Conversion of the Property Investment

Investors who are only able or only wish to invest a fairly small amount of money in properties are reliant on “property splitting”.

The following distinctions are made, depending on the “type of splitting”:

  • Joint property ownership
    • Co-ownership
      • Several persons own a property jointly
      • Preliminary clarification of consensus
        • Investment strategy
        • Type of property
        • Size of property
        • Quality of properly
        • Use of property
        • Financing of property
        • Administration (joint ownership rules)
        • Voting rules
        • Application of funds
        • Allocation of funds
        • Exit options
      • Costs (depending on the category of persons)
        • High organisational, consensus and decision-making costs
      • Organisation is expensive to maintain
        • Search costs in the event of early exit of co-owner
        • Opportunity costs
    • Condominium
      • Several persons own a property together, but condominium owners are specifically entitled to decorate, arrange and use their individual self-contained units to their taste
      • Condominium vs. detached house
        • Condominium has advantages of standardised building and management
      • Condominium vs. multi-storey dwelling
        • Condominium has disadvantages of individual organisation, financing and administration (no economies of scale)
      • Costs of organisation and voting or quorums for items that are exempt from the specific entitlement
        • Building structure
        • Building shell
        • Yard and garden
        • Common parts
  • Investment in separate property assets
    • = Assets managed by third party
    • No lengthy process to achieve consensus
    • Investment options
      • Property funds
      •  Property investment trust
    • Property funds
      • = assets that are accumulated by investors for joint investment in property assets
    •  Property investment trust
      • = assets that are invested by Swiss pension funds in these institutions with special tax status
  • Investment in a property company
    • = investment in shares (so-called real estate shares) or bonds
    • Assets for professionalization of investment and management, as a conversion of plot sizes and obligation to take back investment (in contrast to property investment funds)
  • Combination of direct and indirect property investment
    • Investment diversification can cover a mix of direct and indirect property investment
    • Viable options are:
      • Direct property investment
      • Acquisition of shares in real estate funds
      • Acquisition of shares in a (e.g. listed on the stock market) property company limited by shares

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