Buy a single-family house - mortgage a condominium unit and sell it later?

Hello everyone,
before I go to my financing advisor, I would like to ask you for a few tips.

Current situation:
We own a 108m2 4-room condominium (built in 2012), which is currently worth at least 400k (there is currently a very similar apartment listed online for 409k + 20k underground parking space).
Outstanding loan: 70k. 20k can be fully repaid in Dec '21, 50k only in March '23.

Fortunately, we have won a bid for a great building plot in a peripheral location. Price (fully developed) 165k (+ incidental costs) for 518m2.

Equity capital: 75k

We would like to sell the apartment.

What is the best way to proceed?
The land charge on the apartment is 170k. So 100k would be free. The equity capital was actually intended for the repayment of the apartment.
Wouldn't it be wiser to mortgage the apartment for the purchase of the plot, so that one is more flexible with the later house financing? What about the equity capital? Put it entirely into the financing of the building plot or keep it as a reserve for the full repayment of the apartment?
Plot financing: variable or fixed with the shortest possible fixed interest period? Are fixed interest periods under 3 years even possible?

Wouldn't it be smarter to use the apartment as collateral for the purchase of the land, so that you are more flexible with the house financing later?

Never mind. You can also finance the land with a variable rate or with a fixed interest rate for one year.

What about the equity? Put it entirely into the financing of the building plot or keep it as a reserve for the full repayment of the apartment?

Why do you want to fully repay the apartment? Should it remain in the portfolio or be sold later? My question is rather what you want. Should the apartment remain in your ownership and generate rental income (then not repay anymore because of the debt interest deduction)? Should it become an additional security to get better conditions? What is your specific plan?

My question is rather what you want. Should the apartment remain owned and generate rental income (then no longer repay because of the debt interest deduction)? Should it become additional security to get better conditions? What exactly is your plan?

Yes... we have been thinking a lot about what to do with the apartment.

As it stands now - sell. Why?
It is almost paid off = low/almost no interest deductions if we were to rent it out. We bought the apartment in 2011 for 220k.
A 2% depreciation would result in about €400 monthly tax reduction. Rent could be set at about €1100-1200, but of course it would have to be heavily taxed...

For the house + land, we would have to take out about €700k loan... These are numbers that simply discourage us.

...or are we thinking about this incorrectly?

- how do the interest rates fluctuate nowadays with a one-year fixed term? Are the conditions better than with a variable loan?

As of now - sell. Why?
It is almost paid off = low/almost no interest write-offs in case we should rent it out. We bought the apartment in 2011 for 220k.

Exactly for that reason. There is no speculation tax now, which would be incurred later. In addition, the rent only brings you additional income that must be taxed. And last but not least, you can actually realize profits - and not just on paper. How is the market developing? How will the apartment be worn down by tenants?

2% depreciation would result in about 400€ monthly tax reduction.

LOL, how do you calculate that? Purchase price 220k - say 40k land portion = 180k for depreciation = 3,600€.

Net cold rent 13k
less depreciation 3.6k
= taxable at 40% = 3.8k taxes

Remaining 9.2k surplus less non-allocable operating costs (administrator etc.).

Of course, you can do that. On the other hand, you can sell and save 400k loan. At 1% interest, that’s 4k per year. So in the end, there is a small plus if you keep the apartment.
But then there is maintenance, renovation, tenant turnover to pay for.

Of course, this is only a rough calculation, but it’s not a top deal.

@nordanney - how do interest rates oscillate nowadays with a one-year fixed term? Are the conditions better than with variable financing?

Yes, fixed should be cheaper than variable.

LOL, how do you calculate that? Purchase price €220k - let's say €40k land share = €180k for depreciation = €3,600.

Yes... that was a pure mental shortcut ;) .
Basically, I calculated it the same way as you.

We bought the apartment back then for our own use and installed many extras (Bisazza mosaic, 30x100 tiles, high-quality kitchen with glass fronts in stainless steel frame, parquet floor, the associated garden is very well maintained, etc.).

Renting all this out now would be a pity for me. You never know what kind of tenants you will get.
The apartment is located in a rural area in a new residential development, 50 km from Stuttgart, right by the highway and with top S-Bahn connections. Since building plots are very scarce here, large family apartments are also in great demand.

The question now is how we should approach the financing issue. The building plot must be paid for in September, we want to build in 2022.
Pay off the apartment with the equity and sell completely debt-free in 2023 or invest the available €75k in the building plot?

Pay off the apartment with the equity and sell completely debt-free in 2023, or invest the available 75k in the building plot?

To be honest, it doesn't matter. Either you need full financing for the plot (the apartment can be free of charges and used as additional security - effort/costs) or you carry on with the apartment and the remaining loan and repay upon sale. But then, the plot can be financed comfortably (variable) with a high equity share.