Calculation of Property Purchase and Renovation

Hello,
we are trying to get an objective second opinion from outsiders this way.

General information about you:

[*]Who are you? 32 and 35, unmarried
[*]Are there children? 1 child
[*]Are more children planned? at least 1 more child in the next 5 years
[*]What do you do professionally? He: IT sector, She: laboratory technician, both permanently employed for >10 years
[*]How many hours do you work? 100% / 80%

Income and asset situation:

[*]What income do you have (gross/net)? He: net 2900 / She: net 1900 (variable bonuses, 13th salary not included)
[*]How much child benefit do you receive? 250,-
[*]How much equity do you have? 135,000
[*]How much equity do you want to invest in the house project? 100,000 in the financing, 25k for initial renovations and moving in, 10k as reserve / emergency fund

Housing costs:

[*]current cold rent: 580
[*]current warm rent: 760
[*]electricity: 130
[*]gas, water, etc.: included in warm rent
[*]telephone, internet, mobile phone: 65,-

Mobility costs:
Due to 2 cars, annual fixed costs of €1200 plus approx. €2000 fuel (= €265 / month for mobility)

Living expenses:
We have kept a household budget for 2 years and have average expenses for food, household, leisure, and everything that comes up between €1400 and €1700 per month

Insurance costs including retirement provision
€285 / month

Savings
€1350 / month

Other expenses:
none

General information about the property:

[*]How big is the plot? 1000 sqm
[*]What are its dimensions? 17x60m
[*]What is the standard land value? €290/sqm
[*]New building, old building (year built), type of house? Year built 1905
[*] ? Available + outbuildings, shed, barn
[*]How big is the house? approx. 170 sqm on 2 floors (+ attic expansion would be possible)
[*]What is the market value of the land and house after completion? I can’t say, the rear part can still be used as a building plot, but it should remain a garden

Other costs:
Renovation backlog! The last modernization was 20 years ago, the gas heating, both bathrooms, and windows are from that time and still okay so far
Electricity must be completely renewed. The roof is watertight but has no insulation, which we want to have renewed in the next 3-5 years (including solar), then possibly the heating. Costs may also arise at some point to maintain the cellar. Otherwise: install kitchen, fresh wallpaper on the walls and move in. Everything else we will do gradually.

Cost summary
Purchase price €300,000
Notary / land registry €5,900
Land transfer tax €17,700
Broker fees €0 (yeah)
Equity €100,000
Loan amount €218,600
Interest rate 3.6%
Monthly installment €1,200
Repayment 2.97%

Costs for moving in:
Electricity: 10k for the essentials (with a lot of personal work), further measures over the next years
Kitchen: 10k
Wallpaper, paint, miscellaneous: 5k

From the above figures, after deduction of the repayment and all ongoing costs, a monthly surplus of at least €1200 results, which we save for roof renewal and all other costs that will arise. There will be quite a lot because only the minimum has been done / maintained on the house in recent decades. Cables and pipes run there somewhat 'adventurously'. Since we will not need all rooms immediately, some rooms will probably be renovated gradually.

We can certainly manage the purchase; everything else regarding renovations and repairs will be our task for the next years if not decades.

Extremely, really extremely sporty. 20-year-old heating... it can still run for 20 years or break down in 2 days. You have no reserves for that, do you? Electrical system completely new, including dismantling for 10k. Do you know an electrical master craftsman who would do that for the price? Kitchen 10k... new appliances alone already cost 3,000 if you take standard ones. Doable, but it won’t be anything great. 5k for the rest. Floors remain the old ones? Then that can work. Oh by the way... for 265 EUR/month you can’t drive 2 cars. And if you do, then without building a reserve for 2 new ones. Also consider that with home ownership everything basically gets more expensive because it’s no longer shared. Insurances, trash, heating. Usually you also expand compared to the rental apartment, etc. And with 2 kids + house + lots of DIY work it won’t be 100%/80% at work anymore. More like 100%/50%. Maybe take out more loan right away and do what needs to be done immediately?

That the heating might possibly break down and need to be replaced is taken into account. Reserves for this are available. Ideally, it will last at least until the roof renovation is completed.

Father-in-law is an electrician and recently retired, he would massively assist us.

We are aware that a kitchen for 10k will not be premium. We don’t necessarily need that either. The current kitchen in our rental apartment cost about 3k six years ago and we don’t really miss anything about it.

Tiled floors will remain (not our dream color now, but we can live with it and they are still too good to tear out immediately), in all other rooms there is carpet, underneath that wooden floorboards. The plan is to sand and refurbish these floorboards if possible (we can do it ourselves, we have done it before). In rooms where this is not possible because the wooden floor might be heavily damaged, we will just lay new carpet over them again.

Reserves for new car purchases or in case major repairs are needed are available, even if at the same time the above-mentioned heating also needs to be replaced. If something else happens in the same month, the financial situation will become uncomfortable... then we would have to ask the family for money or liquidate funds that were originally meant for other things. In an emergency, we could also manage for a while with only one car (with a high organizational effort).

We had also already thought about borrowing more directly. However, we want to keep our debts as low as possible. Instead: save, then start a project, when that is completed save more and in the meantime plan the next one.

Did you have an expert with you? The house is already 120 years old and you plan to spend many more decades there. That affects the substance (of the house).

When I see a purchase price of 300k + the foreseeable renovations, I would always go for a young used property or a new build. In 30 years, that still has a residual value, so the higher initial investment usually pays off. With the equity and crisis-proof jobs, I don't see any major financing problems.

But your calculation is not correct if you assume 265 EUR/month for 2 cars. That would be too little even for 2 company cars under the 1% rule. That means the savings rate is as high as it is, but part of it goes towards new vehicles, which is missing for the roof, etc.

And it always gets more expensive than you calculate.. always ;)

Were you ever inside there with an appraiser? Purchase price €300,000 for a plot of 1000 sqm and a standard land value of €290 means that the house is virtually worth "nothing" and the seller rather sees the option "wheel loader" there. Are you sure that with electrical work done personally and a new kitchen you will be done for now?