News and Guide

News from DL and information on the financial market and Swiss romande real estate

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Investment properties

In real estate investment, as in most other types of investment, an investor often finds himself confronted with two questions: How to put a value on the property and how to measure the profitability of the investment?

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Depreciating cost or intrinsic value method

Calculating the intrinsic value of a real estate property goes back to finding an adjusted value of the originally constructed property, to which the value of the land is added.

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Discounting by capitalisation or return

This method provides the first indications of how much an investment property is worth. It is based on the relationship between the annual rent and the value of the real estate, thus showing a discounted return for the buyer.

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Discounting of future cash flows or Discounted Cash Flow (DCF)

Unlike the capitalisation or return method, the discounting of future cash flows offers significant advantages, as it permits the use of parameters such as financing, administration, and maintenance or renovation costs, as well as the development of rental status and risks. All of this is offered on a 5 to 10 year horizon based on projected cash flows that will allow you to determine the future value of the property.

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Tax on real estate gains

Tax on real estate gain is levied on profit earned from the sale of real estate minus allowances (brokerage fees, transfer duties, value added works, etc.)

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Real estate income

Income from property rental, land rental, land occupency rights and usufruct rights are all forms of real estate income that are considered taxable rental return.

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Gross & Net Returns

The investor's task is to judge the estimated profitability of their property investment by assuming that they will pay the price requested by the buyer.

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