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According to several published studies, for some time now, 20% of apartments in Switzerland have been bought by investors who would like to invest their money to obtain a return. Leaving your money in a savings account does not pay off anymore and finding ways to make your money work for you has become more and more difficult.
Investing your capital in a flat
Investing in a flat is a long-term investment. If you purchase a flat in Geneva to rent it out, you will not be able to benefit from Casatax and you will not be able to finance it with your 2nd pillar capital. If you are not Swiss citizen, check first our article: Persons abroad Lex Koller - can foreigners buy property in Switzerland.
The real estate market in Switzerland
The real estate market in Switzerland is cyclical. For some years now, the selling prices have been constantly increasing. Sales prices are high, yields and mortgage interest low. Currently, this cycle is longer than in the past and nobody can guarantee that it will last.
Setting the rent
The rent must be set in accordance with the tenancy law and the cantonal regulations. The rent must cover the operating and financial costs and allow you to obtain a sufficient net return and must be achievable on the market. In Geneva, the state sets the rent for new flats built in the development zone for 10 years and for flats in PPE-HLM for 20 years. In the case of PPE-HLM, the tenant must also meet certain conditions dictated by the state.
Rent and financial risks
The income from the rent cannot be compared with the income from bank interest credited to the savings account from time to time. Rent is not a guaranteed regular and fixed income. The rent is only credited punctually if the tenant remains solvent and has signed a standing order with his bank. The landlord must therefore check his account regularly and if necessary send reminders and notices of default and, in the worst case, initiate legal proceedings. According to the tenancy law, the bank guarantee or surety for a flat may not exceed the amount of three months' net rent.
If there is a change of tenant, the flat cannot always be re-let immediately and the landlord often has to repaint or renovate the apartment before putting it back on the rental market. If it remains vacant for some time, the operating and financial costs must be paid and cannot be left unpaid.
The choice of tenant
It is essential that the flat is rented to a suitable and creditworthy tenant. A thorough check of the file is absolutely necessary. A wrong choice is no longer correctable and can have serious consequences.
Calculations to be made
Before buying a flat to rent, the cost price, yield calculations, future work calculations and tax calculations should be made. The current rent or the rent promised by the seller must correspond to the market price.
Choosing the flat
Choose a flat that is well maintained and if possible in perfect condition. A well-located flat is easier to rent. The building should be in good condition, clean and without any backlog of maintenance. Read the minutes of the last owners' meetings and also inspect the neighbourhood and the environment.
Condominium ownership
As an owner of a flat, you must comply with the rules of the condominium, pay your share of the operating costs, the renovation work and the renovation fund of the building. You can participate in the meetings of the condominium.
Managing the flat
Managing a flat is more complex than it seems at first sight. I advise you to hire a professional property manager to manage your flat, because it requires extensive legal, administrative, financial and technical knowledge.
Conclusions
Buy an apartment in a good location and in good condition, choose the tenant well, make your calculations correctly and entrust the management to a real estate manager. Take into account the long-term return prospects and sufficient tenant potential before signing a contract to buy a flat for rent.
© Written by Esther Lauber, Real Estate Trustee with Advanced Federal Diploma of Professional Education and Training, real estate agent, property manager and real estate broker in Carouge Geneva, translated with www.DeepL.com/Translator (free version)
