Hello everyone,
I was quite a passive reader here, but I would love to introduce myself and of course also to share knowledge.
We are a family of four, in our mid-30s with two toddlers.
We both live and work in Zurich, me as an engineer and my wife as a freelance (40%).
Our combined gross income from our jobs is ~350k CHF per year, including bonuses, RSU, and benefits. Our expenses are around ~13k CHF per month, with the main expenses being rent (5,300 CHF) and kindergarten (3,800 CHF).
Our net worth is approximately 1.3M CHF.
This includes a house outside of Switzerland valued at 900K CHF (5% return)
ETF investments (incl. 2a, 3a) in stocks worth 300K CHF, and Saving account/Bonds/Cash of 100K CHF.
Our strategic goal is to continue increasing our wealth without any specific plan to retire at a specific time.
Next moves:
Put any new money into the capital market (Despite the difficult times)
Learn how to lower the tax burden to the maximum possible
Learning the real estate market around ZH. We would really like to understand if it make sense to buy a house (~3M) in the coming years.
Any insight would be appreciated.
And hereâs a little tip from me that has already helped me increase my capital. Find opportunities in life where your commitment/debt/effort exists but is low and blocked, whereas the profit potential is limitless.
It may appear so, but every success (at least mine) has come from good advice based on the successes or failures of others. The difficult part is determining what is and is not relevant to me, but I canât do it without advice from others
I agree with Dr.PI: you are doing good and would probably be well by keeping doing what you are doing.
As far as outside looks go:
Your expenses seem elevated to me, but so is your income: you can afford it. I guess you are aware of it but I find important to remember that an optimisation on the other side is possible too, that is, you are in a situation where you can reduce your expenses and income in order to have more time, if you so wish at some point in your life. The right balance is personal, you may have found yours and there may be nothing to change at all.
Is the 900K house fully paid or is it a luxury property with a mortgage on it? Asking because adding 1M for the equity part of your 3M real estate plan would make your allocation very real estate heavy. That makes it very illiquid too. The situation is different, in my mind, if you have both stocks/bonds/cash on the side and a mortgage rather than just the real estate and potentially the mortgage.
As for investing regularly in the capital market, remember there are both a stocks and bonds/medium term notes markets. Iâd try to find my risk tolerance before going all in on stocks. Having dependents, some amount of insurance on the side can allow for riskier allocations (just stay away from the mixed life insurance products. Something is either an insurance or an investment, not both, otherwise, itâll suck at one or both).
Looking forward to reading your insights on the forum, I like the bits of wisdoms youâve shared so far.
True, It is easier to save 1 CHF by reducing expenses rather than increasing taxable income, and We currently working on this.
We have recently finished paying off our mortgage and plan to borrow money from it in order to purchase a new property in Switzerland. In order to rebalance our portfolio, the new money from our salary income will be invested in the capital market.
True, 2018, 2020, and 2022 were good tests of our risk tolerance in the stock market, and while it wasnât as severe as the 2008 financial crisis, I believe we were able to handle the market volatility.
Our current goal is to understand the real estate market in Zurich, the Swiss mortgage system, and wait for opportunities to present themselves.
But beside that, It seems that when you are confident in your strategy (and it takes time), everything runs smoothly on its own.
Buying property is not easy in CH. If you just want to buy to get rid of your cash / generate passive income, I suggest you give this to professionals (look at Crowdhouse or Foxstone to distribute the risk).
If you want to live in it, well, first the question is âis there any supply where you want to buy?â, because usually the answer is no, especially around the silver coast.
The second question is: if we DO go into a recession and it will look like anything in 2008, your safest bet is to have as much cash as possible to start buying the dip with a 10-year horizon thatâs going to massively be better than keeping property, in terms of net worth accumulation.
Tax optimization: take a look at grounding an AG for tax-shielding your holdings. Moving to Zug/Wollerau is probably on your list already, anyway
We live in a 150 sqm home with a 60 sqm garden in the silver coast (new development). I canât
imagine finding a home like this for less than 3M CHF in normal days without serious economic
problems.
In terms of career, choose to take projects with asymmetrical potential. This means a âsmallâ time investment with a high potential for profit or success with widespread exposure.
Purchasing an apartment for investment when the mortgage interest is fixed but the rent and value of the apartment are subject to inflation.
Finding opportunities where you can buy the option to invest but not the commitment.
To understand it more deeply I really recommend reading the books âThe Black Swan" and âAntifragileâ by Nassim Nicholas Taleb
Yes, Gerd Kommer posted a small paper on that. The conclusion for the Swiss RE market was very similiar. OP is talking about paying >3M for something he can rent for 5.3k/month. So we are talking about 2%/50x. I donât see any scenario where this makes sense.
Some personal context: I bought an apartment for 770k this year which would cost ~30k/year to rent. So 3.9%/26x which according to Ben Felixs video wouldnât make sense to buy in the first place. But Iâm aware of that because my personal conclusion for Swiss RE is closer to 4%.
Direct answer to this: If your goal is, as stated, mainly to continue increasing your wealth you are probably better off to rent, keep your expenses under control and invest your savings.
If you do the math on rent vs. buy you can twist the numbers any way you like, for example on long-term development of mortgage rates, house values, required maintenance, return of alternative uses of your savings, tax implications etc.
Therefore, in my opinion, advices like âpurchasing prices shouldnât exceed x annual rental paymentsâ donât cut it, even if they do refer to Swiss or Zurich market. Thereâs just too many variables and personal circumstances.
If you take into account all the assumptions, on average it probably doesnât matter financially - all else being equal.
I consider it more of a life-style choice rather than a financial one and would ask yourself questions like
Do you intend to stay in the same place, same neighborhood for decades? Or is it likely your requirements change over time or you want to change location every few years for whatever reason?
Do you enjoy to customize and invest in your own place? Or donât you really care as long as thereâs an oven in the kitchen, a tub in bathroom etc.?
Similar to above, do you have specific expectations on your place? Finding the right place to buy is difficult in Zurich, but, say a single houses with garden may simply not be available for rental.
Thatâs easily possible. Often you pay the KiTa based on your salary. My wife worked in a KiTa where some high earners paid CHF 3â000/month/kid for 100%.
We kept checking the prices for real estate around silver cost, and they were crazy: 22-25CHF/sqm.
Our landlords, who lives next door, did not increase our rent, which we really appreciate.
This makes us think that we will stay in this place for a very long time, and if we buy something, it will probably be just an investment property.
We made some light changes to our portfolio to make it more balanced and simpler. My RSUs to VT and refinanced our house abroad to extract and put some money into VT.
Our income will be slightly higher this year because of a small increase for me and a more significant increase for my wife.
Our provisional tax was quite okay, and we expect it to be even less next year (the Zurich Canton increased the deductions for each child to 25,000 CHF, and some debt deductions).
Focusing right now:
Investment side: We are looking for real estate investment properties in Switzerland or some kind of CHF fixed income.
Expenses: We are trying to find a way to leverage more geo-arbitrage to reduce our expenses, as Iâm often flying abroad and we are traveling to France/Germany.
Career: Iâm still moving forward in my career, trying to find the right work-life balance that will still allow me to get a promotion.
Maintain top status: We really like to travel and enjoy nice hotels and food. We are still working to get and maintain top status at hotels and airline chains (which is worth a lot of money).
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