Buy an existing single-family house with a large plot and renovate it

Good evening,

we are considering purchasing a single-family house from 1970 with a great plot of land. The house needs to be completely gutted and renovated. We would initially exclude the outdoor facilities and implement them later based on private possibilities in EL. However, since we lack experience with such a renovation, we would appreciate some opinions on our project.

General information about you:

[*]Who are you? Married couple from NRW
[*]How old are you? Both 39
[*]Are there children? Yes (3)
[*]Are more children planned? No
[*]What do you do professionally? Both employed in corporations - Both permanently employed
[*]How many hours do you work? 40h / 25h

Income and asset situation:

[*]What income do you have (gross/net)? 7000 net
[*]How much child benefit do you receive? 680
[*]Other transfer payments? 200
[*]How much equity do you have? Expected proceeds from current property: €350,000 + extra buffer €50,000
[*]How much equity do you want to invest in the house project? €350,000

Expense situation:
Expenses that are already included in other positions can of course be omitted. This list is not final and can be expanded or summarized at will. Please make sure to specify all costs monthly, even if they occur only annually!

Approximate housing costs:

[*]current cold rent: €0
[*]current warm rent: €100 (property tax)
[*]electricity: €100
[*]gas: €120
[*]water, sewage, garbage fees, street cleaning: €40
[*]telephone, internet, mobile phone: €60

Mobility costs:

Car loan (or savings rate for new car) €175

[*]insurance - €60
[*]taxes - €15
[*]fuel - €200
[*]repairs - €25
[*]miscellaneous - €0

Insurance costs:

[*]liability insurance (also pets) + household insurance - €65

Living expenses: €1500

Savings:

[*]vacation - €150
[*]house - €350
[*]retirement provision - €200
[*]hobbies/gifts - €100
[*]miscellaneous - whatever is left: ETF etc.

Other expenses:

[*]loans? €250 (will soon be settled)

Income and expense totals:

[*]total income - €7,880
[*]total expenses - ~€3,420
[*]balance - €4,460

General information about the property:

[*]How large is the plot? 1500 sqm
[*]What are its dimensions?
[*]What is the standard land value? €350/sqm (tendency rising)
[*]New building, old building (year built), house type? Old building, 1970
[*]Garages? 2
[*]How large is the house? (living area / usable area) 250 sqm + 80 sqm basement + garage
[*]What is the market value of the land and house after completion? Not known to us

Construction or purchase costs:

Acquisition incidental costs (notary, court, real estate transfer tax, broker) - ~€80,000

[*]construction or purchase costs (incl. architect, structural engineer) - 700,000
[*]renovation and/or refurbishment costs - estimated €350,000 with some EL and excluding outdoor facilities
[*]additional construction costs (e.g., house connections, soil surveyor, construction power, etc.) - €15,000
[*]outdoor facilities/terrace, paths, garden design, fences, etc. - €0
[*]financing costs (e.g., fees or commitment interest) - €0 not yet considered
[*]total costs - €1,150,000

Other costs:

[*]kitchen costs - €20,000
[*]furniture, lamps, decoration - €30,000
[*]other "not acquisition, acquisition incidental, construction or additional construction costs" - not yet considered

Cost summary:

[*]total costs: €1,200,000
[*]deductible equity: €350,000
[*]financing amount: €800,000 (furniture etc. will be covered with extra buffer and annual bonuses)

Would this whole thing be realistically feasible? Would you undertake such a project (we are not craftsmen ourselves)?

Thanks a lot in advance for your opinions.

Hi,

A full renovation for 1,400€/sqm will be difficult without massive personal contribution. And massive personal contribution is out of the question with 3 children and 40h/25h work.

I consider 2,000€ a much more realistic value. Yes, you will get subsidies via BAFA, but you first have to advance that money. So for financing, it would not be 350k renovation costs, but 500k. Calculate the amount of the subsidy and take that part as a variable loan.

Let's say you get 150k subsidized (just a rough guess, you have to check), then you still have 800,000€ to finance. I exclude the variable financing of renovation costs at the subsidy level from the consideration because they only occur temporarily.

Due to your age, you have to go for 3% repayment if you want to be finished before retirement (term 23 years, 3 months). With 15 years fixed interest, according to Interhyp, you would have good 3% interest.
Thus, you would have 6% annuity, which is 48,000€ / year or 4,000€ / month. So it just fits into your income/expense calculation. Nevertheless, I strongly advise against using more than 50% of your monthly income for financing.

What will you do if something breaks, if you need a new car, ...
You surely don’t want to live and work only for the house...

Conclusion: It would be a bit too much for me in your place.

Thank you very much for your detailed feedback. We had the calculation with the subsidy in mind as well. Of course, one would have to see to what extent this is actually feasible. Unfortunately, there was a mistake regarding our age, and I don’t know if the post can be edited, (34 instead of 39) so we assume that we could only repay 2% initially. However, I already feared that the renovation costs are underestimated. 4k repayment per month is definitely too much, even though the prospect of a rising salary and more working hours for my wife due to childcare will be possible.

At 2% repayment, you would be done in 30 years and 6 months with 3.07% interest. So you would be 64. However, that would only reduce the rate to €40,000 per year, or €3,333 per month. That would still be close to 50% of the net income. That would be too much for me. Are you in a lot of pain in your current house?

Definitely, even 3333 per month is too high. There isn't much left for vacation, a more comfortable car, etc. Children generally become more expensive as they get older, so we had imagined a payment of 2600-2800. The sticking point is the renovation costs. At 2000€ per sqm, that is definitely too much for us. Currently, we live in a terraced house with accordingly smaller rooms, a small garden, and a garage not directly attached to the house. Basically, we feel comfortable, but with 3 children, a detached, larger house would of course be significantly more comfortable.

We are currently planning something similar, but built in the 1930s and last renovated in the 1980s. The condition is generally good, but *everything* needs to be done including new house connections for water and wastewater. The perimeter must be sealed, insulation, electricity, heating, ... May I ask how you estimated the individual components? I am currently estimating around 430k for about 150-160 sqm, so roughly 2700€, including architect, structural engineer, ...

By far the largest parts are facade insulation (excavating the perimeter, sealing and insulating the entire facade from the base plate – the basement will not be insulated) and new plumbing/heating (house connections, air-water heat pump, wall heating (underfloor heating not possible), ...). Each of these is estimated at approximately 110-130k in the complete package. The roof is excluded and would not be done. Interior finishing is entirely DIY, kitchen is planned very cheaply (self-built), etc... no golden faucets, but everything solid. Windows and electrical are also each certainly around 30k again.

Apart from that, BAFA and own labor would be deducted – but I thought BAFA is quite manageable, how do you come to 150k subsidy – I must have missed something :eek:.

Now I’m wondering if I’ve massively miscalculated somewhere when I see your estimate – with 250 sqm living area that should be over 1000 sqm facade area, right? I would therefore be very interested to see your estimate :).

Best regards