Consideration and feasibility of buying or constructing a property

Hello everyone,

as already mentioned in the introduction round, we, i.e., my wife and I, want to purchase a property.

A little bit about us:

I am 31, about €2300 net
Wife 31, about €900 (40%) net
Child 15 months
Equity about €30,000 (+ a little bit as an absolute reserve)
No debts or loans.

Roughly estimated, financing of about €220,000 - €250,000 should be possible with these finances. The problem is, for €250,000 you don’t get anything here, and if so, it needs renovation and is in need of repair.

Since my salary will increase again in about 2 years, but there might be another child, the financial situation will not change much in the coming years.

Therefore, we have considered buying something together with my mother. She would then bring about €50,000 equity (as a gift to me, I would be the sole heir).

She would then pay a small rent, about €250-300.

The plan was to buy/build a small two-family house or a single-family house + granny flat.

But is that even feasible? And above all, to what extent? I have calculated various calculators on the internet. They came up with everything from €250,000 to €600,000 as possible financing amounts. Of course, the €600k is totally unrealistic, no question...

Thanks a lot in advance.

Regards, Alex

What do the plots cost with you?
Maybe you can also get cheap state loan funds (in Bavaria, for example, the Labo).

Our house, with medium specifications and KFW 55, at 130m2 including additional construction costs + garage, cost around €300,000.

In addition, the kitchen was just under 10.
And now the outdoor facilities are just under 20 and of course the plot with around 100k.

Our starting point is similar - at the end of 2016 when we signed the loan, interest rates were at an absolute low and we were able to secure a large part of our loan long-term and relatively cheaply
100k KfW for 20 years at 1.5%
140k Labo for 30 years at 1.75% as a full repayment
40k Labo for 15 years at 0.5%
60k Commerzbank at 1.1% for 10 years

All in all, we now pay just under €1,200 per month in installments with a similar family income.

Since you want/have to build bigger, I find that relatively ambitious.

Hello,

depending on the location, plots of land cost between 150 and 250€ / sqm.

In principle, we are rather cautious, so a financing "it absolutely must work" is out of the question.

I think you have already described the situation quite accurately. I would also assume a loan amount of max. 300,000€ if we leave your mother out of it. However, I find that quite ambitious, so building usually falls out and even buying used is getting tight. But I would probably continue searching in the sector where you are looking for a house in the range of 200,000€ that can be renovated with 50-100k€.

Whether the plan with your mother helps you further, of course, depends on whether you find something suitable. Purely from the repayment, it probably won’t make much difference, since your mother probably wants somewhere between 50 and 60m² to live. The 50k€ will probably not be enough for that, so the repayment will be higher and the "rental income" will be used for it. It is also questionable whether the bank will recognize this income, so it could even have a negative effect on your creditworthiness/liquidity.

How much is your current rent and how much can you put aside monthly?

Building is completely out of the question. 2 residential units (whether with a granny flat or a two-family house) will cost 600k€ or more including the land and all the rest.

Buying used is a tricky thing. You’ve already noticed yourself that for 250k€ you only get houses that need renovation. The problem is that you will certainly have to spend 150k€-200k€ on renovations. A new roof costs 30-40k€. A new heating system with piping the same. 2x new bathrooms as well. Then 2x new kitchens. Interior renovation also 2x. So you quickly end up at double the purchase price, overall.

Are rents so cheap where you live that you have to rent out a granny flat (60-70m²) for 250-300€? Is it worth 50k€ equity with a lifelong right of residence, where if you have problems paying the installments it's all worth it? Honestly, I’m not a fan of such models.

From the gut, I also believe that if you buy a used property, you will end up somewhere around a 500k€ loan amount. For this sum, you must at least be prepared to pay 1800€ monthly installments plus 2x additional costs. I don’t see that given the circumstances.

We are currently paying about €900 (70sqm) including utilities for our 3-room apartment.

The assumed €250-300 was just a thought experiment.

I also think a new building is probably not an option. It's just a thoroughly stupid situation.

Even if we say, well, we'll just buy an apartment. Something decent starts at €250,000 and up.