Sirob's FI Story


#1

Hello Mustachians,

As mentioned last week in my introduction, here is my story so far.

For those that did not read my initial post, I am 40, an Indian national, on a C permit and living in Basel Stadt (and by extension, Switzerland) for the past 10 years. By profession, I am an IT project manager.

I live with my gf (Swiss) who has just started working. We plan to get married next year, start a family in 2020 and buy a detached house/apartment in Basel Land in mid-2022. I plan to reduce to 80% at work beginning of 2021 (and gf to 60% beginning of 2021) once we start a family. That will reduce our incomes.

I am currently saving around 52% of my net salary (post compulsory deductions and taxes). This equates to around 50 KCHF net savings a year.

I welcome any comments or suggestions to optimise my savings/portfolio and appreciate your time and effort in reading this.

As of 1st May, the current NW figures are as follows:

Current total NW: 646 KCHF

Indian assets: 426 KCHF (breakdown below)
Swiss assets: 220 KCHF (breakdown below)

I will get an inheritance of 100 KCHF from my parents, however, am not including the same in above numbers as they can change their mind.

Indian real estate:
Apartment 1 in India:
Market value: 148 KCHF, Cost price: 49.8 KCHF, Purchase Date: May 2007. No outstanding mortgage.

Apartment 2 in India:
Market value: 147 KCHF, Cost price: 108.3 KCHF, Purchase Date: Jan 2012. No outstanding mortgage.

My parents live in Apartment 1. I do not take any rent from them, but help them financially with their annual expenses.

Apartment 2 is a slight problem. My parents use it as a vacation home for 3 months in a year but the rest of the time, it is empty. We tried to get a tenant, but it is difficult to get someone to rent for 9 months of the year. So, it lies empty for 9 months in a year.

Indian mutual funds:
54.8 KCHF market value, invested in a combination of large cap, multi cap, small cap, hybrid (debt-equity balanced), and equity arbitrage mutual funds.
Currently, I invest 1,000 CHF into the Indian stock markets every month via the above mutual funds.
I evaluate the funds every year and replace funds which haven’t performed well in the past year.

Indian Fixed deposits in banks:
40.8 KCHF maturity value of various fixed deposits in Indian bank accounts earning a blended rate of 7.5 % risk free interest p.a. The maturity dates are spread between 2019 and 2020.

Indian savings account in banks:
13.4 KCH in savings account earning 4% interest. I use this money to invest monthly in the mutual funds.

Indian recurring deposits:
2 KCHF in recurring deposits earning a risk free interest of 6.5% p.a.

Indian government pension fund:
20 KCHF earning a risk free interest of 8% p.a. The money is locked-in for 15 years (somewhat similar to Pillar 3A)

Total Indian Assets: 426 KCHF

Swiss assets:
100 KCHF sitting in cash in a bank. This is the biggest regret as of now and one I am trying to rectify asap.
My work permit was cancelled in 2016 and I was asked to leave Switzerland in a month. While I somehow survived (long story), it left me quite paranoid and as a result I’ve hoarded cash in the last 2 years of savings.

After reading the forum and various FI sites, I have opened accounts on Swissquote (earlier) and recently, Degiro and have begun investing around 8 KCHF every month to get rid of this 100 KCHF (after accounting for 6 months of living expenses). I have read on the perils of dollar cost averaging but am still apprehensive on sinking the entire 100 KCHF stash into the markets at one go.

Pillar 3a account in a bank: 22.8 KCHF
Pillar 3a account in a life insurance (biggest mistake): 13.5 KCHF – most likely will not get a penny of this when I cancel this month.

Pillar 2 assets so far: 80.5 KCHF (it is quite low considering I have spent 10 years here and thats because for the first 8 years, I was on a short term deputation permit which allows the company to only contribute 50% less than the usual required amount by age.

Apartment deposit: 3.2 KCHF

Investments in Swissquote and Degiro so far: 14 KCHF market price

Total Swiss assets: 220 KCHF

My current investing strategy is as follows:

Get rid of the 100 KCHF cash by investing in low cost Vanguard ETFs thru Degiro (8 KCHF every month, no more than 1 year). I am a buy and hold investor.

From my salary, put aside 3.3 KCHF every month as contribution (gf contributes 1.65 KCHF) towards down-payment for buying a house/apartment in 2022
Expectation is that we will reach 200 KCHF by end of 2021.

My goal is to reach 54 and be in a position where I can follow my own interests. I am open to working also at that time, but definitely maybe 20-40%.

Long term plan is to retire in Spain or Portugal (although gf wants to stay in Switzerland)

Your opinions, suggestions, questions, guidance are most welcome. Thanks for reading.


#2

I think you have done quite well so far!

if I may, I think one of your problems is that your two apartment in India are not used up to their financial potential, i.e :

  • they do not provide an income
  • and/or they do not avoid expenses
    So you have 300k CHF locked in these apartments that are not very productive.

But maybe you need them for non-financial reasons.

Edit : My bad, i did not see the price appreciation of these apartments.


#3

Thank you for sharing your story. So you’re 40 and have already quite a nice sum of money saved. And yet you plan to still work for another 14 years until you’re 54. Interesting. Do you count your net worth alone, or together with your girlfriend?

I also consider Portugal or Spain as possible retirement destinations. I think you can live there really well with 3’000 per month. That means having 1’000’000 saved. you already have 2/3 of that. So either you’re planning to spend more that that, or you’re counting together with your girlfriend. In which case: man, is she lucky for you to sponsor her retirement :wink:

The apartments in India have gained quite nicely on value. Are there some signs of real estate bubble in India? When the whole society goes out of poverty and move into cities looking for better paying jobs, the real estate gets a kick. But at some point, as we have witnessed in China, the rich middle class is buying apartments just to have something physical, but nobody can afford to rent them. If you can’t find a tenant, it could be a signal, that the real value of the flat is lower than you believe.


#4

Thanks for the comments @Julianek

Apartment 1 is used exclusively by my parents. They do not own any real estate and their government pension (around 400 CHF for both of them) is too less to rent a decent, comfortable apartment. They will stay in Apartment 1 for as long as they want and that is fine with me.

One thing I forgot to mention in the original post is that Apartment 1 has an annual maintenance cost of 189 CHF.

Apartment 2 is a slightly unique case. It is in a different city to where my parents stay and thus, I would need someone to actively maintain it. My parents are 70 and 68 and I cannot expect them at that age to run around and deal with the hassles of maintaining it.
In the past I did try letting it out on AirBnB, but there was too much work involved and I would need to hire someone to do it for me.
Apartment 2 has an annual maintenance cost of 574 CHF.

As long as both the apartments keep on appreciating in capital value (especially apartment 2), for now I am ok with the current situation.

Ideally however, I would like to lock in a fixed rent on Apartment 2 asap. The potential long-term rent I could get for it is around 500 CHF per month.


#5

Thanks for your comments @Bojack To answer your observations:

I estimated the NW figure only for myself. My gf has just started working full time this year so she is still learning the ropes of investing, budgeting, financial hacks, etc. I have introduced her to this forum and the various blogs.

The total FI figure which I am targeting for both of us (assuming retirement in Spain or Portugal) is 1.2 MCHF with a withdrawal rate of 3.33% i.e. 40,000 CHF p.a. I think this would be a reasonable amount to target in these countries.

My gf has also started building her NW, but right now it is so negligible that I am excluding it from my calculations. We will take a stock of it in Dec and then see how we can increase her NW gradient. One good thing is that my company provides 100% health insurance coverage for both of us with the lowest franchise, so we do not have to spend a single penny on any health related matters.

Regarding the real estate appreciation, the market value of the apartments has come reduced by almost 15% from a peak attained in Oct 2016. This is because of the financial demonetisation exercise carried out in India from Nov 2016 (you might have heard about it).
Fortunately, both the apartments are in commercial hot spots and are bang in the sweet spot for resale i.e. 2 bedroom, around 75 square metres.
There is definitely an element of a real estate bubble forming, especially in Tier 2/3 cities. However, in the Metros and Tier 1 cities, the demand is very real and has stayed consistent, even through the recession.


#6

Is this for real? You should have a C permit by now or at least no problems applying and getting one after you get your german tested. With C they can’t kick you out of country except for some exceptional circumstances, of which not having a job is not one.

This is all INR denominated I suppose so quoting the interest rate like that is meaningless apples to oranges comparison, you don’t earn this interest in CHF, but in INR in exchange for taking the currency risks and how much did INR lose in value per year compared to CHF over last say 20-30+ years? Bitching about 0% interest on CHF accounts is similar, sure you can convert this money to INR and earn 8%+ interest or to USD with 2-3+% but what about the risks you’re taking on with this? In the long run banks’ interest probably barely catches up with inflation and will not make you rich no matter which currency

Whoa that is some eye opener for me, are you definitely sure it’s not an order of magnitude smaller as that was my impression of India, or is this in some luxury area?


#7

This price seemed similar to Warsaw to me, so I didn’t question it. But it is indeed interesting.

I checked Numbeo:

A square meter outside Mumbai city center supposedly costs 2’400 CHF (and inside city center even 6’500 CHF!). Compare that to less than 300 CHF monthly rent for a 50 sqm flat and you get 3% annual return from rent.


#8

Reminds me of apartments situation in Thailand, they also have exorbitantly expensive ones on the market in touristic areas, but the country’s dirt poor and locals can’t really afford them, neither to buy nor rent, they end up standing empty until another bagholder comes along. not really a worthwhile investment


#9

Actually, do you provide the purchase price with the current exchange rate? In May 2007 the exchange rate was 300 CHF for 10’000 INR, today it’s only 150 CHF.

What about ghost towns in China?


#10

I would rent Apt 2 and tell your parents to stop going there on holiday :slight_smile:
Joking aside, Can you calculate how much will it cost you to rent another apartment for 3 months? If you rent Apt 2, I’m sure you can earn enough to pay them 3 months holidays in another apartment.


#11

Good point @Bojack

All the prices are as of today’s exchange rate which is around 1 CHF = 68 INR

10 years ago, INR was double the value.


#12

Thanks for the input @ma0

Apt 2 is in a different city and it has better weather than Apt 1 city. Thats the main reason my parents go and live there for 3 months.

If I were to rent a separate apartment in same city and locality as Apt 2, it would be around 200 CHF per month for a 1 bedroom apartment.

That could be an option. Renting out Apt 2 (2 bedrooms) permanently and renting a smaller apartment nearby (1 bedroom) for 3 months in a year.


#13

If your parents want to rent for 3 months a year, they could even go somewhere else every year. But of course, given their age, this might not be so attractive.


#14

Thanks for the input @hedgehog

I’ll start with the permit.
I have the C permit now. However, in 2016, I had a project specific B permit, renewed every year, depending on the availability of permit and continuation of project.

I also mentioned in an earlier post that I was on a deputation (secondment) model for 8 years. If you are on this type of arrangement and your project is cancelled/postponed (which happened in my case), you have 1 month to pack up everything and leave (if you are non-eu).

The logic is that you were anyway on a temporary permit and thus, should not have much difficulty in closing everything and leaving. We all know thats far from the truth.

When my project was cancelled, thus, I was given 1 month to leave. However, what saved me was that I had applied just 1 month earlier for a “vorzeitig” C permit and this was approved just 3 weeks before I was about to leave for India permanently. Close escape!

Regarding the INR vs CHF, yes, you are absolutely on point there. The INR depreciated almost 70% against the CHF over 10 years (it was around 1 CHF = 40 INR in 2008 and now its 1 CHF = 68 INR). At the beginning, this did not seem that important as I had a temporary outlook and knew that my permit could be cancelled any time.

After getting the C permit (and meeting my gf), my outlook has changed and therefore I am slowing down my INR investments and investing more in CHF. My portfolio is still heavily weighted to India and that will take some time to correct, maybe a year or more. Indian stock markets have also been on a bull run since 2014 (when the current government came into power).

Regarding the apartments market value, they are correct and current as of beginning of this month. Real estate in India has continued to appreciate, even after the financial crisis (when there was a brief dip).
The crazy period was between 2003 and 2008 when real estate was appreciating around 30-40% year on year. Since 2010 it has been more sedate, around 10-12%. Apt 1 is in a very desirable location and Apt 2 is a premium project (also in a good location).