so you have an alternative case for comparison.
Also keep an eye on affordability. A 100k salary unlocks roughly 460 kCHF of mortgage under standard conditions. Some institutions are willing to agree to lower affordability thresholds and your salary is likely to go up with time (though it may not) but absolutely needing it to happen can become a big stress factor as you near the 10 years term.
Edit: in case you are aiming to achieve the required numbers by being a couple (so two salaries), things happen too and financial stress can weigh down on a relation. Your financial situation 10 years from now may not be the one you are expecting now.
Thank you, everyone, for the feedback. It’s true that becoming a homeowner is important to me so that I can do what I want with the property. However, I hadn’t considered all the different points you mentioned, and it’s true that a 10-year commitment is long. I do believe that it’s better for me to go for something smaller, invest a sum monthly, and these two arguments seem significant:
- You are locking in prices as of today (prices could fall).
- You have uncertainty over the future mortgage rates you can have.
Burningstone, your last argument doesn’t count because it applies every time you buy an apartment/house. I was also around the same age when I bought a house and if you want to have a family it makes sense to buy something now… the only thing you need to ensure is that it is an object that you really want to buy and not just a flat that you rent.
InvestInFreedom, most important question: Is it an “option to buy” or would you already sign a rent/buycontract ->“Mietkaufvertrag”? I would invest some money to get the “Mietkaufvertrag” checked by an expert/lawyer as there are some pitfalls (rent should be fixed for the 10 years, option to buy should be transferable to another person, etc.)
I also think that the rent is quite low (if you deduct the 40%), how can that be for a 4.5room apartment?
A few questions I would ask myself:
- How transparent is the cost / what you pay on top for leasing/interest
- How is your monthly downpayment invested, is it secured in a custody account on your name?
- What happens if you don’t have a job, cannot pay the rent anymore?
- What happens if you’re not willing to buy anymore, are you loosing your downpayments?
- Can you sell your buy-option to a third person?
- Can you buy the apartment more quickly e.g. within 3 years? Would that have an impact?
- Who pays for maintenance and renovation cost within those 10 years?
- What happens if the company offering this setup goes bankrupt?
- Why do they offer a “Mietkauf” - is the property worth the 780’000? Often this option is used to get more potential buyers for a project that sells bad in the first place…
I think it is worth checking if it is possible for you to buy something with your Pillar 2&3 in about 2 years time. Save money until then by renting something cheap and then use Pillar 2&3 - using that money is also not the best option but I think still better than paying additional leasing costs - so it is important to understand in the first place how much it will really cost on top versus buying something today.
Just some thoughts… I’m not an expert.
Yes, but the difference here is that OP is not buying the house now, but in 10 years. So he needs to assume now what he’ll need in 10 years.
One important part which has not been mentioned yet (or I missed it): you are studying, so once you finish to study you would like to get a new job/promotion.
This might not be available in the immediate area of the flat (or you might have much better opportunities somewhere else.
Given that geographic uncertainty, I would absolutely not buy now, as you are at a major career shift/turning point which might limit the geography of your job search. (Personnaly, I am one to move into 15 minutes by bicycle maximum of a job - so much quality of life and savings of not needing a car…)
Hello everyone, thank you for all your inputs and ideas. There are so many things I hadn’t considered. I believe it was more the idea of becoming a homeowner that appealed to me than the apartment itself. I think I will definitely let go of this offer, wait, save some money, and look for a property that suits me without the pressure of a 10-year contract forcing my hand
Is this a state controlled scheme where you buy a property at below market value with restrictions for 10 years? These exist in Geneva as a way to “enable the middle class to own property” and are usually great deals. If you have the opportunity grab it with both hands
Usually these are only available to people with connections to the mayor of the commune, the developer or promoter (one step away from corruption)
Where did you find this apartment and this structure?
Is this available in all of Switzerland or just a specific city/canton/region?
No, it is not controlled by the state at all. It is a private real estate company that offers this deal on a large number of the buildings it constructs.
No, it is not specific to a canton, but it is an offer that is quite available in the German-speaking cantons. I live in a French-speaking canton, and there is very little such offer here. That’s why I had the impression that it was an excellent opportunity because gathering 160k seemed impossible for me, especially considering that I will probably become pregnant in the meantime and reduce my work percentage/take maternity leave.
Could you share the name of the real estate company that offers this?
Also what is the name for this in German if you happen to know?
Thank you!