In this article, we propose you to discover all the terms used, in the field of real estate equity ownership in Switzerland.
You want to diversify your investments, make your savings work for you, or build up your assets…
Master all the terms related to this field of investment (technicalities, specificities) and refine your understanding with peace of mind.
Participatory shareholding
This is a form of financing that involves raising funds from investors to finance real estate projects, such as the purchase of existing investment properties etc.
For each operation, a dedicated limited company is created. A limited number of investors acquire a part of this company for a minimum investment of CHF 49’000 (amount defined according to the company and the project).
These investors become shareholders of the project and thus indirectly co-owners of the building. Once a year, a general meeting is held, at the end of which a dividend is paid to shareholders in proportion to their investment.
Land register
It is a communal document. The cadastre lists all the properties in a municipality and sets their rental value with reference to the local tax base.
Mortgage Schedule
The mortgage note corresponds to a personal claim, secured by a real estate pledge.
Loads (usual)
The charges are out-of-pocket costs and differ for tenants and landlords. In the French-speaking part of Switzerland, tenants’ expenses for housing are heating costs and water heating. All other costs not covered by the tenants are the responsibility of the owners.
Co-ownership
According to article 646 – 651 cc, the condominium is a fractional ownership agreed upon by contract by law. The co-owner is free to dispose of his share. This corresponds to the legal right of pre-emption of the other owners.
Management account
This document lists the expenses and income of a rental property. The management account helps determine the balance available to private or institutional owners.
Portfolio diversification
The portfolio diversification helps you choose a combination of investments to reduce the risk on your portfolio.
You can choose from different types of assets, each with specific characteristics and risk/return profiles. Among the most important are real estate, stocks, bonds, commodities, precious metals and alternative investments.
The most important thing is to choose an investment strategy adapted to your needs, so that your assets are optimally diversified.
Dividends
The dividends are the shares of the profits that are allocated to each shareholder.
Right of transfer
The transfer right is the set of fees collected by the notary for the state and the cantons.
Distinct and Permanent Right or DDP
The PDD corresponds to a development of the land property. This is a long-term lease of part or all of the original parcel.
Thus the owner of the PDD, called the superficiary, can act as the owner. In return, the superficiary pays rent to the owner, called the superficiary, of the original encumbered parcel. Article 655 al.3 provides for a minimum development period of 30 years and a maximum of 100 years via article 779I al.1 CC.
The constitutive act of the DDP to register the building is carried out by a notarial act. When the agreed-upon term expires, the DDP expires. In addition, the buildings revert to the superficiary of the base parcel. Variations may occur with respect to:
- Payment of a return allowance.
- The rent of the land.
- The indexing mode.
The constitution will help you to know the possible specificities.
Rental status
A document summarizes the elements of the various leases attached to an object. It is therental status. The elements concerned are :
- The name of the tenant.
- The purpose of the lease.
- The benchmark mortgage rate.
- The consumer price index.
- The next lease term.
- The amount of the rent (per year, per month and communicated in Fr./m2/year).
Investment funds
Also called investment funds, this corresponds to an organization for the collective holding of securities or contracts.
Incidental expenses
These are additional costs to be paid by the tenants. These are related to their presence in the building such as janitorial, electricity of common areas …
Acquisition costs
The acquisition costs are the costs resulting from the acquisition of a property and charged to the buyer.
Agency fees
The real estate agency handles the sale of a property and receives a percentage of the price in return.
Investment costs
The capital costs are the costs incurred in the acquisition of a property, such as :
- The purchase of the land.
- The purchase of a building.
- Notary fees…
Building
Article 655 CC of the Swiss law gives us details on the definition of a building. This one can be characterized :
- Of plot.
- In condominium shares.
- A Distinct and Permanent Right i.e. DDP.
- A hydraulic concession or a mine.
Generally, a building means a building.
Property tax
Also called « property tax », This tax is payable by all building owners.
Investment in rental property
In order to build an estate or receive additional income, therental real estate investment allows you to buy a property to rent.
Minergie label
The Minergie label is an energy label that applies to new and renovated buildings. In Switzerland, more than 53’000 buildings are certified by one of the Minergie standards.
LFAIE (Lex Koller)
This is the law on the acquisition of real estate by persons abroad. Since 1983, it has prohibited the acquisition of a residential building by any foreigner who does not have a residence or settlement permit. The exception is the acquisition of a second home.
Per Floor Ownership or PPE
The PPE gives an owner access to the co-ownership of a private part of a building and co-ownership of the common parts.
Co-ownership regulations
The co-ownership regulations is a written document. It determines the rights and obligations of the co-owners. It is drawn up by a professional who takes into account the indications of an expert surveyor and, if necessary, the builder of the building. The different lots are defined with for each one :
- His floor.
- Its area.
- The number of tantième for the payment of the charges.
This document also takes into account the common parts and the private parts. You will find a complete summary of the rights and obligations of the co-owners of a building.
Land Registry
The land register is the document that shows the name of the owner for each building. The determination of the valuation of a property is carried out by means of extracts from the Land Register. These are of paramount importance and represent the identity card of a building.
Gross yield
This is the net rental income divided by the equity invested in an operation. It is equal to the rental profitability of a property rented in net.
Rental yields
The rental yields is expressed as a percentage. It expresses the share of annual rental income in relation to the amount initially invested.
Easement
The easement corresponds to a right registered on a building. This one comes to compress or extend its enjoyment. The easement can be addressed in favor of a legal or physical person or another building. For example, you may be the owner of a building 1 and use the parking space on a parcel 2. Example 2 is the mention of the usufruct easement in favour of Mrs X.
Civil real estate company (SCI)
The SCI is a legal entity and has its own legal existence. This allows several people to own and manage a property. It facilitates the transmission of a property and eases the tax conditions.
Capitalization rate
Do not confuse the meaning of words « capitalization » and « update ». We often use the term « capitalization rate » to evoke the value of a return. In reality, capitalization defines the determination of the future value of an investment. Of course, it is necessary to take into account the forecast of interest over a given period. Thus, the value of a return is determined by the discount rate.
Marginal tax rate
This is the highest rate at which the taxpayer is taxed for income tax purposes.
Intrinsic value
The intrinsic value is the value of the construction cost or the replacement value of the building minus the physical depreciation of the property (obsolescence). This does not take into account supply, demand and geographical location.
Rental value
The rental value is taxed as notional income by all owners of primary and secondary residences if they are not rented. It is possible to deduct for each owner the maintenance costs and the interest expenses from their taxes.
Sale in future state of completion
It is the sale on plan before the completion of a program. Depending on the stage of construction, the purchaser becomes the owner of the land and the housing acquired.
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