Buy a property with an old building first - live there - then build a new building???

Hello,

we currently have a very attractive plot with an old building in Hamburg in sight (built in 1935 - 70 sqm living space with a basement) on 570 sqm of land. Costs 300k Euro. Quite overpriced. We initially backed out due to the condition of the house - night storage heating, many cracks inside and outside, mold in the basement. Now the real estate agent has contacted us - there is now a bidding process because they can't sell the house for the price. We have submitted a bid of 250 thousand Euro. Total with additional purchase costs: 280 thousand Euro.

In case we get the plot, it is to be considered what to do with it:

1. Option:
Buy the house - renovate (as much as possible by own effort) - live there for about 10 years until the loan is paid off - then demolish and rebuild - house purchase 280 thousand Euro + later rebuilding 270 thousand Euro = 550 thousand Euro.

2. Option:
Buy the house with a semi-detached house partner - split the plot - build a semi-detached house on it (one semi-detached house to the front street approx. 180 sqm, to the back approx. 390 sqm for us) - construction costs for the semi-detached half amount to 250 thousand Euro with additional costs + 190 thousand Euro land share = 440 thousand Euro.

Now to our situation:

Both fully employed, permanent contracts. Total net income: 4200 Euro, one child, no debts, equity capital: 40 thousand Euro. Current warm rent: 940 €.

Which option is more sensible for our current situation? Are we able to finance one of them or are we heading into major debt?

Thank you very much for your answers in advance!

Sommerkind

Hello,

only you can judge what kind of stress you want to take on (Option 1) and/or if you find a partner who will go through the whole thing with you (Option 2).

Briefly on 1:

Ambitious that you want to repay the loan in 10 years. That corresponds to a full repayment borrower and about €2,700 monthly payment (or a lower payment & special repayments). Whether you can manage that with €4,200, I don’t want to judge. Especially since €280 in the beginning will not remain. Surely you don’t want to live in a dump. Money for renovation also has to be freed up. And building new again in 10 years and investing €250k (is that enough with demolition??? Probably not...) I consider a crazy idea.

Briefly on 2:

Here I see the problem of orientation and plot size. I cannot judge whether the location is attractive and whether you will find a building partner. Stress over the orientation of the plot / shares is preprogrammed. I gather that you want the better half and the partner the rest towards the street. Well, I wouldn’t do it. Whether you find one, I don’t know!

My common sense says buy and renovate. If it really is a great location. Since the agent has gone down from 300 to 250, I tend to doubt it...

Good luck!

You have a child and want to voluntarily move into a moldy house and live there for 10 / 12 years? Sorry, but that's nonsense! Then better option 2. With option 2 you can find a developer, shift the risk for house 2 onto them, and build house 1 with them. In other words: You go to a developer, agree on the construction of 2 semi-detached houses - sell the developer plot 2 and they have to / may take care of customers for house 2. Then you have no stress with marketing, other building partners with other builders, etc.