Guide to investment alternatives

Portfolio analysis: take stock of your property

The decision to sell or reinvest begins with a stock take: what is the value and potential of your property, the individual properties that you own or your entire property portfolio? If you cannot answer this question right away, you are not alone. A recent Engel & Völkers survey found that around half of all property owners do not know exactly how much their property is worth. A property or portfolio analysis can be of great help here.

A comprehensive property analysis starts by taking a close look at the current condition of the building. It recommends maintenance and modernisation measures and provides suggestions for how to expand and develop the building. It then takes into account the external environment and the current market situation. The property analysis shows you both the risks and the potential of your property and provides a market valuation based on similar properties that have been sold in the area.

Aspects of the property and portfolio analysis

Often these analyses bring up things that you may not have thought about before:

• Are there any major renovations to be expected in the near future? Have the electrical installations not been updated for a while and are no longer compliant with current regulations? What is the energy rating of the building? Do investments (e.g. an updating of the heating system) need to be made here to meet the requirements of the MuKEn 2014 (Model Prescriptions of the Cantons Regarding Energy) which form the basis for the implementation of energy regulations in the individual cantons of Switzerland?

• The profitability of the property also needs to be examined closely. How is the rental income developing? Is it in line with the market? Is there some wiggle room? What does the rent index say?

• What is the marketability of the property or portfolio? How has the market developed in the past? What future developments have been forecast?

What are the expenses, profits, returns and risks?

The portfolio analysis begins with a detailed technical and commercial stocktaking of all your properties. As the owner, you will get an overview of the condition of the buildings, as well as the associated expenses, profits, returns and risks. The analysis will also take a look at the structure, management and potential development of your entire property portfolio.

The following risks and opportunities should be noted here:

• Whatis planned and sensible with regards to a future portfolio development? Whatstructural portfolio optimisations are possible to help you get more out of your investment strategy?

• How much equity doyou have tied into the property? And most importantly, can you perhaps investthis equity elsewhere to get higher returns?

A property or portfolio analysis is recommended for anyone that wants to find out exactly how much their property is worth even if they are not planning to sell any time soon. Property analyses can be conducted by property experts or estate agents. The experienced property consultants from Engel & Völkers can conduct a professional analysis of individual properties or your entire property portfolio to help you make well-founded and strategic decisions.

The right investment strategy: keep or sell your property?

Should I hold onto my property, sell it now or wait a little longer? This decision depends on your personal situation, your investment strategy and the market situation. All of these factors need to be taken into consideration when it comes to choosing the right moment to sell.

Good reasons to sell

Most people usually have a personal reason for selling their property. For example, they may want to have liquid assets when they reach retirement age. Another reason may be to avoid potential complications which could arise in the event of a future inheritance, for example. Perhaps the property they are wanting to sell is already shared by several heirs that no longer want to be financially connected.  A financial separation such as this is also common after a divorce.

Another possible reason for selling is that it is takes too much time or effort to manage the property due to disagreements with renters, the property management company, or simply because it has become too complex to make the necessary changes to the property so that it meets new requirements.

Deciding on your investment strategy

Apart from personal reasons, the situation on the property market is decisive when it comes to finding the right moment to sell your property. For example, low interest rates or an uncertain general economic situation make traditional financial investments more unattractive but they make investments in “non-cash assets” such as property or precious metals more attractive. This means that investors need to act in a targeted way and be very familiar with the markets. Market prices and development opportunities can vary wildly from region to region, particularly when it comes to mixed residential and commercial property. Our Swiss market reports offer some initial insights in this area. They contain clear information about prices and trends, with relevant regional information included in local market reports.

In addition, strategic investment reasons can tip the scales when it comes to making a decision to sell. New requirements, such as for greater sustainability in the property sector for example, and an uncertain political or legal situation can play a role here.

You should also consider other options for your investment strategy, such as shifting into other assets, realising value growth, and reinvesting in another property. The property gains tax can provide a guideline for timing the sale of your property. The shorter the ownership period, the higher the property gains tax. However, if you sell your home and buy a new one within a certain period of time, you may not have to pay tax on the profit immediately.

Optimising returns with the right investment strategy

Perhaps you simply want to optimise your returns and believe that this is the best reason for selling your property. By cleverly reinvesting any proceeds from the sale of your property, you can increase the diversification of your property portfolio and invest in other locations and sectors. You could even look at the available options for indirect property investments.

One way to optimise your returns is to take a closer look at the tax-related aspects of your property, for example by writing-off your property expenses. By doing this, any property that is rented or leased (property used to earn money), is taken into account.

This allows property owners can claim the acquisition, running and production costs for tax purposes. The acquisition and running costs include the purchase price of the property, the notary fees, brokerage fees, property transfer fees or estimate costs.

If you want to sell a property from your property portfolio and reinvest the proceeds into another property, the write-off is done based on the current (higher) market value of the newly acquired property. This higher write-off reduces your tax burden and improves your returns.

Reinvesting sales proceeds: What to consider when reinvesting

Once you sell a property, you will probably face new decisions: what are the investment alternatives, in particular alternatives beyond direct property investments? Perhaps you already have a major investment in mind, or you want to finally fulfil a long-held wish. But if you don’t need liquidity immediately, there are other things to consider. Perhaps an investment could help improve your standard of living, bring forward your retirement, or finance further education for yourself or your children in the medium term?

Seek advice

You can achieve personal goals through different forms of investment. Here it is a good idea to seek professional advice. A property sale offers the ideal opportunity for comprehensively assessing your own financial situation and developing a tailor-made investment strategy.

Strategic investing pays off

In periods of declining inflation rates, modest economic growth and an uncertain political environment, well-considered asset allocation is essential. Central banks are currently in an easing cycle, and that makes numerous investment options attractive (see chart). Falling interest rates stimulate investment in bonds and shares in particular. Re-investment in real estate remains an interesting option – with numerous variants to choose from.

Invest sale proceeds wisely

To make an informed decision, you first need to answer the following questions:

• What would you like to achieve with your investment?

• How much of the sale proceeds do you want to invest – all, or only a portion?

• Over what period do you want to invest the money, and when do you need it again?

• Would you like to make your own investment decisions or leave it up to an expert?

After that, it’s a good idea to examine the various investment options in detail. Which options fit your personal goals and needs? Independent advice can help you assess the opportunities and risks of the various alternatives. This will ensure that your decision is ideally suited to your situation.

Active management in periods of low interest rates

To sell a property and invest the proceeds in the financial markets these days is almost like being transported back to 2020. Inflation and key interest rates in Switzerland are low again. As a result, yields on Swiss franc bonds are already significantly lower than they were just two years ago. Nevertheless, there are still plentiful opportunities for reinvesting property proceeds. There are attractive opportunities in bonds as well as equity investments.

A challenging environment

The current economic environment presents both challenges and opportunities for mixed investment portfolios. The different regional growth dynamics throughout the world require active positioning that takes geopolitical developments into account. The global economy is expected to continue growing in 2025, which makes investing in stocks an attractive option. In view of rapidly declining interest rates, the preservation of real asset values remains a key objective. In this context, active asset management is becoming increasingly important and a key to investment success.

Expert advice is indispensable

The structuring of a portfolio is significantly influenced by economic growth, interest rate developments, and the yield and risk characteristics of various asset classes. As well as monitoring long-term trends, you should also take short-term factors into account and review them regularly. Support from your bank or a professional financial institution can help you make informed decisions. However, you are still free to customise the ultimate implementation of your investment strategy as you wish.

Adjusting your investment strategy

2024 was a good year for stocks, and we continue to see opportunities here. Bonds remain an important part of the portfolio as they have a stabilising effect. Gold can also play a valuable complementary role. In periods of market turbulence, it is worth hedging your portfolio with lower-risk investments. To remain flexible in the face of change, it is essential that you review your strategy regularly and adjust your investment mix accordingly.

Investment forms and strategies - Reinvesting in the real estate market

There are two main types of reinvestment in property:

• Direct property investments: purchase of a specific property 

• Indirect propertyinvestments: investments in property shares and bonds, property funds or crowdinvesting, for example

Your checklist for capital investments

The aim of any investment is to achieve a positive result after expenses, taxes and inflation. There is a lot to think about before making an investment. Fixed-term deposits, savings and bonds cannot be used to compensate inflation and while these types of investments are low-risk, the returns that they produce are also low. Even gold prices have gone through long periods in the past during which no positive return was achieved, let alone enough of a return to offset inflation. Property and equity funds, however, act well as an inflation hedge as they are designed for long-term investment. This means that despite expenses, taxes and inflation, investors experience a considerable increase in purchasing power after cashing in these types of investments.

Overall, investments in property are one of the safest and most lucrative types of investment. However, not all property investments are equal. There are significant differences between the types of property (such as private property, apartment buildings, holiday homes, commercial property or mixed-use properties) not only in terms of the possible returns, but also with regards to the tax advantages.

Regardless of whether you feel most at home in the stock market or with property, the best thing to do is to learn about the current performance of different forms of investment and get reliable advice from someone you trust.

Checklist - How well-informed am I about:

• The development of returns and risks related to my property (or properties) or the assets that I have invested in other forms of investment?

• The options available to me if I want to increase the return on equity from my property?

• The right moment to sell my property?

• The weak points and current value of my property?

Please contact us if you have any questions about what we have covered in this guide. We will be happy to provide additional and personal advice even if you do not have any concrete plans to sell or buy property right now.

We will help you to make the right decision for you.

Our Cooperation partner

We have created this guide with the support of Alex Müller, Chief Investment Officer of the Cantonal Bank Zug. | www.zugerkb.ch

Please remember: this guide does not give any specific legal, tax or financialadvice.