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

Thank you very much for the feedback!

To me, the renovation seems very expensive, considering it is more of a refurbishment than a comprehensive renovation. For €300,000, you could do much more extensive work, like underfloor heating?

Whether all of this is sensible, I cannot judge. But you have so much equity lying around that it no longer really matters.
More interesting is the question of whether it would not be better to rent out Property 1 long-term and take on more credit for that.

Short version: Quite a lot of budget for so little work. €75k for a new heating system should be enough in the south as well, for the rest I would budget half up here, but maybe I am now too far removed from the new reality.

Yes, for the modernization of the heating system I have already assumed underfloor heating and switching from gas to X. The architect’s estimate was also not €150k but €120k, but currently, to be safe, we want to add something on everywhere. If it turns out cheaper afterwards, all the better. Also, the €300k includes other "small stuff," for example, a new front door and overall entrance, new exterior paint, etc. (I put that under …) – depending on how much we want and can do with the money.

Two, or rather four properties for well over €1.7 million and cash for almost €520,000 and an income of about €7,500 – what exactly shouldn’t be possible??? Is this a trick question? :D

As written: we know it's possible, but we want to choose the best option for financing.

Was this now a gift of the two houses from the parents to your girlfriend? Which inheritance is being mentioned here?
Why was it gifted? Are there perhaps maintenance costs for the houses involved?

I believe I already described this in another thread: The houses belonged to my girlfriend’s neighbor, who was strongly neglected by her family. My girlfriend’s father therefore became her legal representative, cared for her for a long time, and accompanied her in the nursing home. Fifteen years ago, she transferred the two houses in equal parts to my girlfriend and her father. Since his death two years ago, my girlfriend has been the sole owner.

The still outstanding inheritance is the parental home property. The mother-in-law is 75 but fortunately still in great shape. Additionally, my girlfriend’s godmother is single and has no children – she appointed my girlfriend as heir in a (kept by us) will.

That’s true... on the other hand, we see a bigger inflation approaching us... the properties can still be sold tax-free in a few years.
Now taking on €600-700k at 2-3% interest, which might in a few years only have 60-70% of the purchasing power... makes sense

instead of being debt-free, but having to sell "concrete gold."

I think you just have to look at what it’s ultimately worth:
- what do you get for the houses today? In the end, you then have no rental income, and probably only an overpriced property (luxury)

or rather:
€600k in debt, which has lost a lot of purchasing power
but also 2 more properties that will probably generate much more rental income in 10 years than today, and will also be worth much more than today

I would rather take out a loan here for 20 years, with 1-2% repayment... and then pay it off in a lump sum in 20 years through further inheritance.

Thanks for the approach, but that is not a very good solution for us, because:
- We feel uncomfortable with debt, especially in the currently unstable times
- Much more important: both debt-free properties basically need renovation. The terraced middle house planned for sale would need new windows, electrical wiring, and radiators; the remaining one also needs new windows, electrical wiring, kitchen, etc. In my opinion, we cannot manage that in addition to a €600k loan. Therefore, we prefer to invest the surplus money from the property sale into the other one.
- On the second single-family house to be inherited, a significant inheritance tax will also be due, which also needs to be paid somehow.
- With the one sale, we also want to hedge a bit against bubble risks. It is already extreme how things are going here currently...

A different question regarding the land register entry:

Currently, the plan is to contribute the following equity:

House purchase:
Me: €175K
Girlfriend: €275K

Renovation:
Girlfriend: €250K from house sale (just as an example, it could also be €150K)

In addition, there will be a ~€450K loan, with 2.9% interest that would total about ~€670K, although we will probably finish earlier with special repayments.
The loan will mainly be paid from my money due to the salary differences. My girlfriend will continue to earn relatively little and a €2000 installment rate works well for me (my current savings rate is slightly higher even though we are still paying rent), as long as other costs are divided proportionally.

I see the following options:
1) I pay off the loan entirely on my own. Then the ratio of contributed money would be roughly 60/40.
2) If I have not miscalculated: if my girlfriend takes over about €400 of the installment, we come to 50/50.
3) We plan to get married this year. My girlfriend could also transfer shares of the remaining property to me as compensation so that we return to 50/50.

Under normal circumstances, I would say option 1 and we simply do 50/50 in the land register, but my girlfriend is already extremely well secured, while the house will be a core component of my retirement provision. According to the current plan, I will keep about €30K in stocks, but otherwise I have nothing.

What would be fair to you and which option makes the most sense? Is it worth getting advice from a notary here?

We are planning to get married this year.

With or without a prenuptial agreement?

How about quickly getting married beforehand? Then, in case of separation, your initial assets at the time of the wedding apply. Everything after the wedding then follows the classic community of accrued gains. The ownership arrangements are basically irrelevant, they only define the direction in which the equalization of accrued gains flows. However, since you also participate 50% in the increase in value and rental income of "her" properties, the money tends to flow more in your direction.

I can agree with Tassimat on this.
Just get married, and also settle the assets and who brings in what accordingly.

Without getting married beforehand, then gladly do something like a modified marriage contract with a notary.

You have to take out 450K EUR here (both are fully liable for this)
You bring in 175K EUR equity
Your girlfriend brings in 250-350K EUR more, right?
That means even if you pay 2000€ per month for 10 years (then you have contributed 240K EUR... your girlfriend has contributed much more, since she 1) brings in more equity + 2 she also forgoes interest/dividends on the money she contributes)
if you simply capitalize the 250,000€ additional equity (you pay 2.90% interest, that can be taken as a reference) then the 250K EUR in 10 years would be worth 332K EUR, if she contributes more (350K EUR = 465K EUR value after 10 years... meanwhile you yourself have paid in 240K EUR...)

The cleanest way is always this:
Everyone brings exactly 50/50 equity
Everyone then pays 50% of the installment (if your girlfriend earns less, it would not be a problem, she would have enough since she can draw on the capital she has)

So the cleanest would be:
everyone brings in 175K EUR capital = 350K EUR
the rest is financed, and then you can also pay a 3,000€ installment, everyone pays 1500€ each (Your girlfriend has 250+350K EUR capital, from which she can draw for a long time... if she makes only 3% return on that, it already brings her 7.5-10.5K EUR per year)

The other way around:
The house with additional purchase costs and modernization then costs about 1.05 million?
(You bring 175K, she brings 275+150K (possibly 250K) + 450K loan)

Equity:
You: 175K
She: 425K
since you can do 50/50 on the loan, the capital ratios would be: 400/650... so basically she brings more than 60% for the house...

Fair for both sides would be, as mentioned, to do 50/50 in everything, that is clean, everyone bears 50% of the costs, the interest, and everyone benefits 50% from the appreciation. (in case something goes wrong)

Because just calculate:
I carry the 2000€ rate for the next 20 years = 480,000€ expense (with 153K EUR residual debt)

Then my calculation would look like this:
You: 175K equity
480K loan repayment
repayment residual debt after 20 years of 153K
Total expense: 808K

Your girlfriend:
Equity immediately: 425K
forgoes return for 20 years (2.90%) on the difference (425-175K) so for 250K = 442K
thus girlfriend’s expense = 867K

So currently she would be worse off

Just an idea... to do something fair...

Thank you - you are right, I did not take the lost returns into account!

But I don't know if I can persuade her to a spontaneous marriage for financial reasons... :)

You don't have to get married right away.... but you should try to arrange it in such a way that no matter what happens, later on no one can say that they were exploited or disadvantaged....

if the relationship should fail, it would then lead to a nasty battle...

so talk about what is good and what both sides can live with. And please take everything into account.

Of course, you can also arrange it so that in the event of a sale, the capital that she contributed more is calculated out first... but then if you are paying the installment, that must also be considered... and at some point it becomes too complicated.

so just do everything 50/50, and then you are safe