Consideration: Heritable Building Right vs. Property Purchase / Renovation

I can understand that you are frustrated about leasehold. We also had the feeling in the meantime that we would only get a leasehold property, and personally, I didn’t like the whole concept at all. But there are a few things you should consider:
- The municipality certainly cannot dictate any sale prices. What is market-appropriate can be disputed at length in case of doubt, and you will never have trouble finding 5 similar houses at high prices on a real estate portal
- 1.5% ground rent is not particularly expensive. In fact, it’s quite a poor return for the municipality
- The municipality also makes regulations even if you can buy the property outright. A small excerpt from our development plan: retention cistern, permeable pavement, outbuildings must be roofed like the main house (= tiles) or greened, garden house maximum 40 cbm enclosed space
- With your equity, you won’t get very far on the property market near Munich. All the equity is gone for agents, real estate transfer tax, and notary fees
- Accordingly, you will have no money left for a house when buying land. A house for €300,000 near Munich is quite ambitious, especially for a KfW55 or better, plus additional construction incidental costs of about €50,000, plus garden, carport, kitchen, expert, contingency, etc. Don’t underestimate these last cost blocks. In my calculation, they add up to almost €50,000 additional to the house, land, and construction costs. Certainly, some can be cheaper with your own work, but the trend for the semi-detached house is more around €400,000 than €300,000. With €1,500/sqm land price, you can afford about 100 sqm of land without breaking the calculation. You yourself write that land costs about €250,000 in your area, which will never work for the house
- The KfW loan also has to be secured by a land register entry. So the calculation is not €570 bank + €120 KfW but rather €450K bank + €120 KfW
- The municipality is rather less interested in collecting the house after the leasehold expires. Usually, you will find it easier there to find someone who buys the house

As I see it, with your budget, you have no choice but to build on leasehold. Buying land is not an option at €250,000 for a plot. But if you don’t want leasehold, better leave it. It’s no use becoming unhappy because of it.

And yes... our budget is about 500,000 for everything.

500,000 is not much for your area, from what I also read in other forums.

but always driving forever by car and living separated from everything.

What does that mean? Many commute, the question is whether you already consider 20 minutes unreasonable or is it about 1:20? What do you mean by "living separated"?

continue to go to the usual sports, meet my wife's acquaintances from the music and dance school, etc., and still be relatively close to my parents and my brothers.

You can do sports anywhere. Meeting acquaintances more intensively once in a while rather than more often and superficially. Overall, priorities change with age, you become more "sedentary," if only because of the garden... The 12.5% are already quite steep. Even over just 75 years... But let's calculate the alternative land purchase: how much do you have to pay monthly for the purchase price? I don't understand your list. Regarding 1. You also have to continually renovate and maintain the house on private land to preserve its value. Land prices will not increase like a constant; eventually there will be no more increase in the curve. Because then there are no buyers who can pay the nirvana price. Regarding 2 - 4: Somehow I have the feeling that no contract is read as thoroughly and taken at face value as the heritable building right contract. And why would you build a house to sell it again after 7 years? Those are niche examples... you have to see if you even belong to that niche. Furthermore, I can totally understand that at some point you are no longer willing to do everything. And nowadays time plays a bigger role, the time you can gain with family. What about existing properties? Ps: we built on leasehold.

- The municipality certainly cannot dictate arbitrary selling prices. What is market-appropriate can be debated for a long time in case of doubt, and you will never have trouble finding 5 similar houses at high prices on a real estate portal.
- 1.5% leasehold interest is not particularly expensive. Rather, it's a pretty lousy return for the municipality.
- The municipality makes regulations even if you can properly buy the land. A small excerpt from our development plan: retention cistern, permeable paving, outbuildings must be roofed like the main house (= tiles) or be greened, garden house maximum 40 cubic meters of enclosed space.

The leasehold is very cheap – instead of the 4% that is often still asked for. But don’t worry – the payments are indexed and will steadily increase properly throughout a lifetime. While others acquire land in 30 years and possibly have the interest fixed in the contract for 30 years, with leasehold you won’t be able to gain any inflation advantage – not to mention the paid-off home by retirement.

Leasehold has nothing to do with a development plan either. In the development plan, if everything fits, you can gladly add an extension. Here you cannot do so without approval. And since you change the degree of use, you will also have to pay more afterward.

The normal term would be 99 years – so 2-5 usage periods. Here it is already significantly shortened. Assuming you live in it for 35-40 years. It becomes sporty for the buyer afterward, so it will come down to a new contract, with worse conditions.

Leasehold actually only makes sense if you find a good, old house from a time when building land was very cheap – here you can save the cost, even after inflation adjustment, well, since the exploded land prices do not flow in. But otherwise...

because the exploded land prices are not included

In this case, it is indexed to the standard land value if I understand correctly.

Ground lease only really makes sense if you find a good, old house from a time when building land was very cheap – here you can preserve the cost savings well, even after adjusting for inflation, since the exploded land prices are not included. But otherwise…

I wouldn’t put it that way. I’m glad that in our personal case I got around it. But there are several other reasons to go for ground lease besides old houses. In this specific case, it’s simply the point that the original poster cannot build a house on a purchased plot with his budget if it costs 200-250k. In such areas, existing properties are also problematic; they are all expensive and in need of renovation. The alternative to ground lease in this case is definitely not a house on owned land but at best a condominium. The financial situation doesn’t allow more. With ground lease, I could roughly imagine the following: a house with some own contribution for about €350,000 including ancillary construction costs and a payment of about €1,100. Additionally, €400 per month for the ground lease. That is already calculated somewhat tight since the original poster is already 42 and the whole thing should be paid off by retirement in 25 years. For the low equity at that age, there should also be a good explanation so that the concept works financially.

Directly from the Münchner Merkur:
"The leasehold rent is 1.5 percent. For the calculation of the ground lease rent, as decided in February 2020, a 40 percent discount from the standard land value of 1500 euros including calculated development costs of 150 euros applies, resulting in an annual ground lease rent of 12.15 euros per square meter." For a 280 sqm plot for a semi-detached house, that makes 3,500 euros per year.

To be honest, that’s a bargain. Older contracts yield about 3-4% return. Besides, you wouldn’t be able to afford the land otherwise. Nor other plots nearby. The offer is great!

1. I do not acquire land and soil, meaning what at least retains its value

Correct, you only lease it. But for the 280 sqm you do not have to lay out €420k plus incidental costs to then live in a caravan on it. If you move out after 20 years, you will have paid only €70k for a €420k plot. Good deal for you.

"Here, too, the leaseholder is the owner of their building and can sell it on the open market at any time after the self-use period expires. However, the municipality as the lessor reserves the right in the leasehold contracts to refuse their required consent to the sale if the sale price significantly exceeds the value of the building (excluding the land since it is leasehold)."

Where is the problem? If the house is worth €400k, you certainly won’t be able to sell it for €600k.

As far as I understand so far, I have to ask the municipality for permission for every change (even just a trivial) garden shed. Great! :mad:

Just like with full ownership. There is no difference. This is more about the development plan and building regulations than the leasehold right.

Let’s still assume the 20 years’ self-use period. If I sell then, a buyer would only have 55 years remaining lease term. Yes, you wrote the municipality does not want to dissolve then. But who knows what will happen in 20 years and whether they might not do so after all, and I end up with a house strongly undervalued that nobody wants?

What happens if you own a house in full ownership that’s not worth much? Does anyone want that? No.
Again: 55 years of leasehold is quite common. Here in the Ruhr area there are plenty. I myself sold my condominium in summer with a little over 40 years remaining. Do you really think anyone asked about the leasehold? I had about 10 viewings in one week. The leasehold was not mentioned once. It hardly interests anyone at all.

I don’t understand the calculation. By the way, the 500k is just a rough guideline. It also strongly depends on how much equity we ultimately have. It will only be between 30-50k. Unfortunately. Nonetheless.

Land purchase price €420k plus incidental costs = €440k. Your equity is enough for the architect, the rest of the loan for a luxury caravan standing on the plot.
Or if you move out to the sticks, the land might cost €200k plus incidental costs = €210k.
A house costs from €2k per sqm of living space. At 100 sqm, that is around €200k as a minimal version. Plus €30-50k construction incidental costs, €20k for the garage, €25k for the paved path/terrace, etc.
That already gets you to €500k. But then you probably don’t have shutters, only cheap laminate, 7 sockets for the whole house, and so on.

But yes... it is really tight. And a prefab house (which we aim for at around €300,000, minus various equity contributions, painting, sanding, installing doors, possibly floors + tiles) plus land unfortunately, as you can see now, will not be feasible within a 50 km radius from Eching. Who knows how far we would have to move for that.

What exactly do you have in mind? Here you can also get plenty of input for construction costs to see if that is even feasible with your expectations.

For me personally, I wouldn’t need even three seconds to sign the leasehold contract — even unread if necessary. That’s an unbeatable offer.
But I myself come from the real estate/finance field and can therefore look at it unbiased.

P.S. Actually having the contract in hand and reading it will also help. We can gladly support you.

You yourself write that the standard land value is 1250€/sqm, if I remember correctly. That means with a small 300sqm plot you already come to 400k including additional costs. On top of that, you first have to get a plot for the BRW!

We have a 1-hour travel time to Munich, at least one person from every household commutes to Munich. Land prices start at 1000€/sqm. I don't know where you want to find a plot for 250k. You would have to accept a 1.5-hour one-way travel time or move to a village with a hundred inhabitants.

So the option of buying land is basically out. I don’t find the ground lease fee expensive for your area.
I understand you, because for me ground lease would also be second choice, but better second choice than nothing.

An alternative would be used houses. But what is there for 500k where you are???
You get absolutely nothing for that where we are and I can’t imagine it’s different where you are.