Construction costs and financing for apartment or house

1. There was also an income limit here 2. There was a limit on equity capital 3. There was "only" a discount of about 15% on the land price

I no longer have the exact figures in mind, I had only compared the prices for locals with the land prices on the open market at that time, and within a radius of less than 3 km, with equally good locations, there was a difference of over 50%. So it may be that the plots offered by the city were already cheap and there was "only" a further 15% discount on top of that. Although I vaguely remember that I was already surprised how much cheaper it became. When did you check? For me, that was over 10 years ago...

Also as a self-employed person with a high income + a large loan, here’s my two cents: Self-employment is ALWAYS inherently associated with significantly more risk than being an employee. A 750k loan is really intense and there should definitely be collateral available to cover times of "bad deals" or illness. Life and disability insurance should also be HIGHLY secured. In our case, with a 500k loan we have an "emergency reserve" of about 100k. This is not touched and should last about 2-3 years with full loss of income.

As much of the loan as possible should be paid off within the first few years to reach a level where basically nothing can go wrong anymore. For us that is about 300k, as I suspect.

7500k net sounds like a lot... but in the context of self-employment it must definitely be viewed with nuance. If you were a civil servant with that net... I would say: make it a 1 million loan.

What I wonder about the resale value is: who buys a house with low-end fittings in the most expensive area of Germany.

Very good point! The house should really match the area and the plot. In our case the sqm "only" costs about ~300 EUR... but there are houses for 500k...700k...800k EURO. We are probably the exception with just under 400k.

Regards, Steffen

Hello Fusili,

I can't tell you whether the house price is realistic, architects can assess that better, but I do have my problems with the fact that the land costs almost twice as much as the house. On a plot of land that costs me 600K€, I would at least build a house that also costs 600K€ - the question of whether I can manage with 350K€ would then be irrelevant. Although with 400m² you quickly reach technical limits or build very luxuriously - which probably doesn't fit the surroundings and cannot be reactivated when reselling.

From the perspective of a self-employed person, I would initially raise a different idea/question, because basically you want to invest about 1 million € in improving your living situation. My question would then be whether you could relocate your company locally to improve the overall situation? If you can work just as well somewhere else, but the house including the plot only costs half at a reasonable distance, then 500K€ would remain as an investment in the company. Alternatively possible, although there are also good reasons not to do this: company and living in one building, then in a mixed-use area or similar.

If there is no local alternative (because of friends and/or simply because you like it in the south of M), then you will probably do (or can do) it. For 350K€ you can also get a house in M, in other regions and depending on the standard and size, prices start at 200K€, but in your situation I would also only go in with the premise of 350K€ - if in the end it becomes 400K€ or even 450K€, that would still be "underdressed" compared to the land value.

In your region - and now some people will jump up and down that I write this - you can plan the financing including the sale at retirement in such a way that paying off the loan is not the goal. This means nothing other than selling the house worth about 1 million and an 800K€ loan with e.g. 500K€ remaining loan after 20 years. You receive 1 million, pay 500K€ to the bank, and have 500K€ cash in your pocket to reorient yourself.

Or in other words: for 500K€ you only pay the interest on the capital to the bank, without repaying. Sounds harsh, but has an advantage: your monthly burden decreases (the term increases significantly, but that doesn't matter to you), which in turn means you can still invest another 50 or 100K€ in the house, i.e. the living quality, and still manage.

Think this over and discuss it with the banks. When you retire, you also have from your company the tax-advantaged business closure gain (or similar, I can't recall the exact term right now, can only be done once in a lifetime afaik, talk to your tax advisor) - depending on what values are dormant with you, that can also be taken into account.

Best regards
Dirk Grafe

In your region - and this will probably make a few people jump completely in circles when I say this - you can plan the financing including the sale at retirement in such a way that paying off the loan is not the goal. This means nothing other than that you sell the house valued at about 1 million and with an 800K€ loan, for example with a remaining loan of 500K€ after 20 years. You receive 1 million, pay 500K€ to the bank, and have 500K€ in cash to reorient yourself.

Or in other words: for 500K€ you only pay the interest on the capital to the bank, without repaying the principal. Sounds drastic, but it has an advantage: your monthly burden decreases (however, the term increases significantly, but that can be irrelevant to you), which in turn means that you can still invest another 50 or 100K€ into the house, i.e. the living value, and still manage financially.

I don’t jump there. I actually find this idea quite appealing. We too are not building to grow old there. In 20 years, the hut can gladly be sold and with a lot of money maybe do something completely different again (e.g. emigrate etc.).

Therefore, for me it’s always: location location location and of course location

Many interesting contributions/thoughts.

So, step by step:
To make it significantly cheaper in the Munich region, you really have to go out to the "Pampa," that is, outside the S-Bahn area. That is certainly an option for some; I also know people who drive one and a half to two hours one way to work every day. Then the wife stays at home with the kids because two people can’t do that. That is definitely not an option for us. I don’t need a family if I never see them . Proximity to Munich is quality of life for us and also essential with two earners.

The income limit (sum of earnings/total gross) for the current local projects is a maximum of EUR 100,000 ... Any questions?

Exactly: Location location location and this is prime location.

What I don’t understand at all: everywhere you read a house costs 1000 to 2000 EUR per sqm depending on the equipment. With EUR 350,000 we would be at the upper end with 140sqm. Sure, it wouldn’t be a luxury villa, but it certainly wouldn’t stand out negatively either. Many prefab houses are built in the village because location counts, not the luxury house. It won’t be a villa, no smart house with all the bells and whistles, but I thought you can build something reasonable with that money.

: That is exactly a possible goal. I don’t have to pay off the house, but maybe sell it after 15 years and emigrate or move into an apartment. That’s why I would only spend about EUR 2,600 monthly for the mortgage so that I don’t have to give up vacations, etc.

: We already have life insurance and disability insurance and will increase them.

All in all, I do see that we are moving at the limit with that sum and maybe we would be better off with a 4-room apartment, but that also costs 700,000.

: We already have life insurance and disability insurance and will increase them.

All in all, I can see that we are moving close to the limit with the amount and maybe a 4-room apartment would be better, but it also costs 700,000.

With 7,500k net, the loan at your level (even considering the equity) is certainly no problem. The sticking point is solely the risk of self-employment. As mentioned.. I am trying to compensate for that with a "emergency reserve." In 2..3 years worst-case, you should have come up with something.

350k for the house including ALL ancillary construction costs is certainly too little. With your income, you probably already have a certain standard of living. Many incredible costs come up when building a house, and you want things you didn't even know before. Better calculate with 400k and don't forget things for the garden, kitchen, etc.