Bridge financing or sell inventory first?

Hello,

I will briefly describe the scenario:

We currently live in our own home. However, it is a renovated old building and has not turned out to be ideal for us.

Therefore, the plan is to build a new house and sell the existing property.
I roughly calculated keeping the property and renting it out. It would take about 40 years for the rent to cover the price I could get from selling now. So I prefer selling now. The advantage would be that I would be debt-free all at once.

The land for the new build is already available.

I see two options now:

1. Selling the existing property with the option to live in it rent-free for a certain period X (maybe 1 year). If longer, rental costs of X€ per month would apply.
Advantage: I would not need interim financing and would have the money directly available for the new build.
Disadvantage: I would sell the house earlier, and a year later it might gain some value due to current price increases. A railway line is being expanded near us until the end of 2020, which would likely also lead to some increase in value.

2. Selling the existing property when or after the new build is finished.
Disadvantage: Costs for interim financing for 1 to 1.5 years would apply.
Advantage: Later sale, and especially for direct use, would probably mean a somewhat higher sales price.

How do you assess the situation? What would probably be the better approach?
Does anyone know what such interim financing for an amount of about 380,000,- for 1 to 1.5 years would cost?

Maybe briefly on the estimated figures:
Expected proceeds from the sale: 600,000 – 650,000,-
Costs for new build: 380,000,-
Remaining debt on current property: 220,000,-

Thanks a lot for your assessment.

Regards
Specki

perhaps still gain some value due to the current price increases.
[..]
Costs for interim financing for 1 to 1.5 years will be incurred.

You will have to look into your personal crystal ball to weigh your two mentioned points against each other. A lot can happen within 1.5 years: new real estate crisis, changes in state subsidies, etc. Or nothing happens and prices just continue to rise. Who knows.

1. Sale of the existing property with the option to live there rent-free for a period X (maybe 1 year). For longer need, rent costs of X€ per month will apply.

If you say that renting out is not worthwhile, only buyers for owner-occupation come into question. But since you demand that the buyer may only move in two years later at the earliest, I suspect that this will massively restrict the pool of buyers and will not lead to a top price.

With this last thought, I would tend to sell later.

We currently live in a homeowner's house. However, it is a renovated old building and has not turned out to be ideal for us. Therefore, the plan is to build new and sell the existing property. [...] So I prefer the sale now. It would have the advantage that I would then be debt-free in one go.

If I remember correctly, the house is from the 60s or so, so existing but not old building, and you would basically be neighbors with the buyers at the other end of the property. Is it clear now when the rear street will actually become a reality? You know my view regarding, on the one hand, the usability of tips based on selectively presented facts and, on the other hand, whether the respondents feel they are being made fools of. I will still try with a contribution in the sense of the currently asked snippet: selling the old existing property is the cleaner and better cut for the non-professional property owner. But here again, the advice would be based on a different foundation before considering all the facts: namely, the aspect of the cut through the division before the property development would also come into play.

Hey

Bridge financing is quite expensive, the banks like to charge 2-3% (sometimes even more...). So if the construction takes 12-18 months, you can figure out what it will cost you!

So the best solution: Sell + get the money immediately (house handover to the new owner) but at the same time have it included in the contract that you can use the house for amount X for the 12-18 months. You can sort all that out with the future owners.

1) Option: You get more money for the house, with which you can also pay rent or usage fees. 2) Option: You get less for the house, but you live there rent-free during the construction phase.

All this can be nicely arranged in the purchase contract at the notary.

With the current interest rates, it does not make sense to invest the entire sales proceeds into the new house. Depending on the investment period / age / tax burden, etc., it also makes sense to finance the new house, invest the money well, and then repay over 10-15 years. Renting out the previous house also yields a higher return at 2.5% (calculated over 40 years).

Hello, we have just bought a house and financed €40,000 temporarily until our current house is sold. We went to 2 banks. The 1st bank wanted €280 per month (7% interest). The 2nd bank, with which we have now signed, wanted €39 per month (1.1% interest). I am personally totally surprised but very happy that we now have significantly more financial leeway... So it definitely pays off to compare!