Direct 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