Assessment of financing and purchase project

Good day,

thank you first of all for the interesting threads here in the forum. I have already been able to take away some interesting incentives.

Now to my project:

There is the possibility to purchase a used property in my desired place of residence. The two-family house was built in 1950 and has about 175 sqm. The previous occupants, whom I know, have made some improvements in the house from time to time (insulation, new windows, new heating system...). The house is situated on a plot of 1,000 sqm. Banks value the plots at 105 euros per sqm. In reality, current payments are rather 120 - 140 euros.

The purchase price is supposed to be 180,000 euros. Ancillary costs will amount to about 12,500 euros. The loan amount is to be exactly 200,000 euros, as some work still needs to be done. 13,000 euros of equity are also available. However, these are not to be invested but used as renovation funds and a buffer.

The upper apartment, which is completely move-in ready, is to be rented out for 450 euros net cold rent. I have a rent commitment from the municipality for this. I will occupy the lower apartment myself. A kitchen will be installed there. In addition, a few more things need to be done. Everything will be done with own labor.

Now about me:
I am a civil servant in the administrative service. After deducting the private health insurance, I have 1,800 euros net left. I currently live in a rental apartment and pay 315 euros cold rent, 400 euros warm. Last year I was able to set aside 300 euros monthly. From the remaining money, I paid for vacations, repairs and living expenses. After the allocation phase in 13 years (see below), I will receive a net salary of at least 2,150 euros net after deducting private health insurance. Usual increases of about 2% annually are not included in this.

I bear the financing alone. At the moment I have an offer from my house bank:

050,000 euros KFW; 1.87% effective interest, 10 years interest fixed
125,000 euros Wohnbauriester without government subsidy; 1.81% effective, from allocation after 13 years 2.77% effective, 24 years (total) interest fixed
025,000 euros building savings contract; 3.09% effective, from allocation after 13 years 2.50% effective, 24 years (total) interest fixed

This results in a financing rate of 827 euros in the first 13 years and subsequently 953 euros over 11 years.

After 24 years, a KFW residual debt of 20,000 euros remains. KFW allows full special repayments. One would then repay whatever is possible. Total costs for the loan are about 75,000 euros if KFW is paid off normally.

To my questions:

1) What do you think about the affordability of the property? My current calculation is as follows:

Income:

1,800 euros salary
450 euros rent
100 euros subsidy from parents
2,350 euros

Expenses:

827 euros repayment
250 euros ancillary costs
100 euros reserves rental apartment + house
1,100 euros living expenses including everything (last 12 months: 1800 - 400 euros warm rent - 300 euros saving)
2,277 euros

Considering the financing, the calculation seems quite “tight”. However, all vacations are included in the living expenses. One would cut back on these with liquidity shortages. Furthermore, there is the possibility that a person moves in with me and pays about 200 euros quasi-rent to me. But I cannot count on this 100%. Besides the normal increases based on collective bargaining, my salary rises every two years because I move up levels. In three years, a standard promotion is also due. As I move closer again to my original living area, I expect fuel costs to decrease by about 75 euros monthly. But this is also not part of the calculation.

2) What do you think about the financing model suggested by the Volksbank?

Thank you in advance for your assessment!

Best regards
Nordseelagune

I cannot and do not want to address everything right now, but I want to give you 2 important hints.

1) Normally, financing is divided into thirds when incorporating Bauspar or Riester, meaning 1/3 equity, 1/3 bank, and 1/3 Bauspar contract (including Riester). Here, you simply take 50 TEUR KFW and, due to lack of equity, put the rest into the Bauspar contract. That means 25% bank and 75% Bauspar contract.

Why does the bank not offer its own part as an annuity loan? In my opinion, there should have been a maximum of 100 TEUR Bauspar contract, or even less, especially since I find Riester generally out of place here due to lack of proper subsidies.

2) The full prepayment option is only valid during the initial fixed interest period, after which it is zero euros.

the entire idea is not particularly good. the interest rates are high due to the lack of equity, the additional costs have to be financed, the renovation costs are not financed, but you don’t have any money left to pay for them. you have a car, but you don’t mention anything about the financing/saving. the rental income has to come in first of all. if the apartment is, to put it mildly, nonsense, then you’ll only get nonsense tenants. at 100 euros per sqm, it’s not a very great location either (we ourselves bought a plot for 100 euros/sqm...) and it can happen that no one wants to live with you at all.

all in all, i consider this very, very risky. any salary increases at some point don’t affect anyone today. if you are a civil servant, buy a nice condominium within the range of 100,000€ and leave the tenant nonsense alone. you don’t buy a 65-year-old house just to be able to pay for the house ONLY through the rent. such a house is a money pit...

you have already recognized yourself that the calculations are very tight. and if you already notice it now, it can’t possibly end well. 6 months without a tenant, a broken heating system (and 100% rent reduction in winter + further damage from frozen water pipes...), problem tenants and you are already in foreclosure?!