The great secret to investing in commercial properties is that the underlying business model is relatively simple and easy to understand.

A simple model makes it much easier to be successful – i.e., making profit and avoiding loss.

This is in clear contrast to most other investments where success is a lot more elusive – e.g., the difficult art of stock picking, selecting bonds, and choosing cryptos.

A simple three-part model
The basic business model underlying Swiss Properties Invest has only three parts:

Easy to succeed, difficult to fail – and already proven
That is our very simple and easy-to-understand business model underlying Swiss Properties Invest.

It is really not very sophisticated and a 7% return on investment per year is definitely not something extraordinary, but because it is so simple it is very easy to replicate – i.e., it is easy to pick the right properties.

Also, because the business model is so simple it is almost difficult to fail – i.e., it is difficult not to pick the right properties!

Easy replication without failure means that we can easily build a big portfolio of properties by simply adding new properties to the portfolio.

And the business model is already proven because it is the same simple model that the team behind Swiss Properties Invest has been using since 2006 to acquire more than 60 Swiss commercial properties with a total acquisition volume of more than CHF 500 million.

For the properties with a running time of at least 10 years (median of 13 years), the average return on investment* has been more than 400%.

*The return on investment is calculated for each property as the sum of the value appreciation, the accumulated profits paid-out to investors, and the currency gain for Danish and EU investors.

Benefitting from inflation

Besides the simple business model combined with compounding to make commercial properties a great investment, there is another and completely different reason why properties are so great as investment assets, and that is their ability to provide an effective hedge against the effects of inflation.

Actually, they not only hedge against inflation – they really benefit from it!

Getting cause and effect right
Inflation is the increase in the quantity of money and credit.

The main effect of inflation is an increase in the prices of goods including consumer goods, services, and real assets.

The hedging and benefitting effect is exactly this increase in price on a real asset – due to ever-increasing amounts of money chasing the same relatively small number of real assets!

The effects of inflation create winners and losers
You might think that if the prices for everything increase, then it is the same for all and then it doesn’t really matter.

But that would be missing the most important point of inflation; the prices of different goods and services are never influenced at the same time and to the same extent – i.e., the price increases are very unequal and some prices may even decrease during inflation.

The name of the game with inflation is to place your money in those goods (i.e., real assets) which will increase faster in value than the money is losing its value (i.e., their power to purchase).

Inflation is in the final analysis a massive transfer of income and wealth from some people to others. Actually, it is the transfer of income and wealth from most people to only a few people!

All real assets provide some hedging against inflation because they will all increase in value as an effect of inflation. Ownership of shares in good companies (listed or private) and assets like precious metals, cryptos, jewelry, watches, classical cars and art will all provide some hedging against from inflation.

However, due to the use of leverage in property investments you will own more assets when you invest in properties and you get an increase in value not only on that part of the assets bought with your money, but also on that part bought with the help of other people’s money (e.g., a mortgage from a bank).

Therefore, you get more hedging against inflation with properties than you do with any of the other real assets.

And you get the added advantage that the inflation will not only increase the value of your properties, but it will at the same time depreciate the debt that you have used to purchase the properties!

Inflated prices of real assets
Most of the increase in the prices of real assets seen today is caused by inflation.

When listed companies are traded for price-to-earnings ratios (P/E ratio) of 50 or more, then prices have been severely inflated.

A P/E ratio of 50 means that it will take you 50 years before your investment has returned what you paid for it!

It is, of course, possible that a company has a business model which can be expanded and extended so that a P/E ratio of 50 will turn out to be a bargain, but the odds are that most companies don’t even survive – at least not as leaders within an industry – for the 50 years it takes to get back the investment!

Link to reality and the real economy
Property prices are, of course, also increasing due to inflation.

However, commercial properties have an advantage in comparison to other types of real assets (including many residential properties), and that is the link between the purchase price and the rental income generated by the property.

As long as we buy commercial properties based on the rental income, then we maintain a sound link to reality and the underlying real economy of scarce resources, and hence, we know that we are not at risk of paying too much.

In our basic business model underlying Swiss Properties Invest, we need an rental income that will allow us to get a return on investment of approximately 3.5% per year – after all costs.

Only when we have this level of basic business return on investment will we buy a property.

When you have to play, then go for winning!
It is important to point out that inflation is so massive nowadays that in order to just preserve what you have managed to save, and especially if you want to increase it, then it is not an option to stay out of the game!

You need a good strategy for your investing where you actively use inflation as an instrument for your enrichment.

And Swiss commercial properties are ideal also for this purpose!

Artificially low interest rates
In order to sustain the present global fiat currency system with its massive debt levels, national banks have introduced ever lower interest rates – many have even recently introduced, for the first time in history, a period with negative rates.

This, of course, goes against all economic sense.

After all, the term “economics” comes from the activity of “economizing,” which recognizes the simple truth of life that our resources are always scarce and that we need to carefully choose which ends and objectives we want to achieve with our limited resources.

Nonetheless, our commercial properties benefit twofold from these artificially low interest rates:

First, the costs for using leverage (i.e., the interest rate) are lower than it would have been in a world without inflation.

Second, the more national banks push the interest rates down, the less attractive it is going to be for investors to keep capital in accounts and as loans (e.g. bonds), and the more attractive real assets like commercial properties are going to look, causing their value to appreciate further.

Less bad is the new good
Inflation has become an important means of financing political programs in most states nowadays.

However, not all states are using inflation to the same extent, and not all states are in the same bad economic situation; some states are a lot more in trouble than others!

Switzerland is in comparison to most other states, “less bad” – and in a world where “good” is not an option, then we prefer to go for “less bad”!

The Swiss fiat currency (i.e., CHF) is demonstrating that “less bad” really is the new “good” in the world today; the CHF has gradually over time grown in strength in comparison to other currencies (e.g., DKK, EUR, USD and GBP).

It should be noted that CHF is also just a fiat currency made out of nothing like all the other currencies in the world and, hence, the “strength” of CHF in comparison to the other currencies is only by being associated with the strong Swiss economy.

And the strategy has worked very well
The beneficial effects of inflation have been quite significant in the Swiss property projects which the team behind Swiss Properties Invest has done since 2006.

A big part of the more than 400% average return on investment in properties with a running time of at least 10 years (median of 13 years) for Danish and EU investors has come from value appreciation of the properties caused by inflation – and from currency gains also related to inflation.

Safe haven Switzerland

Swiss Properties Invest focuses only on commercial properties in Switzerland.

The reason for this very strict geopolitical focus is that Switzerland has proven to be a unique place to keep and accumulate wealth.

These characteristics have rightly earned Switzerland the predicate “safe haven”.

And it is not a coincidence that a high proportion of private wealth in the world is in or associated with Switzerland!

Strong private property rights
For centuries, the Swiss citizens have maintained a tradition of strong private property rights.

Respect for private property rights and political systems are, of course, closely linked.

The Swiss tradition for strong private property rights is to a large extent due to their very decentralized political system, where a population of less than 9 million is divided into almost 2.000 political communities which are spread over 26 independent small states (i.e., cantons). The cantons are joined in one federation (Confoederatio Helvetica, i.e., CH).

Political decentralization is good for private property rights. Or more accurately, political centralization is bad for private property rights and, hence, political decentralization is less bad – and “less bad” is also here the new “good”!

Anyway, private property rights are absolutely necessary for a market economy, social cooperation, the creation of wealth and ultimately peace and civilization.

These effects are easily visible when you visit Switzerland; it is obviously a very rich society – with a fantastic nature!

A very strong economy
Switzerland is arguably the strongest economy in the world when measured by population size.

Gross Domestic Product (GDP) is commonly used as a measure of economic strength when comparing countries, and Switzerland is usually placed high in those comparisons.

However, it should be mentioned that GDP is not a very good surrogate measure of true economic strength within a geographic area.

Actually, GDP is more a measure of the size and extent of the state and is only very indirectly a measure of private production, which is where income and wealth in the final analysis come from.

Domestic market capitalization per capita is a much more valid measure of the private production and the strength of the economy because it is based on the value of all the listed companies within a given geographic area.

And here, Switzerland is ranked at the absolute top globally!

A very strong property market
It is no surprise that within the very strong Swiss economy, there is also a very strong market for commercial properties.

The costs of financing properties are lower than most other countries, and this has historically given a positive yield gap (i.e., the difference between the net return on a property without leverage and the interest rate paid on a loan or a mortgage).

The positive yield gap is, of course, very important because it is the reason for using leverage as part of our basic business model underlying Swiss Properties Invest.

A safe haven for a global economic storm
Switzerland has, throughout the last 500 years of history, been a safe haven in times of all types of serious international trouble.

During a global economic storm, we believe that Switzerland in general, and investing in Swiss properties in particular, will be some of the best options available – especially to investors living outside of Switzerland.

The old saying regarding the 3 most important things in property investing being “location, location and location” is indeed true. And the first and by far most important “location” is the country and, hence, the macroeconomic setting chosen!

For an investor living outside of Switzerland, being invested in Swiss Properties Invest could easily be the most important determining factor in achieving the best return on investment – and the even more important point of preserving the invested capital.

We must, however, emphasize that we believe that things will get tough also in Switzerland during a global economic storm; we are not claiming that Switzerland is a heaven on earth!

But we are certain that it will get a lot tougher everywhere else, and that is why we and many others are claiming that Switzerland is a safe haven!