Buying an apartment despite planning to buy a house in 3-4 years?

Hello everyone,

we are about to decide to buy our current rental apartment from our landlord. The purchase price would be €190,000 for 95m². We have been living here for almost 3 years and know the apartment and the area. The price would be slightly below the current local prices.

Equity is available (current value after the Corona crash €140,000). We currently plan to use €75,000 as equity and have a financing offer with 0.49% for €128,000 (9 years fixed interest), installment €700, which corresponds to our current cold rent.

We are married (both 30) and have two children (4 and 1). Another child is planned in 4-5 years. I am the sole earner with €4000, plus €408 child benefit and bonus payments of €5000 net annually (amount less certain in the current times, but at least partly).

We originally planned to build a single-family house or semi-detached house, but the risk currently seems too high and the prices in the new development area seem personally overheated to us. We would live in the apartment as a temporary solution for another 3-4 years, then rent it out as an investment and buy a single-family house/semi-detached house in the area. We hope that stock prices will recover somewhat and with our current savings rate of about €1000 per month we would have at least €90,000 again. Additionally, there would be a grant from the families of €40,000, so with €130,000 equity we could start the second project. Our personal limit would then be €420,000.

Now the question is whether anyone has dared a similar scenario and shares their experiences with us. How do banks react to a second real estate financing related to the income? Are we risking something or overlooking something in the decision?

Thank you very much for the feedback.

Now the question is whether someone has dared a similar scenario and shares their experiences with us. How do banks react to a second real estate financing in relation to income? Are we hindering ourselves in some way or overlooking something in the decision?

Basically a very feasible project. However, if you want to rent out, talk to a tax advisor – preferably finance with a high loan amount and as low repayment as possible (max. 2%, better 1%), because the interest rate on the financing is rather secondary. Oh yes, as soon as you start building, there are also plenty of tax saving opportunities. Since the investment is self-sustaining through renting, everything is fine. Good income, equity available. Let's go. I see no problems at all. Worst case, you stay living there.

Oh yes, as soon as you start building, there are also plenty of tax saving opportunities

Sure? Which ones are meant? Did I miss something?

Sure? Which ones are meant there? Did I miss something?

You have to understand my winking smiley... Maybe various materials have to be purchased for the apartment then rented out, which are advertising costs within the scope of V+V. I don't want to say more about that.

If we want to rent out, it makes sense to increase the financing despite equity.

In our area, there were some municipal development areas where previous ownership of real estate was a disqualification criterion when allocating plots.

The same applies to [Baukindergeld].

So the state punishes people who initially buy a small property early on.

However, that would not be an important reason for me to refrain from purchasing the apartment. Just mentioned for the sake of completeness. The apartment is worth less rented out than unrented, and you as the current tenants are in a good negotiating position. Stay calm if the apartment is good.