Building and renting DH with two parties as an investment

Hello everyone,

I would like to put the following thought experiment up for discussion. I have no knowledge of legal and tax pitfalls in this context and would appreciate some feedback on this.

- There are two parties A and B. Both parties are married couples, in their mid to late 30s, each with two children.
- A and B each built a single-family home for their own use two to three years ago.
- New building plots have been developed in the community, with 150 applicants for 20 plots. Party A has the opportunity to purchase one of the plots (500 sqm, 120,000 euros).
- A and B are considering buying and financing the plot together and building a semi-detached house with basic amenities on it. (Rental bunker ;)
- Both semi-detached halves are to be rented out to refinance themselves.
- The living area is approximately 2 x 120 sqm.
- The cold rents are currently customary at 10 euros per sqm.
- Construction costs for the semi-detached house: 340,000 euros (ready to move in without kitchen) / ancillary construction costs 40,000 euros.
- Total financing requirement is 500,000 euros.
- Both parties do not want to contribute equity, except for incidental purchase costs.
- The annuity should be 5%.
- Both parties have a minimum monthly income of 7,000 euros each (from non-self-employed work).
- It is assumed that the property will increase in value by 5% in the first year, then 1% annually.

The following questions could be discussed:

- Will a bank approve such financing for each party, and is the entry in the land register for the semi-detached house sufficient for the bank?
- Can both parties be listed as owners in the land register? For example, can party A sell their half later and party C take their place?
- Is there anything crucial to consider when purchasing the plot by two parties? Does the plot have to be divided? How does the whole process work in the land register?
- What happens if A or B goes bankrupt?
- How large is the potential to save taxes on the loan interest?
- How can an approximate return be calculated taking tax effects into account?

I would appreciate active participation.

I would first ask myself whether it is even allowed to purchase the property together with party B if only party A has the commitment.

-A and B each built a single-family house for their own use two to three years ago.

That sounds like ongoing financing for these properties – do you want to jeopardize that with a reassessment of their risks?

-A and B are considering buying and financing the plot together and building a duplex with simple features on it.

I would definitely divide the plot so that each half stands on its own property and avoid a property co-ownership partnership or similar between A and B.

Regarding the features, I have doubts that single-family house rental applicants find an apartment-standard attractive. And for couples in their mid to late thirties, I might consider these houses for their own use once the children have left home – or even then for the children.

Would never want to be dependent on other lives with such sums. What if one party goes bankrupt, does the other then have to pay "double"?

Even if you get along well, it’s about money and a lot of money at that. The best friendships and even families have broken over this.

Just arranging these details so that neither of the two falls flat because of the other will be almost impossible. Then dividing property etc. and then building "together".

We just had the same/similar discussion here. The municipality immediately waved it off when it came to dividing the plot.

As a GbR you can probably jointly build and rent out a house, whether it’s a semi-detached or single-family house. Jointly, not divided shares. However, it’s just like any other crazy idea here: you’re not safe from trouble. Money and obligations are the biggest sources of conflict. It can happen that one spends his evenings (sorry) with the family, while the other has to deal with an urgent rental problem. You do it twice; the third time remarks will be made. Negative feelings arise. Three weeks later, you avoid each other, etc. The friendship is then also over. Or the women get bitchy. Or, or... Rental income in the plus must be taxed, selling within 10 years is speculation. If the tenants don’t get along or the faucet leaks, they can always ring the landlords next door. Good luck ;) And whether you can sell the houses well at all with simple standards and loveless rental gardens is also unknown.

I only know of one corresponding constellation and there it is a GbR. (However, they do not just have a semi-detached house, but several larger rental buildings and a management company.) I mean, in a GbR, two married couples would be four parties, right?

Has anyone already made an investment calculation? Do you have any practical personal connection to the topic (are you a construction contractor, craftsman, tax advisor, or property manager)?