Consideration: Heritable Building Right vs. Property Purchase / Renovation

From a post earlier - today the property may be worth €250,000, in 75 years maybe €1,000,000 - and the tenant has paid AT LEAST 75*€6100.

Then in 75 years he lives on a property worth €1 million, only that he has still paid only €457,500 over a period of 75 years (!). That is not even half, so I still think that’s not bad. :)

Woulda woulda bike chain! I also wish it were different, but the circumstances are unfortunately what they are. What is done is done.

I think you don’t see the problem. You can repay debt as quickly as you build equity (plus a part of the previous rent). No equity usually means you’re paying off forever because first, there’s a lot to repay, second, the interest rate won’t be very favorable, and third, you usually have high expenses besides housing. In 25 years you retire and then a big chunk of income is gone. If you now take out a €500,000 loan, you’d have to pay off €20,000 per year to be done by then. Without interest. At 1% interest and €1,500 monthly payments, you’d still have €130,000 left after 25 years. In reality it will probably be significantly more because you won’t get a 25-year fixed interest rate at that price. And you start out with ideas like €570k bank + €120k KfW. Under €2,000 in monthly payments won’t work for you if you want a plot of land of that size; otherwise, your grandchildren will still be paying off the house. Exactly what bothers you about the hereditary building right. Take a repayment calculator and enter what money you need, what you can realistically pay monthly and how you manage that until retirement. Don’t forget incidental costs and reserves. In 25 years some things will be broken.

Yes, the bigger problem is not the hereditary building right, but the lack of equity.

Then he lives for 75 years on a property worth 1 million, only that he has still only paid 457,500 over a period of 75 years (!). That is not even half, so I still don’t think that is bad. :)

No, after 75 years his descendants lose the right to use the property, and for the house there is practically nothing solid. Or how high will the value of a house at the end of its economic useful life be WITHOUT land?

And again - because you also don’t want to do the math - he pays about 2 million euros in today’s value (with 2% inflation/year) for the property in 75 years. So instead of letting the repayment interest & inflation work for him on the purchase, HE HAS to regularly compensate the ground leaseholder for inflation over the 75 years - who, in return, also gets the land’s increase in value for free. That means instead of buying today for €250,000, the grantor would have about €2,000,000 in interest and a plot of land worth €1,000,000 in 75 years.

A high price for the "feeling" of ownership described here. Even if you only consider it until retirement - the €500 "rent" in today’s euros must be placed into the taxable pension entitlement in today’s euros. Realistically probably €2,000 pension - €1,600 net. Manageable as a couple, but not nice. Alone it’s already difficult with the additional costs.

No, after 75 years his descendants lose the right to use the property, and there is practically nothing solid left for the house. Or how high will the value of a house be at the end of its economic useful life WITHOUT land?

Just as high as with land. At least I see practically no ads saying "house for free, but the land must be paid for," and if there are any, they are building ruins.

Apart from that, there is compensation when the leasehold expires. And this compensation the municipality cannot and does not want to afford. So the leasehold is extended. This is how it looks in 99.9% of all cases in the last 30-40 years.

And again – because you don’t want to calculate – he pays around 2 million current euros over 75 years (with 2% inflation/a) for the land. So instead of letting the amortization interest & inflation work for him on the purchase, he has to regularly compensate the leaseholder for inflation during the 75 years – who, in return, gets the increase in value of the property for free. That means instead of buying today for €250,000, the grantor would have around €2,000,000 in interest and land worth €1,000,000 after 75 years.

Please just make it concrete for the OP and stop rambling. You don’t actually want to calculate properly anyway ;-)

The land would cost €420,000 if purchased or with a leasehold payment of €3,500 p.a. Now let’s reduce the 75 years to 40 years since the OP won’t live in the house for 75 years. Thus, with a normal usage period, it’s €140,000 in leasehold payments. He didn’t mention any adjustments to the CPI in any way (which was about 1% in the last 5 years) – assuming 1% annually, that’s €171,000 he pays over 40 years.

Of course, he doesn’t have ownership, but by signing the leasehold contract, he instantly saved a quarter million. That’s the key lever.

Who cares what happens in 75 years? TODAY I want to build. And either I go to the bank and borrow €420,000 and pay about €525,000 over 40 years (calculated as a 40-year loan with 1.2% interest and 2% principal repayment). So either a €1,120 monthly payment to the bank or initially €263 to the leasehold grantor. For the one who wants to build, that’s only a modest €857 monthly additional expense (which still reduces to €690 monthly in year 40).

Exactly in this calculation lies the huge advantage of the leasehold. You can simply build cheaper = more liquidity-friendly. Give me an objective reason – not the feeling of ownership or inheritance – why it wouldn’t be best to have signed the leasehold contract yesterday.

Just please make it concrete for the OP and don't ramble.

One can also say briefly and concisely: the OP cannot afford to build a house with the known information. Who sees here 140-160 sqm with a basement plus land in the area for €500,000? Whether on leasehold or freehold land (which does not exist).
Of course, it may be that the OP’s salary allows much more, which we don't know, the OP is just stubbornly rejecting the options or is being overly optimistic in their calculations, or fundamentally rejects the high construction costs. Maybe the salary is fundamentally too low, the OP does not want or cannot admit it, or now sees from the leasehold how horrendous the building land actually is in their area, but is blaming the “leasehold” system?!
So: something in the facts must be adjusted, otherwise this definitely will not work.