Prospective buyer of an appartment for the purpose of staying in it. I am trying to get a good handle on all costs, one-off and recurring ones from buying and staying in an owned appartment. I am listing here some I could research and would appreciate corrections. Of course, these are only estimates but I try to err on the side of caution and round up.
Building insurance costs: e.g., against fire, floodings etc. I know it depends on property value, but any indicative value? e.g., for a 1m CHF property
Renovation / maintenance costs: 1% of property value per year
Opportunity cost of capital tied up in the property
Opportunity cost of having to hold reserves to deal with property or having a more conservative portfolio (maybe holding reserve cash, less aggressive portfolio etc.)
You mean the imputed rent? I understand the valuation methods differ widely. Same goes for notary cost or land register in @chrispappas12 question.
Where I live, imputed rent is 3.5% on the calculated value of land and building (1% above a threshold). Building value includes an annual 1% depreciation.
The calculated value is some 2/3 of the market value. For wealth tax, they can also use an estimated value. like 70% of the quoted purchase price.
On the income side, the mortgage is fully deductible, and renovations as long they don’t have a value-enhancing character. There’s also flat-rate option, which is 20%.
I didn’t consider one-off expenses like home purchases taxes and expenses.
Let me know if you think it is reasonable, you can play around by changing the numbers in the left columns.
I considered:
home purchase
rent
deposit
morgage interest
renovations expenses
% of renovations that are tax deductibles
Imputed rent/rent (if you want to simulate a scenario where you rent the apartment you can set this to 100%)
Inflation to me is an expense because the real value of your deposit gets reduced. I only apply it to the deposit because that is the only money you are investing.
Wasn’t sure how to consider the equity appreciation, how would you do that?
Is that for your place, or something to rent out? What’s the capital gain tax about?
At least for a new-built, the maintenance won’t be 1%, inititally. On average it’s a propably a good estimate.
The result makes sense, either way. Once you also consider opportunity cost of your equity, the result can / will change more in favor of renting, depending on your parameters, but not by a life-changing amount.
Great topic, I’m trying to make such a list myself.
On the topic if assurances, how much does an apartment or home owner pays per year? I am learning that there is a Cantonal base insurance in most cantons, bit I can’t get an example of yearly cost. Is it a percentage of the value insured? Does anybody have a rule of thumb for the insured vale and how does it relate to other home values (fiscal one, market one etc)
Hi, I had the same in mind. I’m tempted to buy a new flat in Schwyz ~700k or Zurich ~550k. Both are modern Minergie constructions. I’m looking for a monthly cost estimate. I’ve heard that heating costs are low in Minergie buildings. Could I assume ~200 CHF/m for the first few years, afterwards add 1% of value annually for renovation fund?
Also, assuming I have only 10 years to benefit from lower income tax, does it make sense to buy in Schwyz? I have no idea yet what will happen after 10 years, maybe I’ll stay in Switzerland or I’ll leave and want to rent it out or even sell it. I somehow would like to live in Schwyz, but speaking in terms of investment location I guess it’s not so good: connection by public transport by bus + train, 50 min to Zurich, and no other city around big enough to hop for shopping. The other flat would benefit from connection by train only, also 50 min to Zurich HB, even less to the airport, but there’s another town to hop for shopping within 20 min by train.
I bet many of you would like to tell me right away do not bother with buying for 10 years only, but I’m somehow attached to the idea of ownership. Furthermore I’m undecided regarding the future. It really depends how much wealth I’ll accumulate in the next 10 years. If it’ll be plenty to retire in CH then sure, otherwise it’ll be very tempting to look for a cheaper location. My current income helps building wealth at a nice rate, but looking at the turmoil with layoffs in software companies I’m not sure if my job is secure for the next 10 years, nor if I’ll have another such “golden cage” job before retirement.
Obviously I’m talking about rural areas, also I’m looking for something around 60 m2 not a family apartment. Even on the outskirts of Zurich city or adjacent towns I could find such flats for ~800 - 900k, but it doesn’t make sense to me. I’m happy living in rural area, the commute doesn’t bother me, where rent goes between 1.3 - 1.5k. There’s no financial incentive to buy in the city. On the contrary there’s the risk of prices crash.
I’ve been looking on the market for some time, it takes months to sell anything in Reichenburg or Buttikon, which sounds like eventually there’s a price negotiation on the negative side. The asking price is just too much for a rural area. Places like Siebnen or Goldau where you can just hop on the train to Zurich city are a different story.
So here I am, I’d like to buy a flat but stay away from the “premium” locations. However, even in rural location, it’s hard to make the calculation. I’m currently renting, 1k rent + 200 ancillary costs. Moving to my own property would save the 12k p.a, but there’s also tax on theoretical income, costs of lost opportunity etc… hence I’m curious what would be the recurring cost of owning, if it’s 500 instead of 200 then the calculation can even flip to the other side towards a strong “don’t buy”.
I think some of these numbers are double counted. You have additional costs & maintenance costs. This itself is 2%. Normally banks account for 1% only. Why are you accounting for 2%?
In addition, interest rates of 2.4% are not current rates. Is this just an example or real number?
If I just add some of these numbers, this would simply mean all RE investment in your location is bad vs renting. Your interest, wealth tax, maintenance costs and other costs add up to 5.4%. Average rental yield in CH is less than 3% unless you live in an area where rents are very high.
Biggest category is missing: “wife asking you to buy something for the house, or renovate something”. Budget around 2.5% of house value per annum for this
Obviously the one off costs vary a lot between cantons. I know that ZH and SZ are very cheap (lang register, property tranfer tax, notary), but does anyone have current values for TG and AG?
If you buy the land and build “yourself” through a general contractor => you only pay the transfer tax on the land.
If you buy everything once it is built, my understanding is that you pay the tax on everything since the building belong to the property developer first, even if for a very short time, and is then transferred to you. There might be some cantonal exceptions though.
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