Inheriting real estate is no easy task. Because the right decisions are guided by emotions, inheritance law and careful planning, among other things.
Mr. and Mrs. Kohler were the proud owners of an apartment building in the city of Lucerne. They bought it around 40 years ago and initially carefully maintained and modernized it. With increasing age, it became more and more difficult to take care of the maintenance and management of the tenants. Deadlines and details were also forgotten, which are essential for the return on investment and sustainable maintenance of the property. Frustration, excessive demands and a guilty conscience towards the tenants were the order of the day. When the couple died, the apartment building was inherited. Without concrete estate planning, property management also became increasingly complicated for the surviving dependants and the optimum return for a sale was difficult to achieve. But what do owners need to pay attention to in order to build up real estate investments in such a way that they are lucrative during their lifetime and for the next generation?
1. inheritance law and new regulations
Life is constantly changing and so are our assets. The will should therefore be reviewed regularly. At least every three to five years and after important family events such as marriage, divorce or the birth of a child – but also after changes to the Swiss inheritance law reform, which, for example, has given testators more freedom in the distribution of their estate since January 1, 2023. In the past, spouses, children and parents had to receive certain compulsory portions, while cohabiting partners had no entitlement. The new regulation removes the compulsory portion for parents, but leaves that for spouses or registered partners unchanged. This means that cohabiting partners and stepchildren have easier access to the inheritance. Information that is important for estate planning, which is why you should always consult an expert.
2. the real estate valuation
The property valuation is important for the return on a property. It provides relevant information on the course of returns, tax costs and has a direct influence on financing. For example, the market value is used by the bank as collateral for a mortgage. Without knowing the market value, it can be difficult to carry out repairs and modernizations because you don’t know how much money can be spent on them. Neglecting the property valuation can therefore lead to financial problems and make it more difficult for the next generation to sell or manage the property. In addition to carefully documenting the documents to be managed, it is also important to keep a regular eye on the market value in order to be able to make the right financial decisions on an ongoing basis.
3. emotions and returns
As a real estate owner, it is important to leave emotions about the property out of the equation, as they can have a negative impact on important decisions. Easier said than done. However, those who are too attached to a property are often unable to objectively assess the next steps. Time and again, owners are tempted to set the sales price too high, e.g. in order to delay the sale. What should have been a “simple sale” in legal and logistical terms is becoming unnecessarily complicated. It is therefore important to realize that real estate is a financial investment and the decisions you make should be based on objective factors such as market value, financing and taxes. In this way, you can ensure that decisions are made rationally and financially sensibly and are not influenced by emotional factors.
4. environment and society
As an owner, there are various ways to make a contribution to the environment and society. One option is to promote sustainable services and materials as well as renewable energies, which help to reduce environmental impact and conserve resources. In the long term, this can help to maintain or even increase the value of the property. Tenants are also increasingly interested in environmentally friendly solutions and feel respected and valued by landlords who are committed to sustainability, which promises an intact and long-term landlord-tenant relationship and also increases their willingness to pay accordingly.
Conclusion
It is clear that estate planning goes far beyond the drafting of a will. Comprehensive planning is advisable in any case so that owners have the necessary basic knowledge and are aware of future opportunities and challenges. Private individuals are increasingly relying on real estate experts when it comes to making the right decisions and managing properties profitably – also in the interests of the next generation.
Thanks to constant digitalization, new applications have emerged along the life cycle of properties that will make property management considerably easier in the future, as properti’s management service shows: Thanks to exclusive access in the monthly cancelable subscription model, owners can keep track of their portfolio and its budget planning and returns, i.e. their mortgages, important documents and insurance policies, the current market value as well as planned investments and tenant concerns, around the clock. Through constant market focus and the necessary expertise, we ensure that the planned estate is handed over in good condition and that the property value remains as high as possible.
Excerpt from “der Hauseigentümer” (HEV Switzerland) from January 15, 2023. You can find more publications in our newsroom.