How to value investment properties from auctions

Introduction: The Key to Successful Property Valuation

Anyone evaluating investment properties from foreclosure auctions in Switzerland faces a complex but lucrative task. The challenge lies in accurately analyzing opportunities and risks - from location quality to building substance to potential rental yields. Unlike the traditional real estate market, success here depends less on emotions and more on data-driven decisions. Platforms like LocalAuction.ch provide a comprehensive overview of all official auctions in Switzerland for the first time, providing the data foundation that investors need for informed valuations.

Basics of Valuing Investment Properties

The value of an investment property fundamentally consists of two components: the Income Value and the Substance Value.

1. Income Value - the Basis of Yield

The income value reflects the expected rental income that a property can generate over the long term. The following are crucial:

Gross Rental Yield: The total of all achievable rents per year.
Operating Costs: Maintenance, management, reserves, and insurance.
Capitalization Rate: The interest rate used to discount future earnings (depending on location and property between 3-6 %).

Income Value = (Net Rental Income × 100) ÷ Capitalization Rate

Example: A property with an annual net income of CHF 40,000 and a capitalization rate of 4 % results in an income value of CHF 1,000,000.

2. Substance Value - the Material Basis

The substance value is derived from the replacement costs minus the depreciation due to age or wear. It serves to verify whether the purchase price justifies the physical value of the property.

Step-by-Step: How to Properly Evaluate Auction Properties

1. Location Analysis

Location remains the decisive factor. Particularly in growing regions like Zurich (ZH), Zug (ZG), or Vaud (VD), rental properties achieve stable yields and long-term value increases. Even more rural areas like St. Gallen (SG) or Solothurn (SO) present opportunities - especially when infrastructure projects or migration to the region are planned. Important location factors:

Population growth and economic dynamics
Transport connections and labor market
Vacancy rate and rental price level
Long-term development prospects (e.g., new industrial zones or university locations)

2. Understanding Market Value and Transaction Value

In the case of auction properties, the so-called Appraisal Value is set by the enforcement office or an appraiser. It serves as a reference value, but not as a limit. Experienced investors calculate with a target purchase price that is about 10-25 % below the appraisal value - depending on condition, demand, and financing situation. Example: A property in Bern (BE) with an appraisal value of CHF 950,000 can already be auctioned for CHF 780,000 with little competition.

3. Technical and Legal Examination

Since viewings are not always possible, thorough file review is essential. The following documents are crucial:

Market value appraisal (including building substance and income estimate)
Land register extract with liability directory
Cadastre and site plans
Lease agreements and utility statements (for rented properties)

4. Need for Renovation and Yield Potential

Renovation properties carry higher risks - but can also achieve the most attractive yields. It is crucial that the planned investments are proportionate to the expected value increase. Sample calculation:

Item	Amount (CHF)
Purchase Price (Auction)	750'000
Renovation	120'000
Total Investment	870'000
Appraisal Value after Renovation	1'050'000
Value Increase	+180'000
Annual Net Rental Income	45'000

The gross yield here is around 5.1 %, in addition to the value increase of over 20 %.

Yield Calculation in Practice

1. Gross vs. Net Yield

Gross Yield: (Annual Rental Income ÷ Purchase Price) × 100
Net Yield: ((Rental Income - Costs) ÷ Equity) × 100

2. Example Calculation for an Apartment in Lucerne (LU)

Item	Amount (CHF)
Purchase Price	620'000
Annual Rental Income	31'000
Operating Costs & Management	5'000
Equity Share	200'000

Gross Yield = 5 % Net Yield = ((31’000 - 5’000) ÷ 200’000) × 100 = 13 % These values indicate that properties from auctions can offer above-average yields with careful analysis.

The Role of Digital Tools in the Valuation Phase

Data platforms like LocalAuction.ch today offer more than just an overview of foreclosure auctions. Through intelligent filters and AI-assisted valuation systems, properties can be compared based on yield potential, location, or appraisal value.

Advantages of Digital Analysis:

Automatic comparison of market value and bidding prices
Detection of regional trends (e.g., rising bids in Thurgau (TG) or Grisons (GR))
Early warning systems for undervalued properties
Exports and analyses for investment planning

Conclusion: Systematic Valuation Leads to Above-Average Yield

Those who systematically evaluate investment properties from foreclosure auctions combine market understanding, numerical knowledge, and strategic thinking. The greatest successes are achieved by investors who base their decisions on solid data and recognize opportunities where others hesitate. With tools like LocalAuction.ch, this process becomes easier, more transparent, and more efficient - from site analysis to final yield calculation. Those who understand the mechanisms not only benefit from favorable entry prices but also build a robust real estate portfolio in the long term.