Successfully building your real estate portfolio

Understanding the basics of a real estate portfolio

At smzh, we know that building a successful real estate portfolio starts with understanding key concepts. In this section, we explain the essential aspects you need to know as you begin your real estate investment journey.

What is a real estate portfolio?

A real estate portfolio is defined as a strategic collection of different real estate investments designed to build and secure wealth. It’s not just about owning several properties, it’s about intelligently combining different property types and investment vehicles to support your financial goals.

Benefits of a diversified portfolio

A well-structured real estate portfolio offers a variety of benefits, all based on the principle of risk diversification:

• Risk reduction: Spreading investments across different property types and locations reduces risk
• Stable income: Regular rental income from various sources
• Inflation protection: Properties tend to increase in value over time
• Tax advantages: Various depreciation options
• Flexibility: Ability to adapt to market changes

Typical components of a real estate portfolio

A balanced portfolio can include the following components:

1. Direct investments

• Owner-occupied apartment or house
• Income properties (rental residential real estate)
• Office and commercial properties

2. Indirect investments

• Real estate equities
• Real estate funds
• Real estate ETFs
• Digital real estate investments

What matters most is an even risk-return profile, achieved through the careful selection and combination of different investment vehicles.

Developing a clear strategy

Creating a clear strategy is the key to building a successful real estate portfolio. At smzh, we help you develop a structured approach that aligns with your personal objectives and financial situation.

Defining your objectives

When defining your investment objectives, it is important to create a clear vision together. We advise our clients to structure their goals as follows:

• Passive income streams from rental income

• Wealth accumulation through property appreciation

• Tax optimization using real estate investments

• Retirement planning with a sustainable portfolio

Assessing risk appetite

The formula in the real estate market is straightforward: the higher the risk, the higher the potential return – but also the greater the downside. We help you determine your personal risk tolerance and build a portfolio that matches your profile.

Typical risks in real estate:

1. Interest rate risk: Rising rates can make follow-up financing more expensive
2. Completion risk: Especially relevant for new construction
3. Depreciation risk: Due to changes in infrastructure or the economic environment
4. Rental loss risk: Due to problematic tenants or vacancies

To mitigate these risks, we recommend:

• Increasing your equity share
• Planning sufficient reserves for delays
• Conducting thorough market analysis
• Careful tenant screening

Determining the investment horizon

Your investment horizon is crucial for portfolio strategy. Real estate is a long-term investment, ideally appreciating over time. We suggest the following timelines for our clients:

Short-term (1–3 years):

• Building up equity reserves

• Market analysis and location selection

• Developing a financing strategy

Medium-term (4-10 years):

• Gradual portfolio development

• Optimizing rental income

• Regular portfolio review

Long-term (over 10 years):

• Continuous appreciation

• Sustainable cash flow generation

• Strategic portfolio growth

It is particularly important to factor in the current market situation. We therefore recommend calculating investments and monthly costs even with higher interest rates in mind.

Selecting the right properties

Careful selection of the right properties is critical to the sustained success of your portfolio. At smzh, we support you with our expertise at every step of this crucial decision-making process.

Conducting a location analysis

A sound location analysis is the foundation of any successful real estate investment. We differentiate various location categories:

In a location analysis, we take into consideration the following core factors:

• Micro location: local infrastructure, public transport connections, schools
• Macro location: economic development, demographic trends
• Perspectives: planned infrastructure projects, urban development

Comparing object types

Selecting the right type of object depends on your individual investment strategy. We analyze various options with you:

Residential real estate

• Strong demand in urban areas

• More stable rental income than commercial real estate
• Lower vacancy risk in prime locations

Commercial real estate

• Higher potential returns
• Longer rental contract durations
• Indexed rental contracts as inflation protection

Calculate expectes returns

In our return calculation, we take various factors into account:

Gross return: Provides a first impression of profitability

• Calculation: (annual net rent × 100) / purchase price
• Limited significance, as ancillary costs are not included

Net return: More realistic assessment of profitability

• Takes into account management and maintenance costs
• Interest costs
• Amortization
• Taxes

We recommend factoring in the leverage effect when calculating returns. This effect occurs when the investment yield exceeds the interest rate on external financing. By optimally combining equity and debt capital, we can increase the overall return on your portfolio.

Optimizing financing and taxes

Financing and tax structuring are central to optimizing a real estate portfolio. At smzh, we help you structure these complex aspects efficiently.

Reviewing financing options

The right financing structure is essential for your portfolio’s long-term success. We identify the following opportunities for you:

• More favorable interest rates for financing
• Flexibility when expanding your portfolio, managing amortizations, and handling service charges
• Sufficient reserves for renovations
• A stronger negotiating position with banks

The expected rental income should always exceed the monthly financial burden to ensure a positive cash flow.

Considering tax aspects

Tax optimization offers significant potential to increase returns. Together with you, we analyze different holding structures and their tax implications:

It is especially important to consider cantonal differences in property gains tax and real estate transfer tax. These taxes can range from 1% to 3% of the purchase price.

Continuously optimizing your portfolio

Continuous optimization of a real estate portfolio requires systematic analysis and regular adjustments. At smzh, we use our expertise to help ensure your portfolio remains on the best path.

Conducting regular performance analyses

A thorough performance analysis is the cornerstone of successful portfolio management. Our experience shows that regular reviews are crucial to long-term value development. Performance measurement should include the following key aspects:

Performance is measured on various levels:

• Object level: individual properties and their specific performance
• Portfolio level: overall performance and diversificaiton effects
• Benchmarking: comparison of relvant market indices
• Risk management: monitoring concentration risks and market risks

Monitoring market developments

Professional market monitoring is essential to make investment decisions. We continuously analyze:

Macroeconomic factors:

• Interest rate developments and their impact on financing costs
• Reference interest rate, rent
• Inflation rates and their impact on rental income
• Demographic trends in the target regions
• Economic growth and labor market trends

Microeconomic factors:

• Local rent developments
• Consumer price index (inflation)
• Shifts in demand in various segments
• Changes in user requirements
• Development of operating costs

Our experts use state-of-the-art analytical tools to identify market trends at an early stage and to derive targeted recommendations for action. Systematic market monitoring enables us to recognize opportunities and risks in a timely manner.

Portfolio adjustments if necessary

Periodic portfolio adjustments are crucial for long-term success. We recommend a structured approach:

1. Strategic monitoring

• Comparison with defined investment objectives
• Analysis of portfolio structure
• Assessment of diversification effects
• Analysis of risk-return profiles

2. Operational adjustments

• Optimization of rental management
• Adjustment of maintenance strategies
• Assessment of financing structures
• Evaluation of purchase and sale opportunities

The integration of sustainability aspects is especially important in this context. The energy optimization of existing properties is becoming an increasingly significant value driver. We support you in developing a sustainable portfolio strategy that takes both ecological and economic factors into account.

Another key aspect is active risk management. Through regular stress tests and scenario analyses, we can identify potential risks early and initiate appropriate countermeasures. In doing so, we consider:

• Market risks due to changes in demand
• Financing risks resulting from interest rate changes
• Asset risks caused by technical or legal changes
• Location risks arising from infrastructural developments

Performance measurement is conducted according to internationally recognized standards to ensure objective comparability. We use state-of-the-art analytical tools to provide a detailed breakdown of performance data.