Direct Property Investment

Advantages

Direct property investment has the following advantages:

• Legal form
  • Ownership security
  • Properties in sole ownership offer freedom to act and make decisions
  • No (start-up and running) costs for an intermediate legal entity
• Property and portfolio volumes
  • No pressure to create large portfolios (in contrast to indirect property investments listed on a stock exchange)
  • No pressure to acquire property (in contrast to property funds and investment trust properties)
  • Independent administration possible / no management pressure
• Taxes
  • No double taxation
  • Timely tax planning (often planning requirement, in particular when the properties are not part of the personal assets, but are held in the business assets)
  • Risk or benefit (depending on the canton) of classification as a professional real estate broker) by the tax authorities
    1. Assumption by the tax authorities that the activity no longer falls within the definition of private asset management and is developing into a commercial or business activity.
    2. Loss statement depending on the canton, only relevant if accounts are kept.
    3. Private asset management does not require accounts to be kept; accounting would be proof of a commercial self-assessment by the taxpayer; clarification of the existence of accounting by the tax authorities; the tax authorities reject the loss statement in the absence of accounts.

Disadvantages

The disadvantages of direct property investment are the reverse of the aims of indirect property investment, namely:

• No anonymity
• No flexibility (only asset deal, impossible to switch to a share deal)