How much equity is required for a rental property in Switzerland?

For an investment property, banks require a minimum of 25% equity (compared to 20% for a primary residence). Moreover, this equity must be entirely 'hard' assets: savings, securities, pillar 3a or gifts. The 2nd pillar (LPP/BVG) cannot be used for an investment property, as pension fund withdrawals are legally reserved for primary residences.

What is the maximum loan-to-value ratio for a rental property?

The maximum LTV is generally 75% for a rental property (vs. 80% for a primary residence). Some banks limit the advance to 66-70% for investment properties, particularly if rental yields are deemed insufficient or the property is located in a higher-risk area.

How do banks assess affordability for rental property?

Banks use two approaches: the standard affordability test (max. 33% of gross income) and rental yield analysis. Rental income is generally counted at 80% (to account for vacancy risk). The theoretical rate of 5% is applied, plus 1% maintenance and 2nd rank amortisation.

Can you deduct mortgage interest on a rental property?

Yes, mortgage interest on a rental property is fully deductible from taxable income. Maintenance costs, insurance premiums and management fees are also deductible. However, rental income is taxable as income. Tax optimisation is a central element of rental investment profitability.

Investment property financing: conditions and requirements in Switzerland

Rental property investment in Switzerland remains a popular wealth-building strategy, offering regular income and inflation protection. However, financing conditions are more demanding than for a primary residence: minimum 25% equity, reduced loan-to-value ratio, and rigorous yield analysis.

Financing conditions specific to rental property

Financing an investment property works differently from financing your primary residence. Banks apply stricter criteria to limit risk associated with property investment.

Equity: minimum 25%, 'hard' assets only

This is the fundamental difference from a primary residence. For a rental property:

Minimum 25% equity (vs. 20% for a primary residence)
100% in 'hard' equity: savings, securities, pillar 3a assets, gifts
No 2nd pillar (LPP/BVG): Pension fund withdrawals are legally reserved for primary residence acquisition. They cannot be used for investment property
No 2nd pillar pledging: Even pledging (without withdrawal) is generally refused for rental property

For a rental property worth CHF 1,500,000, you would need at least CHF 375,000 in liquid assets or realisable securities. This high amount is the main barrier to entry for rental property investment.

Maximum loan-to-value: 75%

The maximum LTV is reduced to 75% for rental property (vs. 80% for primary residence). Some banks are even more restrictive:

Rental properties in rural areas: 65-70%
Commercial or mixed-use properties: 60-70%
Older buildings requiring renovation: 60-70%
Well-located new buildings: up to 75%

Amortisation

The 2nd rank (from 67% to 75%) must be amortised within 15 years maximum, as with a primary residence. Some banks require amortisation down to 60% or 65% of the property value, which increases annual charges.

Indirect amortisation via pillar 3a is not possible for rental property, since the 3a can only be linked to a primary residence. Amortisation must therefore be direct.

Affordability calculation

Banks assess the financial viability of the investment from two angles:

1. Personal affordability analysis

Total charges (primary residence + rental property) must not exceed 33% of total gross income. Rental income is taken into account, but generally with a 20% discount for vacancy risk.

Item	Amount
Rental property value	CHF 1,000,000
Mortgage on rental (75%)	CHF 750,000
Theoretical interest (5%)	CHF 37,500
Maintenance (1%)	CHF 10,000
Amortisation (2nd rank over 15 years)	CHF 5,333
Total theoretical charges (rental)	CHF 52,833
Gross rental income	CHF 40,000
Retained rental income (80%)	CHF 32,000

The net charges from the rental property (CHF 52,833 - CHF 32,000 = CHF 20,833) are added to your primary residence charges for the overall affordability calculation.

2. Property yield analysis

The bank also evaluates the intrinsic yield of the property. An insufficient gross yield (below 4-5%) may lead to rejection, even if personal affordability is sufficient. See our detailed guide on return calculation and financing.

Types of investment property

Individual rental apartment

Buying a condominium (PPE) to rent out is the most accessible form of rental investment. The equity required is lower in absolute terms, but yields are generally modest (3-4% gross in major cities).

Apartment building

Purchasing an entire building (multiple apartments) offers potentially higher yields and diversification of rental risk. However, the initial investment is considerable (several million) and management is more complex.

Commercial or mixed-use property

Commercial spaces (offices, retail) offer higher yields but with increased vacancy risk. Financing is more restrictive (LTV reduced to 60-70%) and evaluation criteria are stricter.

Tax aspects of rental investment

Taxation is a central element of rental investment profitability in Switzerland:

Rental income: Taxable as ordinary income (marginal rate)
Mortgage interest: Fully deductible from taxable income
Maintenance costs: Deductible (flat rate or actual costs, depending on the canton)
Accounting depreciation: Not deductible for individuals in Switzerland (unlike some other countries)
Property value: Taxable as wealth (fiscal value, generally below market value)
Capital gains: Taxed separately on resale, with a decreasing rate based on holding period

The fiscal leverage effect is one of the main arguments for maintaining a high mortgage on rental property: deductible interest reduces taxation of rental income.

Detailed guides

Return calculation and financing — Gross vs net yield, charges, taxation, worked examples

Assess the feasibility of your rental investment project

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