Noob, first time buyer here. I’ve been reading a lot but I’m still not feeling comfortable.
Background:
I’m working from home since two years and I don’t want to change it.
I can work from anywhere, but the salary is really good for the Swiss reality so why would I move to any Elbonia if I like it here.
I like lake Zurich area, Zug/Cham but I couldn’t find a flat for up to 2k/p.m. I’ve applied for c.a. 100 apartments this summer but I still haven’t got anything.
I have sufficient funds for down-payment/purchase. If I’d cashed all my assets, that would be c.a. 500k CHF. Of course, I rather don’t want to pour all my wealth into a property. I’ll use as much as is needed for the (cheap) loan.
I’m single, was raised in a 20 floors block of flats in a city center, and most likely my civil status won’t change so I’m rather looking for a flat
Having the basics cleared, what should I look at when buying a flat?
There’s plenty of “classic” (not awful Minegrie) apartments for sale, notably in Tessin, however I’ve heard that Tessin is depopulating, and here come the questions:
Is the renovation fund mandatory and thus all necessary works are made timely before any serious problems appears
Is there a law in Switzerland to make regular “standardized” building inspection to make sure it’s still safe
What to look for in statuses etc. to avoid issues regarding above points, in case the owners move out and just wait for “the right buyer” not willing to invest a penny
The future resale price is lower than your current purchase price. Seems like a fairly low risk but not 0. Where and what you buy will be big factors
Interest rates are going to go up in the near future. But then again they might go up and then down. There's another thread going on about this at the moment.
You have to pay into the building fund. This cost can go up considerably over time for an older property if something 'big' needs renewing (heating, roof, plumbing etc)
Hah, interesting I rather assumed buying won't be quick, could take a year or even longer if I decide to buy in a new building, however I have to start with the process seriously to eventually know enough how, when and where to buy.
Regarding the renovation funds, I thought people are paying it from day 0 to have a nice pot at the time when it's needed. You're suggesting that's not given, maybe some property were run cheaply (being exploited for max profit) and when it's time to do the maintenance the owners are suddenly looking to jump on another shiny new apartments rather than squeeze the pockets to pay for the renovation. Thanks, added to my notes to ask about the state of renovation budget.
I would absolutely never buy a flat in Switzerland. Either buy the whole block, let an agent manage it and take whichever you like, you can take your pick and kick out a tenant, they have no grounds to object as you are claiming eigenbedarf as owner.
If you are willing to live there, you can get a block with a problem tenant cheap, and evict them on day 1, no questions asked. Just make sure you pick the tenant that is the problem, not necessarily the one the old agent says is a problem!
A small Multi family house is amazing value, or a small house.
It is true parts of Switzerland are depopulating, and it is likely that interest and payments, maintenance will show a loss when you sell. However, you have saved rent so not lost that much in reality.
Why not buy a flat? Well maintenance has to be such that all residents have no grounds to object. So it is usually done on a no one is ever happy, everyone pays a bit too much. Did you expect any different? This usually kicks in 20 years after build. The simple solution to a problem tends to give way to the more expensive. Legal disputes are common as property ages and then everyone becomes a loser.
I hate shared ownership of a building. Always issues and trouble. You end up paying over the odd for repairs and it hurts. I have a lease in a council owned terrace in London - never been unhappier. Had a flat where I managed the freehold with 5 other properties, the aggro definitely didn't make it worth it.
If you don't care, and you don't mind sometime paying over the odds, then I say go for it. Probably still a better decision to own than to rent - for me it has to do with the psychology of wasting money that kills me.
I own a house in Switzerland, having had a bunch of people come and quote for various things (200k for a swimming pool, no joke). So whatever work will be done to your apartment building you will get your pants pulled down, collectively. Just remember that you will have no control over this, and Switzerland prices are extortionate.
I am doing all the work myself now, including electrics, I just can't bare the idea of paying some guy £1500 to paint a bedroom. My best friend is coming over to dig with me my pool next summer in exchange for me taking him bike riding every over day, and I'll YOLO the filter and connections to the pool.
PS: Very personal feedback - i used to do property management for friends and family and have a tiny real estate business in London. I hate depending on neighbours for anything.
I see, having unplanned expenses could be annoying, but actually I was more afraid about the opposite situation, having neighbors who would never agree to make any renovation. In such case the building could just deteriorate with time. When you travel throughout the country you can see many such neglected buildings. If it's the old town all buildings are taken care of but when it's just some street on the outskirts it seems often the owners just don't care
There's usually a 'Verwaltung' paid out of the pot to manage the property. Either they can highlight what needs to be done to the building or residents can suggest projects. Generally it just needs a majority decision for the work to proceed. Payment comes out of the pot. Generally you pay in on a 'pro rata' basis of how many sq.m. you own.
The maintenance fund is dictated by the owners. It will be managed by the management company. So if you were an owner then you would also get your vote, on what needs doing and how much to pay.
So basically what will happen is you pay an amount in each month (tax deductible), this is to cover known costs and there will be a chunk for unknown costs, like a savings. Each year there will be a building or an area meeting. The management company will say look in 5 years we think the roof needs redoing, do you agree? Assuming the majority say yes. They then say there is this much in the fund do you wish to use this? They could also propose if we add 50 bucks a month on to the NK charges, in 5 years when we finally do the roof, the money will be in the pot to cover it. Likewise the owners could say look we will just pay the 10/20/X K each when the time comes to pay for this and dont touch the fund or increase payments.
So what I am trying to say is typically the NK charges are set up to cover the maintenance so the impact in one hit to the owners is avoided.
Now the losing money... You rent is 100% sunk cost. Your mortgage, its only the NK and the interest which is sunk (both tax deductible), your repayments are where you can make or lose money, so your loses would have to exceed what you paid in rent. Even if the property decreased in value you may not lose in reality compared to renting. The risk is mitigated the longer you own it.
Do however keep in mind, selling isnt so easy here. You will need the loan term to have been reached without paying a penalty, and I understand selling anything below 5 years of owning will face high taxes, the taxes decrease the longer you own it.
And with an apartment, it's only about communal stuff. Your own walls, you can do as you can please.
Do you also
- cut your hair yourself
- bake all your bread
- raise cattle, chickens
- so you can make your own sausages, cure your own meat
- make your own beer
- never order food, go to restaurant
?
Because the "markup" on those is significant, too.
Yes, stuff is expensive, but I get more money per hour than the guy who fixed my sink - and I don't have to worry that I create a mess that takes even more time to fix - and that doesn't include buying all the specialized tools that I may or may not need maybe once every couple of years, at best.
On top of that, even the guy who repaired my sink took a bit longer because apparently the previous repair was pretty botched-up.
The only thing I'd say is that the property should not be "too" old - most old buildings have an accumulation of open issues - and the older the building (and its tenant) is, the less likely the other owners are willing or even able to come up with the money for renovations.
The above mentioned heating is one such thing. It continues with building envelope, lift, water-pipes, the roof...
Especially, if a number of owners have rented out their apartments, the rents never justify the cost of expensive renovations or upgrades.
A few years ago I was in a similar situation - was planning to buy a flat in Switzerland. Like you, my legal marital status is 'single', and have no intention of marrying my girlfriend. Because of some legal reasons my girlfriend doesn't want to inherit any of my property. My next kin is in a non-EU country and has a non-EU passport. So my biggest worry was - what happens to the property if I die? It was difficult to get a proper answer to this question from the mortgage agents that I met.
After doing a little bit of research I found out that things can get really complicated in terms of inheritance if your next kin is not a Swiss resident. In all possibilities, the Gemeinde will force your next kin to sell the property. And the banks will try to sell the property to their 'internal' clients usually after under-evaluating the property price. So basically say you put 250k of the deposit for a 1 million flat (25% considering 5% under evaluation while obtaining the mortgage). and then you pay 50k interest for the next 5-10 years (just an example)... So in total, you spent 300k and, god forbid- in case of your death, if the bank sells the property for 800k. Your next kin will get 50k ish...
So for a single person, is it really worth investing in this country?
Also remember the banks will not lend you the mortgage if the mortgage amount is less than 50% of the property price or at least 350k (whichever is higher).
To put it bluntly: What do you care about some out-of county cousin or whatever it is, when you're dead?
You can set this up all while you're alive. Get a decent real estate agent to manage the sale.
One purpose of owning a property is to live in a place you like, with a "setup" you like (kitchen, bathroom etc.). If you want to live as cheap as possible so your next-of-kin can inherit as much as possible, you can do that, too. E.g. rent a room in a WG in a low-tax canton (and a hotel room hourly, occasionally, when your girlfriend comes over for a visit).
How to buy a flat and not loose your money, given how the Swiss real estate market works it is pretty difficult to lose money here. Quotes from "remember the 90s to what happens elsewhere" really don't apply here, the market is popular areas is not liquid enough for boom/bust cycles.
The restrictions and criteria for a mortgage are quite stringent so unless your personal and financial circumstances don't change dramatically (which is the case for the majority of home buyers) there won't be a flood of foreclosures or property coming onto the market to drive prices down. Is the market overvalued? Yes but it has been that way for 20 years hence the reason for the difference in bank valuation and market price, the margin between these two prices varies greatly depending on location, condition of the property and economic outlook. You are in control of 2 out 3 of these so it is not all bad. Location, as always is critical, buying an average property in a reasonable location will further insulate from price fluctuations.
Given your circumstances, I would be looking for large shared accommodation in the area you want to socialize in. Secondly, buy an apartment in a ski area which needs renovation or updating, renovations will help your tax situation. Rent it out using Air B&B or similar and use it yourself the rest of the time. If you seach through holiday apartments to rent you will see that the majority are furnished with everyone's leftover furniture and a tv from the 90s! So setting it up as as "work from home office" with benefits (fibre optic internet, big screen TV with playstation, proper coffee machine, desk with large monitor and printer ect) will ensure a premium price, market it to a few companies who have travelling executives and this will offset you normal rent. Lifestyle and passive income, we all search for it.
You obviously weren't here in the 90s then! There was a massive problem here. I know of a property that recently sold for 1/6th of what it was mortgaged for back then. Someone paid market price, with a mortgage on top for some improvements, got half way through, the cost to finish was less than the value completed. Property then stood for decades. New owners gave it a go, they recently gave up at a loss for various reasons.
Exactly. There is nowhere that won't lose money at some time or another, period.
My rule for real estate is simple - it's not a financial investment*, it's an investment in personal stability. If you're planning on living somewhere a long long time, and don't want to worry about moving again, buy.
This is particularly great for folks with kids who like the schools and neighborhoods, but not exclusively. SINKs and DINKs and whatever else we have now often enjoy stability as too.
* This primarily applies to folks who wish to live in the real estate they purchase. If you're buying with the intent of renting, or improving and flipping, etc... that's a different game altogether.
[QUOTE=p42;3430678]You obviously weren't here in the 90s then! There was a massive problem here. I know of a property that recently sold for 1/6th of what it was mortgaged for back then. Someone paid market price, with a mortgage on top for some improvements, got half way through, the cost to finish was less than the value completed. Property then stood for decades. New owners gave it a go, they recently gave up at a loss for various reasons.[/QUOTE
No I wasn't here in the 90s but please explain how this could happen again when the GFC was a blip on the radar and pretty much every other country had a correction?
So I assume that this property wasn't average in a reasonable location?
That will eliminate FMP and stop economic immigration (plus wreak havok with the economy and probably have unemployment increase). Not only will demand no longer increase every year, but a certain percent of the resident foreigners will still return and have population sink and real estate demand shrink.
Starting in 1990/91 triggered by the SNB's moronic interest rate hike, real estate prices kept falling until the Bilaterale came into effect, prices bottomed when the population stopped shrinking. Prices started to rise once the population had started to grow again. IIRC commercial property prices bottomed a couple years before residential (or perhaps the other way round), by then the owners had lost almost 50% purchase power due to 35-40% nominal price drop plus ~15% accumulated inflation.