Zürich city, 2 earners in the family, mid-40 parents
We’d like to own properties outright as opposed to owning REITs or funds
The place we could afford for my requirements (4.5-5.5+garden, up to 1.5M tops = rural CH, deep AG, Zürich Oberland) is not somewhere I want to live
The place we want to live in, I can’t afford to buy in “my size” - they start from 2M CHF around here, even more on the silver coast and they are getting more expensive yearly than all of our yearly savings combined, so I’m never gonna catch this train it seems.
I don’t want to end up being locked in a “forever renting” setup
we are having loads of money available in 2nd and 3rd pillar, alas, these only unlock themselves for self-lived units. We also keep a sizable cash pile, but I’m not sure we would want to move from here, so that leads me to…
… Crowdhouse and Foxstone in the past and both seem to work reasonably well, but we are not owning the properties outright and the setup is a bit complicated with the co-ownership and exit possibilities. On the plus side, they allow smaller tranches of money (25-100k chunks) to be invested that do generate income.
However, with a 10-yr backtest, what I could’ve bought 10 yrs ago for 600k now goes for 1.5M, so appreciation is also huge (and as long as influx of people will not stop, I don’t believe the trend will break significantly).
But I’m still back to the topic of:
not owning something fully to my own name
I want to own something where rents are stable so we can rent it (even if it’s not ZH)
create a “backup plan” for worst-case nightmares that we can finance with low or zero income
I’m only interested in modern buildings or new builds (let’s say 2005+, heatpump/floor heating/large windows type)
Ideally we could get a 2.5-room for somewhere around 1M and rent it out.
Where do I start? Or should I not even? Is this a stupid idea, taxation- or otherwise?
Those of you who did start, how did you start the journey?
Shall we get 2-3 units of “something barely enough for peanuts” or rather a nice new build for 1M/2.5room (that seems super overpriced)?
Is there any DB that one can buy (from WP?) to compare prices and valuations and possible rental yields?
How do you give back the property to management? Does a a “fully managed property” concept exist in Switzerland at all - where you give the capital and the Agency does everything needed (as in: fire-and-forget)?
is there any way we could unlock 2nd or 3rd pillar money into this property (either now or later for amortization when we do need to live there)? I’m happy to keep the money compounding until then.
Do we buy these things to our name or directly to my kid (avoiding any inheritance taxation)?
I would recommend to look into areas where unit prices are lower. And I would also suggest to remain realistic in your expectations. For very long term , real estate price appreciation is +1% in real terms (adjusted for inflation) , so I wouldn’t count for much higher gains.
Ideally it’s better to find properties with good cash flow or else you will have to sell the property to make any real return (after paying capital gains tax) and that’s a gamble. Thus having good rental yield is important because maintenance etc need to be paid from pocket.
I once looked into it and decided that tax free yield of 2-2.5% via Direct Real estate funds is a good alternate option versus owning property and becoming landlord.
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BUT -: remember for rental properties, you need higher personal equity. It’s more than 20%
This is an average with a bunch of buildings from the 70’s not appreciating a cent, and the new modern ones going 60-80%. I wish there was a filter on “heating”.
Only anecdotal, but my friends were buying a 4.5 in Obfelden 6 years ago for 850k - the same is now 1.3M (just sold some months ago). That’s 50%+ in 6 years. The Rhyfall Tower in Schaffhausen has seen first advertised prices around 750k for a 5.5 (if I’m not mistaken, around 2020ish?). Now they are going for north 1.5M each.
Well I think while making a plan, you need to think of averages because how do you know if you will buy a property which will end up being an outlier.
In the end you should do what you like. But I think making assumptions based on few examples is not such a good idea.
I don’t quite understand the point about old or new. The property prices are mainly appreciating due to land. The construction itself is depreciating asset. So why should new or old make a difference?
this doesn’t seem to apply for the last ~15 years. I have only found data for the last 8 years that shows a 4% compound increase on prices only (plus 3-4% yield on capital sounds not too bad?).
I don’t see this slowing down in a macro way tbh, Switzerland is struggling with workforce both on lower and also on higher paying jobs and the influx is steady. For the last 25 years, net migration has been a small city per year or more.
I am not saying Swiss real estate is doomed. I myself invest in Swiss RE funds.
All I am saying is that in long term RE price returns much above inflation are difficult because of few things
capital gains tax
Affordability is correlated with wage increases
Now we are also facing aging population issues
In the end wages track inflation and if wages don’t go up substantially above inflation, then who is going to buy these properties?
I personally think post GFC time has inflated asset prices across the board due to zero interest rates . 2008 to 2025 is not really representative period for estimating returns . Be it VOO, Swiss Real Estate or Bitcoin
I don’t get your motivation, but it seems crucial to answer all other questions.
Just some thoughts or questions on that:
You write you “don’t want to rent forever” (why not?), but since your desired home is out of reach financially, you’d buy-to-let something else instead and keep on renting?
So, it’s an investment? Are you considering admin effort or fees, maintenance, risk of bad tenants or rising interest rates? Sure, real estate is a less efficient market than stocks, but if appreciation would be that certain, and either anecdotal or 10-yr back test evidence representative, wouldn’t that be incorporated in the price, already?
If you plan to sell or move in 20 years, won’t today’s “modern” buildings be outdated and ripe for renovations?
No(t just). It’s a combination of micro and macrolocation, energy efficiency, etc. The sum of appreciation is the appreciation of the land (which differs largely due to location) and the depreciation of the physical asset, where old houses depreciate much faster than anything built to Minergie standards for example.
This is a myth showing you’ve never done physical real estate
There is no capital gainst tax if you never sell (which you should never do in RE business). Even if you sell, you buy another one and you never end up paying CGT.
This is partly true - affordability is gettig less and less as prices (+50%/10y) have outpaced wage growth (<<50%/10y)
Old Swiss people who own now have usually no financial problem whatsoever, with the value of their properties having doubled over the last 20 years. Ageing immigrants have it hard → thus I want to escape/hedge that faith.
you would still draw a nice 4-6% rental yield (on capital) if you owned in those 30 years - and as you never sell RE, you can relax (it’s like dividend investing).
But also: the 70s were 55 years, 1 internet and 1 cold war ago - very different life then, maybe that is not so relevant anymore? I’m looking at a VERY long 25-years tail that I generally don’t see stopping.
It seems like you have already made up your mind to buy real estate and rent it out
There is no problem with this. Many people do this in many countries. And lot of institutions do this in Switzerland too (lot of pension funds for example).
As long as your expectations are reasonable, and you are willing to take liquidity and concentration risk, it’s going to be ok.
Just make sure you do a good calculation for income tax, maintenance , management costs, rental yield, amortisation etc.
Yes. we all love returns which are too good to be ever lasting. Why not I also want SPI Index to outperform the world like it did for last 35 years. But i do not think it would continue
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I also want SPI Index to outperform the world like it did for