Step One: Define the Outlines of Your Real Estate Project
Apartment, house, old, new, to be built, to live, to rent… to carry out a real estate project allows you to have the constraint of choice. This great freedom, while very pleasant, is sometimes difficult for first time buyers to grasp. On the contrary, if you have already purchased a property on one or more occasions, it will be easier for you to focus on the essentials and focus your search on a specific type of home. Whatever your situation, finding accommodation takes time. Therefore, you need to be well prepared to optimize your search, the cost of the operation and put all the odds on your side.
What is your real estate project?
An essential step, you probably already know the main components. However, you need to review the type of property and the reasons for your willingness to buy. Discussing it among all family members helps to agree and save time.
Why do you want to buy?
- Acquire a primary residence: You want to buy a home to live in, you and your family. Buying a main residence is a life project that is designed in the long run.
- Making a rental investment: To supplement your income and / or create and develop your real estate assets by purchasing a home for rent.
- Becoming a Second Owner: There is nothing better than owning your vacation home and being able to go whenever you want.
Become a home or apartment owner?
The choice is made mainly on a matter of preference for the living environment: the calm and serenity of the countryside or the ease of transportation and access to the culture of the city. Apart from these personal preferences, it is important to note that the prices of a home are higher than those of an apartment. On average, the price of a home represents 8 times the annual gross income of a Swiss family. An apartment, on the other hand, has a lower ratio of 6 times the income of a household.
Buy new or old?
Buying a new property gives you peace of mind: a new property will avoid unpleasant surprises and work to be planned. It can be a completed real estate project or a planned purchase, or an individual construction for which exactly what the project is according to needs is determined.
Purchasing an old house gives you access to housing in the city center or in places of character. It can also record in the purchase price when work should be planned. You will need to budget them well through estimates made by artisans.
What is the geographical area where you are mobile?
Determining the area you are looking for in your home depends on where you live, the transportation options (roads, public transportation, bike paths, etc.) and the time you want to spend traveling. After this step, the search will be even more accurate, neighborhood, city, number of kilometers at their discretion. On the other hand, always consider possible traffic jams and rush hours when making your calculations.
Determine Your Budget
Estimating the budget you have for your purchase is essential to knowing if your operation is consistent. To know the overall budget of your project, you need to take into account all your resources, also called equity, such as personal savings (savings contracts, life insurance, etc.), occupational benefits (second pillar) and private benefits. (third pillar). This requires adding third party funds, ie the mortgage loan to which you are entitled. For an estimate, you can use a mortgage credit simulator or contact a financial advisor. Créditgram allows you to get a quick response to all your study requests for a real estate project.
Once you have determined your budget, the main question to ask yourself is: Are properties available in the geographic area I want and according to my criteria? If not, what commitments am I willing to make? It is quite possible to visit properties over your budget as there is often a bargaining margin with the seller. Be careful not to forget the extra costs that are added to the property’s selling price and always keep a portion of the savings available in the event of unforeseen circumstances.
Here is an example of a balanced project:
With an equity of CHF 30’000 and a mortgage loan of CHF 170’000, the total assets are CHF 200’000.
The purchased apartment costs 190,000 francs, to which must be added 10,000 francs in expenses (notary, registration, etc.) for a total of 200,000 francs.
Therefore, the operation is balanced, with all borrower resources covering the entire project.
Concerning acquisition costs
Becoming a homeowner is not just about paying the sale price. It is also necessary to pay a number of fees. Knowing them well makes it possible to include them in your budget and thus provide a certain amount of money for this purpose. A good estimate of these costs is to apply a rate of 3% to 5% on the selling price. It covers notary expenses, registration expenses, home loan expenses, etc.
In addition to the costs payable at the time of purchase, ownership also requires the payment of certain specific costs per month or per year (insurance, maintenance, labor, etc.). In particular, when you become the owner of a property located in Switzerland, you will need to pay a tax called “rental value tax”. The amount of this tax is equivalent to the theoretical rent that would be charged if the property in question were rented and not inhabited by its owner. Choosing the amortization of your acquisition will have a very significant impact on this tax. Indeed, the calculation is based on the share actually held by the borrower. By depreciating a lot, he holds a larger part of the property and the rental value tax will be even more important.