So I have been trying to buy two garages estimated at 75’000 CHF. I have 20’000 cash, 8000 in mintos, 12000 in etoro (conservative and well balanced portfolio) with some other non convertible investments.
I basically told my current bank UBS that I was willing to use those investment as a caution, deliver 20’000 CHF as down payement and they did’nt even invited me to talk. Same thing for bank raiffeisen. And postfinance would lend to me at 7.9% which is freaking high.
I hear everywhere that real estate is good way to invest because you can leverage debt and you only need 20% down payment. But what if banks don’t want to lend me money ?
To tell you some more about myself i’m a 29 years old man. I started a new job (my first permanent contract) in the Swiss State (SERI / SEFRI / SBFI) in january 2023 and I make 6.2k net salary per month (*13)
Since i’m single I am back to my parents place so my monthly expenses are quite low, health insurance, rent contribution, gas and parking spot for around 1200 CHF / month.
So why do banks dont even want to receive me ? Is it because I told them that I wanted to buy those garages to for rentability purpose ? Is it because i’m working from only 6 months in this place ?
You can get mortgages on housing at 2-3% iff 1) you’ll make it your primary residence 2) you bring some amount of equity, generally at least 20% 3) the loan amount is interesting to them (~ 100k on the loan, or more).
You fail the most important criteria: the amount is too small so it’s no good business.
You told UBS you wanted to use your Mintos, eToro and „some other non convertible“ investments as a guarantee for a loan? To buy garages?
Was or is there any indication that Michou is a foreigner and/or on a B permit? (especially since he‘s mentioned living with his parents)
But nobody lives or works in your garage. I’d argue you’d become (and should view yourself) not so much a traditional “real estate” investor but rather a small “entrepreneur” in the garage rental business.
Actually not that bad, given the circumstances.
Let’s look at it this way:
You have 20’000 in cash
You have another 12’000 liquid assets with eToro
And another 8’000 with Mintos (how liquid are they?)
And 5’000/month net disposable - or in your case investable - income from employment (after living expenses)
Plus the net cash flow from renting out the garages.
If those two garages are 75’000, you have about 50% equity today. You’ll have to take out a loan for only about half of the price of the garages. And with your income and living frugally, you’ll pay back that loan in less than a year.
PS: leverage should not be an end in itself in investing.
Depending on where you are from, you may need a permit to buy property in Switzerland. More on that here:
A 20% down payment is the minimum. For investment properties in particular, banks may require a bigger down payment. It also isn’t common for banks to offer mortgages for garages. It would depend on the property’s makeup.
The down-payment has to be paid to the bank which holds the mortgage. External collateral is irrelevant. The collateral is the property itself.
It is possible to use a personal loan to buy property, and for buying garages, that would be more realistic than getting a mortgage. Here too, you cannot offer collateral for personal loans. Your creditworthiness is the collateral. The interest rates are correspondingly high (7.9% is very average right now).
So either you try for mortgage, or you go for a personal loan and pay high interest. If you opt for the second, you should consider using your savings towards the purchase, and only borrowing as much as you need. The reason is that you are unlikely to earn returns in excess of 7% per annum, so the interest cost would exceed the returns.
You fail the most important criteria: the amount is too small so it’s no good business.
oh okay that’s it, deal may not be interesting to them …
Are you even allowed to buy those garages with a B permit?
I’m Swiss and living in Switzerland … even though I guess that you could buy
If those two garages are 75’000, you have about 50% equity today. You’ll have to take out a loan for only about half of the price of the garages. And with your income and living frugally, you’ll pay back that loan in less than a year .
Thanks ! I’ll consider that offer more carefully then !
Exactly, and make sure you understand your expected yield/returns (how much can you charge, what are the vacancy rates, etc).
On this topic i’m open, either to sell them at an higher price (because I expect buying them lower than current market price) or rent them. Both are an option to me.
I fear he has 20k in cash, they consist of 8k in Mintos and 12k in eToro…
Incorrect I have 20k in cash as a down payment + 20k in investments, mintos is quite liquid you call sell them with only 1% discount in one week or so …
Anyway, why not just wait a year or a few months and buy with no leverage?
Leverage is financially important for tax deduction for me this year. Also it is an auction sale so this particular case will not be available when I’ll have enough money.
Leverage is also a way to get higher rentability so it’s always interesting.
You say you are open to options, but do you have an actual business plan? Do you understand the running cost these parking spaces might have (can be quite significant)? How do you conclude that you will get them below market value, with an easy option to sell them higher? There are so many questions open here…
This is not to criticise, but from what you describe it sounds like you consider this huge investment (relativ to your net worth) without really much knowledge.
I actually have all this information available. In worst case running costs and interest can be covered by my salary. Running cost were listed in the documents for the sales, also I have help from a personal broker that helps me with insurances, investments and as an expertise in real estate …
Also I am quite confident that I can get them below market prices because they are estimated at 75’000 CHF by an expert and auction starts at 40’000 CHF, if the price would go higher than market price (fees included) I will simply stop bidding and pay back the loan.
You will understand that to avoid competition on the bid this information is not really relevant to share… also the topic was not really asking for tips regarding this investment but rather on why the banks are not willing to lend me money. Maybe it is for the same reason you felt I had not a lot of knowledge …
Should I send e-mails with an actual business plan instead of raw information ? They did not even offer me a coffee for a talk …
What I’d do if I were knowledgeable about this particular topic and confident in my ability to execute is:
Find someone I know who can lend me the funds needed (think “private lenders”, aka friends/family/fools)
Draw up plans for how to buy them on the cheap, how to lease them at market rates, then provide some calculations with expected returns (expected rent per garage, net operating income for the portfolio, debt payback plan, etc etc) to convince them that it is, in fact, beneficial
Draw up an agreement, plenty of free ones available - get a lawyer to review them for you
Execute
The important thing with this is that you’ll be personally liable for the funds AND you’ll not just risk your reputation in the friends/family/fools circle but also the relationships.
And don’t go around talking about how you go about deal sourcing on the internet, because someone might just know the very deal you’re talking about, and be faster than you at all those steps.
That is a very good idea I would usually consider it.
However my circle despite having more than enough money aside is risk averse. The kind of swiss people that keep their money in the bank and are very wary as soon as you suggest them to change the insurance they complain about or to maybe open a third pilar or ETF world … FFO is not really an option for me. Looks like the postfinance credit may be the best option for now until I make some like minded friends in networking events…
And yes I gave more than enough info for you to find the deal i’m talking about but an other opportunity will appear sooner or later … hopefully I will have a financing partner at that point.
You mentioned that one bank (Postfinance) had agreed to a personal loan, but with a 7.9% interest rate. The absolute best available interest rate in the current high-interest environment is 5.9%. Most lenders are currently charging 6.9% for borrowers with property and perfect creditworthiness. So 7.9% is not particularly high. I recommend you compare current rates online here: Loan Comparison Switzerland - moneyland.ch
Also, there are very few Swiss banks which offer (their own) personal loans. Even Postfinance just markets third-party loans. Many Swiss banks (e.g. cantonal banks, Raiffeisen) offer loans from Cashgate, so if you have been refused by several of these banks, that may just mean that you have been refused by Cashgate. I recommend you apply to the actual lenders.
The most important thing to understand is that Swiss personal loans are based on your creditworthiness only. You cannot offer collateral. Some give better rates to property owners, but that is only because property owners are statistically less likely to default, and their property can be seized for debt collection. It is not collateral.
So what you will want to have are a clean ZEK record, no entries in debt collection registers, a high income-to-expense ratio (no high rent or other big, ongoing expenses), a steady job and income, a stable home situation (ideally a Swiss passport too) which indicates that you will not up and leave the country (remember, Swiss debt collectors can only easily collect on debts in Switzerland).
Personally, I would avoid mentioning Mintos or any other unconventional assets, as in the eyes of a lender who does not understand what that is, it could seem that you are engaging in risky activities, which does not boost confidence in your creditworthiness. Just enter the value of your actual, conventional savings in the application, if required. Try to appear as stable and conventional as is possibly possible.
Thanks to your tip I managed to get a loan from “Milenia” at 5.9% ! As you said it was purely based on credit worthyness …
Unfortunately the auction as been cancelled either the seler managed to reimburse his debt, either he managed to sell them at current market price (sale was also available online at market price).
So now i’m left with some cash that I don’t really know how to invest … I’m looking for all the options but at this point what i see as best option is park it all in few ETFs that perform better than 5.9% …
I would recommend just repaying the loan in full. You have every right to repay it early without any penalty, as per the Swiss consumer credit law. The reason I recommend this is that the interest cost is fixed at 5.9%, but you have no guarantee that any investment will deliver a return higher than 5.9% per annum, especially in the current market environment. So the best “return” you can make is to avoid the cost altogether.
Real estate is a possible exception to that rule, because you have to grab good deals when they come up, and the returns are more predictable. But otherwise, I generally wouldn’t recommend using loans for stocks and other risky investments.
This option is indeed available … but I did my taxe bill in anticipation and noticed that the tax deduction was higher than the interest pay … so basically holding to that loan would be profitable per se (I double checked yes).
Also I took that loan in a way that I can repay it with only my salary so I don’t even need it to be profitable (risk mitigation) I could buy an Audi with it (please don’t)… so I might as well invest instead of repaying … don’t you think so ?
In CHF, the long term average historical returns of global stocks are closer to 5% than to 7%-10% (that’s for US stocks only, in USD and there’s no guarantee that history will repeat itself and offer outsized returns to US stocks specifically moving forward). Getting an expected return above 5.9% on the timeframe of your loan may be harder than expected.
Your tax conclusions seem weird to me too. I would not bank on it until I’ve received the actual taxation decision from the tax office. It could happen if the deductions take you under some poverty threshold where subsidies or bigger deductions apply but we’re talking about roughly 3K interests per year, so it probably doesn’t have such an effect.
Also seems weird to me tbh but that’s what my software says … (we’re talking about a few undreds chf after all accounted) but also I live in Neuchatel where tax is freaking high … so it might have an effect.
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either the seler managed to reimburse his debt, either he managed to sell them at current market price (sale was also available online at market price).