Key Facts
- High demand and full occupancy: In urban centers such as Zurich, Basel and Geneva, demand for rental apartments remains strong, enabling landlords to offer their properties fully let at market prices and generate stable income.
- Invest or sell: If rental income does not cover costs, owners have the choice of either investing in modernization to increase rental yields or thinking about selling to make the most of the property’s value.
Last year, the profitability of MFA investments deteriorated in the short term. High interest rates and rising costs meant that many owners had difficulties covering their operating costs through rental income. This led to uncertainty and, in some cases, a decline in the attractiveness of this form of investment. However, the situation is now slowly stabilizing, especially for landlords who can rent out their properties efficiently.
Despite interest rates remaining relatively high at 1.00% (new from 26.09.24), financing costs are once again more predictable thanks to falling inflation and stable rents. One decisive factor that continues to make multi-family homes attractive to investors is the high demand for rental apartments in urban areas such as Zurich, Basel and Geneva. For landlords, this means Full occupancy at current market prices is the key to maximizing income and benefiting from stable returns in the long term.
Costs, investments and returns: what investors need to know
While financing conditions for apartment building investors became more difficult last year due to rising interest rates, the ratio of investment to return has now improved. According to recent reports, the average return on multi-family homes in Switzerland is around 3% to 4%. This is higher than many alternative real estate investments, such as single-family homes or condominiums.
Cost structure for MFH investments:
- Financing costs: The effective interest rate for mortgages is currently around 1.25% to 2%, depending on the bank and term.
- Maintenance and upkeep: Investors should budget around 0.8% to 1% of the property value per year for the maintenance and upkeep of apartment buildings.
- Tax aspects: Another advantage for investors are the tax deductions for maintenance costs, which significantly reduce the overall burden.
Potential for value appreciation:
- Modernization and energy-efficient refurbishment: Investments in modernization and energy-efficient refurbishment can secure the long-term increase in the value of the property and increase rental yields. Particularly in urban areas, rental prices have risen steadily in recent years, which has a positive impact on the profitability of investments.
Focus on tenants: Why full occupancy is crucial
For property owners , the aim is to keep their properties fully let – and at fair market prices. The demand for urban living space is unbroken, which forms the basis for a successful real estate investment. Living space remains sought-after and scarce, especially in the big cities. This gives landlords the opportunity to offer their rental properties at attractive prices, even in a difficult market environment.
But what to do if the income is still not enough to cover the running costs? Owners are often faced with a difficult decision here: either continue to invest in the property in order to achieve higher rental income in the long term, or consider selling it.
Costs, investments and sales options: What is the right way?
If, despite high demand and prices in line with the market, rental income is still not sufficient to cover expenses, owners have several options. Targeted investment in modernization and energy-efficient refurbishment can not only push through higher rents, but also increase the long-term value of the property.
Another option is to sell the property. In a dynamic real estate market like the one in Switzerland, selling an apartment building can be a profitable solution, especially if you have quick access to a reliable real estate price portal and valuation. Use this information to decide whether to sell or make a new investment.
Conclusion: Act now – either invest or sell
Even in volatile times, multi-family homes remain an attractive form of investment, especially in sought-after urban locations. However, in some cases the cost structure makes it necessary to either continue investing or consider selling. At properti, we help you find the best solution – be it through a precise property valuation, advice on rent optimization or support in marketing your property.