PPE / Proceed to "added-values" or not?

Hi,

I have bought a 4-room apartment on plans in a PPE (my first real estate purchase, purchased alone, I’m in my mid-30’s). The construction of the buildings is planned for the end of next year.

It results from the conditions of the promotion that the architect’s office bills a percentage of the “added value” (“plus-value”) to the kitchen, bathrooms etc. for the additional “work”, with a base of several hundred francs for the slightest modification. This leads to additional costs that quickly add up to large sums, for nothing…

I am therefore hesitating between two approaches:

  • take the “basic” flat, as it is, on the plans, and proceed to modifications works later, once I’m living inside

  • plan the modifications already at this stage, despite the extra financial costs

I see several advantages to waiting and proceeding with the works once I’m in it: financial (I’ll pay later and cheaper, as I won’t have to pay the architect’s fees) and practical, as I’m very undecided at the moment about what I like, what I don’t like etc. and I’m a bit lost in the showrooms, and I tell myself that once I’m will live in there I’ll know better what I want, because right now it’s rather difficult for me to project what I’ll be happy with or not.

I discussed this with the sanitaryware supplier, who told me that other buyers of the same lot had already planned to buy as it is, and to proceed with works and modifications as soon as they arrive in the flat, which is possible because the flats have two bathrooms, so you can always use one while the other is under works.

Does this approach make sense to you? Any input welcome, especially from those who already experienced this process. Thank you in advance.

As you have no children moving in, you can totally do all modifications later. Just remember: there is nothing more permanent than the temporary.

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You have pros and cons with your two options.

A) While the maître d’oeuvre will get his fat commission on each modification, it can make your life easier.

  1. modify the flat’s plan based on the chosen kitchen (appliances, locations of electrical outlets, electrical system, furniture).
  2. include important modification (electrical system, locations of electrical outlets, false ceiling with spots etc) when the concrete is poured. It can be more time consuming/expensive afterwards.
  3. be immediately at home after 2 or 3 years of construction.

B) I’m not sure you have a lot of power to reduce the price if you decide to do some work on your own (i.e. raw walls at delivery, no bathroom).

From an economical point of view, it won’t make any sense to pay for a “basic” bathroom and destroy it upon your move. Pay for a bathtub and replace it immediately for an Italian shower with nice tiles ? Won’t it be cheaper to include it upfront ? To be checked.

C) Verify the tax implications with your cantonal tax authorities

The “improvements” during the construction phase will be added to your purchase price (capital gain tax upon sale).

What will be the tax treatment of “improvements” done right after your move ? Tax deductible (unlikely when buying a new property) ? Will it be added to your purchase price ?

Maybe also Try to find out if the architect / developer gets other kickbacks

The usual practise seems to be to sell a new build with 20k budget for kitchen. The developer is getting a kick back from the kitchen provider, so the true cost of the kitchen is only say 10k and that is the discount you’ll get if you ask to choose your own kitchen instead of the ones they offer

I have absolutely no ability to help you on this, but I just wanted to congratulate you. I’m in my mid 30’s as well and I’m thinking about buying a 4-room apartment.

It doesn’t make any sense in my case financially since it would take up all of my liquidity and investments, I would have to live further from the center and I may feel stuck at work (you have a debt, you need income) and at a location. Still, the psychological part plays a role.

So again, congrats! Out of curiosity: where is it you bought? At least, which region?

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I think it comes down to convenience: doing modifications now means you just have to tell what you want being done, and the architect will handle it for you, for a price. Also, waiting to do them means you’ll have to handle yourself the contractors who are going to do it. They can have a busy order book, so you might not come first on their list and may have to call them repeatedly until they finally come to do the work. You’re also currently in the mindset of thinking about these things, and are in relation with your financing institution (if there’s one), so if you want to do it, it’s easier to do now.

In your case:

I would let time pass and wait. If I bought an appartment, I would like for it to fit my wants, that is hard to do if I don’t really know my wants yet. I’d set appart a budget that I’m willing to spend on comfort and keep it aside for a few years (if I can, the financing aspects should also be handled now). If by that time, you want to do something, the money is there and it was psychologically already sunk into the price of your home, so you can give in to your desires. If you just realize that you’re fine in your current appartment, you get to use that money for other things (investing would be my go to).

On the other hand, if there’s something you really want in your appartment, I’d go for it right now, even if it costs me more (assuming it’s not more than I can afford): I’d hate to spend a good amount of money on the place I want to live in, take on a significant amount of dept, buy it new so I can set it in the exact way that I want it and end up with something that doesn’t fit what I’d be expecting specifically out of my home. I mean, the main point (for me) of owning vs renting is that you get to fit the place to your actual preferences instead of having to do with what someone else thought would be good for some unspecified person.

Also this:

Sooo much this.

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I would say move in, learn about the twists and what you want to modify and what not. Then you can also adjust to the best personal feeling (a lot of stuff just gets realised once you see it every day).

I would wait.

As you are in your mid-30s, chances are you won’t live there (alone) for the considerable future. I would keep expenses low, on a first PPE and save money for the next purchase (i.e. when you want kids, have a partner or change jobs). This also allows you to confirm your tastes/preferences before : I fairly recently did an extension on my flat and even doing it exactly as planned, I learned quickly that I need to learn more. I’ve heard said that your “3rd house” design is finally how you want it, so don’t stress minor imperfections of a first one.

Real estate will usually appreciate in value but I would also think that the more “std” your PPE is, the more likely you could sell it quickly - especially since you can out bid your neighbours if they sell at the same time. They would would be looking to depreciate their investments (as you mentioned above) and would ask for a higher selling price (which also benefits you). You could undercut them a bit while benefiting from them raising the cost for a similar PPE on the market (if your timing coincides).

Just my thoughts…

2 Likes

Many thanks for the very useful and wise input - loved the “there is nothing more permanent than the temporary” and also the tax side of things, that I did not consider at all previously.

For those interested, I bought in Geneva according to the “loi générale zone de développement” regime, which means that I have to stay 10 years in my flat as the purchase price is controlled by the State (and rather low), after 10 years I will be able to sell (if I want) to market price.

I think I will take it as it is and wait when until I’m inside. The added-values I’m thinking about are rather cosmetic (type of sink, italian shower instead of a standard shower and so on) and nothing heavy implying modifications of the concrete etc., that’s also why I’m reluctant to pay additionnal costs to the architect office.

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Hello Mr_Beanz,

I am in the same situation as you, same kind of project that also finishes end of 2022 / beginning 2023 in Geneva (maybe we’re future neighbors :D).

While it is indeed expensive to make changes on plan due to architects adding a hefty percentage of the added values to the bill, you have to keep in mind that if you replace something that way, you will only pay the difference of price between the initial equipment (that you will pay for anyways) and the new one.

You talk about changing the type of shower for example. Let’s say the price of the base shower is 1k, and you want an italian style one worth 3k, you’ll pay the 2k difference + the architect’s percentage. Now if you plan to replace after delivery, you still need to pay those 3k for the equipment, plus the price for the people to install those changes (assuming you’re not willing to do it yourself), which will end up being more than what you would’ve paid if you did that from the start.

Now we could argue that you can shop around for a better price than the initial provider’s you’re forced to use during the construction. Probably, but it’s hard to evaluate beforehand if the benefit will be good enough to justify the hassle while not having the apartment as you’d like straight on delivery.

Since you’re mentioning only simple changes like a different shower or sink, it’s not like you’re committing to something more definitive like moving walls.

It seems to me that from a money / effort perspective, there’s hardly advantages in doing it later, even though those added fees sting.
Now if you went to the project’s provider showrooms and nothing made you click among the things you’re willing to replace, that’s a no brainer. It just means you either don’t know what you want or didn’t find something you like. In that case it makes total sense change stuff later.

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Well my issue is that I like more than half of the stuff in the showroom, and I can’t decide if I prefer the one or the other or a third :smiley:

Then ask your partner for a decision/opinion, or a style and quality-aware friend if you don’t have one. :slight_smile:

Well done getting this. You will typically be getting the property 30-40% below free market price so room to pay for adaptations later

We tried to buy in such schemes several times but were never accepted.

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