Craftsman on the way to FI

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Hey there

When i was about 15 and startet my apprentice as an electrician i used to say to my parents i will stop working at 40. They for sure did laugh about that. But i’m getting closer and closer:-)

I see most of the active members of this forum are in to IT or any job that you need a degree for.

So i wanted to share my Story as a normal craftsman on the way to FI:

I am now 29 years old making about 145’000CHF Brutto a year.

About 90’000CHF in my Job as a technican in a pharma company and 55’000CHF from my renting property (a block with 4 flats)

My fixcosts are about 40’000CHF a year.

I was interested in finance since i was a little kid because then i allready knew in this 1st world capitalism game that money is freedom.

So i startet investing in single Stocks when i was 19 years old and lost about 10’000CHF after that my trading career was over:-)

I’am living now with my girlfriend in my small house (about 90m2) that i bought when i was 21 years old and did renovate over 5 years in endless hours of work beside my normal job.

2 years ago i bought a block with 4 flats. Its all rented out since 1,5 years and some renovations. Im paying now of a lone from my parents to buy the block till and of the year it will be payed of.

My net worth is around 400’000CHF it depends on the calculation price of my house and the block. (if i would sell everything right now) And my mortgages are -1’000’630CHF what is absolutely crazy for me if i think about that.

I want to start now to invest again in to socks. But this time maybe a bit smarter after reading a lot about fire and ETF’s. For now it will be 1’000CHF a month.

I choose Degiro to be on my side for the next 100’000CHF to put in to ETF’s.

I will go for 80/20 by following ETF’s:

ISHARES MSCI WOR A IE00B4L5Y983 / 80%
ISHARES MSCI EM A IE00B4L5YC18 / 20%

I took the acc ETF’s to avoid the 3% cost on the dividend payout to my Degiro depot. And to profit from the free trade each month. Did i make the right choice here or do i miss any thing?

And what im most interested in is what are your plans after you reached FI? i don’t know mine so far:-)

Sorry for my bad english, school is a long time a go and i’ve never had to write anything in english since then.

Happy to find all this free information!

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Hi and welcome!

The trades look like a good background for FI in Switzerland and you seem to be putting it to good use (including the synergies with landlording). Congrats on your income/expenses ratio!

I haven’t much to say about your strategy. Investing in stocks makes sense as a way to diversify your assets and achieve some returns not dependant on real estate. Being 3.5x leveraged would get me a bit nervous so I’d focus on an allocation including a good part dedicated to mortgage amortization (either as part of the way you are considering your real estate portfolio, or as a cash/bonds equivalent for the fixed income part of your portfolio).

As for my plans for after FI, I like to volunteer in associations so that’d be a good chunk of that, as well as more political investment. Probably a good chunk of hiking and some travels.

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I’d be interested to know more how “a normal craftsman” was (is) able to buy a house at age 21.

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Well done, Dude. Good job, very inspiring story. It’s easy to go for FI if you get tons of money as IT engineer, it’s much more challenging financially and psychologically if you’re average (or a bit above average) salary earner.

PS. In terms of dividends it doesn’t make any difference. Tax office will tax you like your fund would pay a virtual dividend. It’s better to chose the fund with lower costs (TER, spreads, total taxes, etc).

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@ProvidentRetriever
Thanks but its more about the vocabulary (<–i had to google Wortschatz…) that causes the problems. But if i don’t practice it wont get better:-)

I am aware about the 55% of US stocks. I think its ok to start with this concentration of US stocks but once i have reached the 100’000.- on Degiro and built about 50’000.- of cash reserve i will open a IB account and reorder my asset allocation for the future investments. And all sow because i’m lazy and don’t wont to rebalance and waste too much time on my investments.

I can take a lot of risk for now if it dosen’t work out i will just keep on working. My job is pretty save for the next 10 years, of corse you never know… but i will always have any kind of work, maybe not that well paid but still some work.

@Wolverine
When i’m thinking of my mortgages im getting extremely nervous. I pay back every year 13’000CHF, over the 3a pillar 5000CHF and directly for the flats 8’000CHF.
This year i will make a new mortgage deal for my flats fix over the next 10 to 15 years and that will include a pay of plan till 66% of the house worth over the next 10 years.
And if i can lend some more money i will do so. Because where else you get money on such a low interest rate:-) I know this is crazy but why not?

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@San_Francisco
When i was 21 years old i had saved around 56’000CHF and i was dreaming about a nice car and traveling the world and partying and and and…

But then my dad showed up and told me about a house on the countryside in a small village that cost only 195’000CHF. I was 21 and didn’t think a lot about the consequences and back then i always wanted to be rich so seamed to be god point to start. So i got it for 180’000CHF and startet renovating. It took a loooooooot of work/cash and i came multiple times to the point i was getting some overwork symptoms. At the end it worked out, maybe i missed some off my youth but now i’m happy about it:-)

And then the bank rated the house again and gave me more mortgage with that money and of corse the money i saved till then and some of my parents i bought the 4 flat’s.
They did want 1’050’000CHF for the flat’s i got it for 850’000CHF i don’t know why i had so much luck with money in my live till now.

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These ETFs are one of the best choices with Degiro. The concentration of US stock is normal due to the size of the US.

What is your rate of return with the flats? I’m not sure to understand completely. Did you buy the flats for 850’000? With a 20% down payment?
In general, I’m quite interested to know more about RE investment in Switzerland. In most cases, stocks/ETFs have better rate or returns and less worries.

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As someone somewhere said: “There is no luck in life, only missed opportunities”.
You are earning lots of experience in your investment (in your case, the technical part of real estate). That’s extremely important to know well in what you are investing.

A possible investment is an ultra-safe bond in CHF with 1.x% yield (so, much more than the negative rates of the Confederation bonds): it is done by reimbursing (not renewing) a tranche of your mortgages. Plus, you reduce the liability side of your balance sheet and will sleep better. Once you sleep very well in a few years, you buy the next block :slightly_smiling_face:.

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I don’t have nearly your wealth and have never handled as valuable and expensive assets, so make of this what you want but if thinking about it is making you nervous, my take would be that you are over invested in it and could gain from some more conservative investments. Debt is a liability. Mortgages are special beasts because special rules apply to them to make them affordable but CHF 1’000’000 in debt is a lot, at whatever interest rates.

I’m also curious: usually, mortgages are issued as a multiple of your own funds but are also checked based on your ability to repay them (as a function of your salary). It is my understanding that your basic salary wouldn’t qualify you for such a high mortgage, my guess is that your parents are backing you up on it (feel free to correct me if I’m wrong). That is another risk factor and could create tensions in your family depending on how the property is managed (or it could not, some families, like yours seems to, have a good “we are sharing a business” mentality).

In any way, it looks to me like you are taking on risk. Your backers and/or yourself could loose part or all of your salary, forcing you to reduce your exposition to the mortgage. Your property could loose value, reducing the mortgage available. Interest rates could raise. Laws may change (taxation, mainly). I’m guessing you are correctly insured but natural events or tenants could wreck part of your property. You could get caught up in legal procedures because of some incident linked to your property (say private sewers leakage contaminating drinkable water - rare but could happen), …

That exposure to risk would lead me to invest more conservatively, that is either considering a healthy allocation to fixed income (cash, bonds) or planning to severely reduce my mortgage as part of my budget (CHF 13’000/year would amortize it in 76 years without interests…).

That’s just me, though. You may feel perfectly fine with it and be very well off keeping on investing on leverage. Your statement that it’s making you nervous makes me think it would be valuable to reduce the anxiety associated to it (as far as I understand it, you have already reached a status where you could live off of your real estate investments, or pretty close to it so you don’t need to take on much more risk).

If it were me, I’d put together a targeted asset allocation including real estate, stocks, bonds (2nd pillar) and cash (replaced by bonds if rates go higher) and plan on amortizing part of my mortgage before buying a new building for the real estate part. As your wealth grows, the target value of your real estate would grow too, which you could do by amortizing the mortgage (upping your equity in the buildings).

You’re well off on your way and I have very few experiences in real estate, so I’m not qualified to provide meaningful advice on the matter. My thoughts come only from my life experiences and philosophy, make of it what you want.

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This seems different here, though. This is more like moonlighting, @why is leveraging their skills (they did mention spending quite a lot of time fixing apartments etc.), which might be a good idea why not get more return from your skills if you can.

Unless you’re willing to learn the skills/spend the time, don’t expect it to be something very passive :slight_smile:

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@wapiti @Wolverine

For a better understanding what my RE investment look like:

My own house i live in (thats a non Renditeobjekt so you have to cover the mortgage with your salary):

Price in 2013 180’000.- after i put my own money in it to renovate, the money what i earned at my work as electrician while i was renovating, i asked the bank for more mortgage:

So after 2 mortgage races this is the stand today:

Mortgage1 / fix / -CHF126’000,00 / 1.95% interest
Mortgage2 / fix / -CHF122’000,00 / 0.90% interest
Mortgage3 / libor / -CHF115’000,00 / 1.05% interest in this quarter but changes every 3 months

And my down payment is only 56’000CHF this is possible because the Bank rated my house higher than 419’000CHF its because i put my own work/money in it.

Now my block with 4 flat’s in it (that is a Renditeobjekt so you have to cover the mortgage with your income on this property for it self)

Mortgage1 / libor / -CHF664’000 / 1.05% interest in this quarter but changes every 3 months (initial mortgage was 680’000CHF)

Down payment was 20% so 170’000CHF. (I paid 85’000CHF and my parents 85’000CHF + 25’000CHF for renovation + 20’000CHF as part of the earnings while they was invested in it)

I allready payed back 60’000CHF so i still owe them 60’000CHF but by end of the year i will have fully paid back the loan from them.

So my parents are not backing me up ant wont loose anything except the 60’000CHF i owe them by now.

On the income side for the 4flat’s: 55’800.- gross a year after you subtract everything what you need to pay inclusive some future maintenance cost but bevor tax there will be 24’000.- a year left.

But this is only possible because i do all the work by my self, its not really passiv income but i like to do such things so its not really work for me.

And an other advantage of my craftsmanship is that when i have someone in a flat that destroyed it i can fix it by my self for a very low cost. It costs some nerves but those you need any way if you rent out your property.

But after all i think its normal to be nervous if your 1’000’000CHF in debt :slight_smile:

Thats why i want to invest a small amount of my monthly income in to stocks by now to diversify till i got enough cash on the side. And my mortgages are fixed for the next 10 to 15 years. I mean for sure there is a lot of risk in my investments by now but thats why i don’t want to buy an other block or house in the next few years.

In Switzerland you are usually not paying down you mortgage fully.

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@1000000CHF
Thanks a lot! I think it’s not really easier to make your money in IT you still have to have a lot of skills! Other wise every one including me would work in IT/Tec:-) But i think for the well educated IT/Tec people its easier to get in touch with such things as fire.

I know that there is no difference between distributing and accelerating ETF’s in therms of taxation. I just choose the accelerating ones because of the costs that Degiro tax you if you get the dividends payed out on your depot. I think its 2CHF and 3% of your dividend payout. Thats not a lot but still money:-)

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Respect for your achievements and two properties. In which canton are the properties so affordable if I may ask?

You used this twice, so do you have to have coverage with your salary for Renditeobjekt too, or not?

I think you’re strategy is fair to later switch to IBKR when you have 100k in ETFs together.

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I understood:

  • non-rendite: have to cover with your salary/income
  • rendite: have to cover with the income coming directly from that same property

Might be wrong. :slight_smile:

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@MrCheese
You can see the income object (the 4flats) as a stand alone person that means you have to cover your mortgage on that income object with the income from this property alone. (You can not include your salary at least at my bank)
So if you lend 100’000.- from the bank you have to make at least 6’000.- income out of it that the bank gives you the money. (5% calcuolatory interest and 1% maintenance cost)

The block and the house is based in Baselland. And i especially was looking for a house with cheap flats because they are building a lot of expensive flats around here. And it had to be in a special zone for old buildings because there you are allowed build houses on less m2 so its cheaper. And if you are looking for a house with maximum 4 apartments in it you don’t have to compare with any big investors like insurances.

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I also would like to know where did you find the apartments to buy so cheaply.

Don’t worry for your english. it’s still better than someone else in this forum ahaha :slight_smile: (also I do make loads of mistakes.)
I suppose you have some sort of autocorrect since it seems that you make typical autocorrect errors ( Do you really want to invest in socks or stocks )

Please keep posting, I love your story. I’d love to be able to buy flats and an house for me to renovate, but right now the only thing I can do well is moving bit and bytes around

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Why do you think you are not able to buy flats?

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Sorry, I should have added “…that can make me money”. I can buy flat(s), but maybe not where I live and not at a fair/good price.

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OK, the criteria

  1. “…that can make me money”
  2. “where I live”
  3. “at a fair/good price”

are perhaps a bit restrictive altogether, depending on where you live…
For 3. you have wonderful search engines that scan the market for you. For 1. you get the information in the selling booklet (as pdf) or sometimes already on a web site.

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@ma0

You do as follows:

  1. Thinking about whats your niche, for me it was houses with 3 or 4 apartments in it. Wich are located in my canton and are build in the Kernzone/old part of villages. The rents have to be cheap because, at least in my area, every one is putting money in to RE and builds expensive living space.

  2. You looking on Comparis Immo all the entry’s up that are fitting in your criterial. There is an option to make some searching abo’s. You keep doing this for months because then you get to know what are the prices.

  3. Before you go some where and waist your time ask for all the financial details the seller can provide you. If that looks good, even if the price is too high, you go there and check roof, heating… and then you negotiate with the seller. Always keep in mind those RE agents will tell you everything you want to hear! Some are even on your side because they want to make a fast trade, to make some money this month.

  4. But after all you need some luck too:-) I bought my block for 850’000.- and next to it an almost identical block was sold just now for 1’050’000.-. I didn’t expect the owner to say yes to my offer of 850’000.- but i just tried it. The only condition was that the trade had to be done within about a month of time.

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