Buy a house with equity and loan, renovate through property sale

Hello everyone,

after more than 2 years of searching with several frustrating experiences, we have finally received an acceptance from sellers and are "allowed" to spend a lot of money on a house. The situation is as follows:

General information about you:

[*
How old are you? 38, 38, 2, -1 (K2 is coming in winter, if all goes well)
[*]Are children planned? No more after K2
[*]What do you do professionally? Employees (IT + administration)
[*]How many hours do you work? He 37, She 20


Income and asset situation:


[*]What income do you have (gross/net)?
[LIST]
[*]He: 4800€ net (tax class 1, we want to marry this year)
[*]She: 1100€ net (tax class 1) -> will drop to about 600€ for 1 year of parental leave starting winter, then back up to 1100€
[*]Rental income: 1200€ after taxes (1000€ rent + 200€ income from photovoltaic system)


[*]How much child benefit do you receive?


[*]currently 219€, from winter 438€


[*]How much equity do you have?


[*]About 520K€ cash, about 50K€ invested.
[*]Property 1: mid-terrace house from 1925, current value about 350K€, rent after taxes: 650€, debt-free and owned for more than 10 years
[*]Property 2: small single-family house in the village, current value about 350K€ (1000sqm plot), rent after taxes: 400€ + 200€ photovoltaic, debt-free and owned for more than 10 years
[*]My girlfriend is an only child and will inherit two houses (current conservative value approx. 500K€ each).


[*]How much equity do you want to invest in the house project?


[*]About 450K€ from the cash
[*]Property 1

Income and expenditure totals:

We have kept a detailed household diary for the last 2 years and analyzed all bank statements.
The result is:

[*
Total current income ~7500€
[*]Total current expenses (including reserves for real estate, cars, electrical devices, ...) ~5000€ (including rent + ancillary costs)


General information about the property:


[*]How big is the plot? 950sqm
[*]What is the land value? 350€/sqm - but this is irrelevant here - market prices are completely decoupled. In the same street, half the size plot sold for 500K€ two years ago.
[*]New build, old building (year built), house type? Old building 1936
[*]Garages? 1
[*]How big is the house? (living area / usable area) just under 180sqm on 3 floors + fully basement
[*]What is the market value of the land and house after completion? ~1.05-1.2 million


Construction or purchase costs:


[*]Additional acquisition costs (notary, court, property transfer tax, broker) 55K€
[*]Construction or purchase costs (incl. architect, structural engineer) 850K€
[*]Renovation and/or refurbishment costs ~150-300K€ (without considering potential subsidies)
[LIST]
[*]Fortunately, the house is in quite good condition (e.g. external insulation present, windows between 10 and 30 years old). 150K€ is the minimum assumed by the architect during inspection:
[LIST]
[*]new kitchen
[*]new radiators
[*]insulate top floor ceiling (attic)
[*]a new bathroom (one bathroom is only ~6 years old)
[*]expose and sand floorboards (there are a few layers of carpet/laminate on top)
[*]painting work
[*]electrical system (partially already 3-wire (ground floor and 1st floor), partially still 2-wire (attic))


[*]For 220-250K€ would be added:


[*]opening of floor plan on the ground floor for open living/dining area
[*]sliding doors from the open living area to the
[*]terrace
[*]fireplace


[*]For 300K€ I had now thought:


[*]modernization of heating (year built 2002) (possibly underfloor heating on ground floor)
[*]...


[*]What remains will either be put aside/saved and/or invested when the over-80 tenant in Property 2 moves out.

[*

Total costs 1.05-1.2 million €

Firstly, the price is of course insane, that we are aware of. However, it was a tough fight with two other interested parties who offered the same price - in the end, the sellers chose us for personal reasons. The sellers had over 100 inquiries, many from investors because the plots are extremely sought after there. The financial risk is therefore quite manageable.

Secondly, we are aware that we can manage it. We have now thought as follows:

We pay the purchase price + ancillary costs (~900K€) from our equity (use ~430K€) and credit (~470K€). For the renovation, we sell Property 1 (Property 2 is not an option because my girlfriend is emotionally attached to it, even though the yield there is poor). Depending on the proceeds, the renovation will be done. In case of emergency, we still have almost 100K€ cash buffer.

The online calculators currently give interest rates between 2.35-2.55% depending on the day for 2000€ payments and 20-25 years fixed interest period. This would keep the remaining debt very manageable after the end of the fixed interest period, and the total term would also end before retirement. Presumably, we can also make special repayments, but currently, we are not counting on that.

Questions about this:

1) Does this make sense overall?
2) Can this be done with the allocation as described, or does the bank want a renovation plan, which then must be included in the financing? In principle, one can also move in like this (except roof insulation), then just with bathrooms and wallpapers from the 70s/80s :) If a renovation plan is necessary, would we then need interim financing?
3) Starting tomorrow, we want to call brokers and banks and have them make us offers. Is there anything else we should keep in mind?

Have fun with the electrical work. We have sometimes even had three-core wiring and suddenly a cotton cable is smiling at us. Best to redo everything...

The renovation seems very expensive to me, considering that it is more of a refurbishment than a comprehensive renovation. For €300,000, much more extensive work could be done, like underfloor heating?

I cannot judge whether all of this makes sense. But you have so much equity lying around that it no longer matters.

The more interesting question is whether it would not be better to rent out Property 1 long-term and take out more credit for it.

Makes sense. Sell off as many of the properties with poor returns as the emotional value allows :D

Two, or rather almost four properties for just over 1.7 million and cash for almost 520,000 and income of around 7,500 euros - what exactly is not possible??? Is this a joke?:D

The same applies as in your last thread

But it is quite a luxury and quite a waste of money to do it that way. If you want, then do it.