Build an investment property, despite a 1 1/2-story development plan

Hello everyone,

I am interested in whether it can be economically profitable to build a rental house as an investment property if the development plan only allows for a 1 1/2-story building?

The background of my question is as follows:
Some time ago, I inherited a roughly 800 m² plot of land with a south-facing side, close to the city center and recreational opportunities. Really very nicely located!

However, since the distance to my and my wife's workplaces is somewhat too great and we feel very comfortable at our current place of residence, we do not intend to build there for ourselves.

Since there are certain costs for property tax and maintenance of the land and we would like to invest in the current low-interest environment, we are considering building a house there and then renting it out.

However, the problem is that the development plan only allows for a 1.5-story building and the neighbors would certainly not agree to a change in the development plan...

As far as I know as a layperson, building a rental property is generally only economically sensible due to the fixed costs incurred if a multi-family house with at least 2 stories can be built. Is this correct, or can you say from your experience that a 1.5-story building also allows a worthwhile return? The return expectations are around 5 to 6 percent. Do you have any ideas/approaches on how to use the property profitably despite the restrictions in the development plan?

Selling is of course basically also an option, but since there is a certain "emotional attachment" to the property, it is only the last resort...

Sell and be happy. Every thought in a different direction is commendable but not purposeful.

1.5 storeys would then mean an apartment = ground floor apartment + converted attic apartment? A multi-family house that only becomes profitable from 2 storeys might be true. But it probably also always depends on how many apartments are then found there. How many m² of living space should it be, divided into how many apartments? You can have a look at what similar new apartments in your area cost in rent. Two apartments I generally consider tight. Surely better would be 3 or even 4. But then there is also the question whether you can fit 3 or 4 apartments in?

So it means looking at how to build the planned house to accommodate as many apartments as possible. I know, for example, that 2 or 3 room apartments rent best. (these are most often occupied and rent per m² is often somewhat better than for large apartments) Then you can look at what rent you can ask per apartment. The sum from that then further calculated with taxes, reserves, rent losses etc. Don’t forget yield and finally calculate what the house may cost in order to be able to achieve the goal.

That’s how I would take the first steps in the project.

PS: I would probably only sell if it absolutely has to be, especially if the plot is in a good location. The price will probably only rise.

€: Are you even allowed to build a pure rental building in the town? Here in town you don’t get a building permit if you don’t want to live in it yourself :)

How about a duplex, if allowed. If the property is in Stuttgart or Munich, with international corporations that occasionally look for a house for managers with families for a certain period, that could be worthwhile. Houses are also often rented in smaller cities, but if it's in the countryside.... :rolleyes:

Good evening,

I would be interested to know whether it can be economically viable to build a rental house as an investment property if the development plan only allows a 1 1/2-story building?

That depends on the building plot and the capital you want to invest!

The problem, however, is that the development plan only allows a 1.5-story building and the neighbors would certainly not agree to a change in the development plan...

See above! Basically, one-story buildings are not a problem; also not for multi-family houses, provided the development plan allows more than 2 residential units. Otherwise, a semi-detached house is not a bad alternative.

Do you have any ideas/approaches on how the property could be used profitably despite the restrictions in the development plan?

Send me the link to the development plan and the size of the building plot.

Rhenish greetings

If he is aiming for a pure rental property, I would fully rely on multiple apartments. If one apartment ever experiences rental losses, it is not immediately 50% that is lost. If there are no more than 2 apartments, then the duplex option will probably be the best. However, with 800m² of land, a house with 2 ground floor apartments that can share the garden and 2 small apartments in the attic should be possible. Maybe also 2 downstairs and one upstairs, then there would be at least 3.

For rental apartments, properties with overly generous rooms usually do not pay off. After all, you are not building for personal comfort.