Construction project worth TEUR400 possible?

Hello everyone,

My girlfriend and I would like to start building a house within the next 1-2 years. A brief overview of our situation: She (27) is currently doing her teaching internship. Her current net income is about €1,000 per month. After the internship, we plan to start having children. In the medium term, we expect her to have a 60% position as a teacher. That would be about €1,500. As a math teacher, the general chance of getting a teaching position is very, very good.

I work as a business economist and currently have a net income of €2,900 per month. Since I have held a management position since 2016, I expect a salary increase within the next 2 years to €3,300.

Altogether, we currently have €3,900 per month. In 2 years, I expect €1,500 + €3,300 = €4,800 per month. I am leaving child benefit out for now.

We currently have equity of €70,000. Part of that is long-term invested and intended for retirement provision. We would use about €50,000 out of the €70,000 for the house construction. We currently pay €600 rent including utilities. We save €300 per month for retirement provision. Additionally, about €1,000 per month for the house. Otherwise, money is also put aside for vacation, car, etc. In 2 years, we will have about €75,000 equity for the house.

Overview:

Income 3,900
Apartment 600
Retirement provision 300
Living expenses 2,000
Saving for house 1,000

The living expenses seem quite high, but I am still paying off my car and had additional training over the past 2 years (€250 per month), plus I commute 35 km one way every day. Also, there were occasionally larger purchases like a dishwasher. The amount might still increase slightly in the coming months.

We want to build in a small town about 50 km from Hamburg. A plot of land there costs €120 per sqm. We want about 600-800 sqm.

According to a press release, a new building area is supposed to be developed in this town at some point. This would be very suitable in terms of location. However, the exact date is not yet known. So it may still take a while. Therefore, we invest most of our equity for the house in bonds (50%), another part in overnight money accounts (40%), and a small part in stocks (10%). Through this mix, we achieve about 4% annual return. How do you invest your money when planning a house build in a few years? As soon as the plot becomes concrete, we would no longer invest any more money in securities. The bonds would therefore gradually mature and we would try to sell the stocks at an appropriate time.

How much house can we afford?

Hello everyone,

my girlfriend and I would like to start building a house in the next 1-2 years. A brief overview of our situation. She (27) is currently doing her teaching internship. Her net income at the moment is about €1,000 per month. After the internship, we plan to start having children. In the medium term, we expect her to have a 60% position as a teacher. That amounts to about €1,500. As a math teacher, the general chance of getting a teaching position is very, very good.

I work as a business economist and currently have a net income of €2,900 per month. Since I have had a management position since 2016, I expect a salary increase to €3,300 within the next 2 years.

In total, we currently have €3,900 per month. In 2 years, I calculate €1,500 + €3,300 = €4,800 per month. I’m ignoring child benefits for now.

We currently have equity of €70,000. Part of it, however, is invested long-term and meant for retirement provision. We would use about €50,000 of the €70,000 for the house construction. We currently pay €600 rent warm (including heating). We save €300 per month for retirement provision. Additionally, about €1,000 per month for the house. Apart from that, money is saved for vacation, car, etc. So in 2 years we will have about €75,000 equity for the house.

Overview:

Income 3,900
Apartment rent 600
Retirement provision 300
Living expenses 2,000
Savings for house 1,000

The living expenses seem quite high, but I am still paying off my car and have done further training over the past 2 years (€250 per month), plus I commute 35 km each way every day. Also, there have been occasional larger purchases, such as a dishwasher. The amount might go up slightly in the next few months.

We want to build in a small town about 50 km from Hamburg. A plot of land costs €120/sq m there. We want about 600-800 sq m.

According to a press release, a new development area is supposed to come to the town at some point. This would be very suitable with regard to location. The exact date is not yet known. So it could also take longer. That is why we invest a large part of our equity for the house in bonds (50%), another part in overnight money (40%), and a small part in stocks (10%). With this mix, we achieve about 4% return p.a. How do you invest when a house build is planned in a few years? Once it gets concrete with the plot, we would no longer invest any money in securities. The bonds would thus gradually mature and we would try to sell the stocks at a suitable time.

How much house can we afford?

800*€120 = €96k just for the land. That means about €300k for a house. Hmm, how big should it be?

Regarding the equity: Bonds and stocks are still speculative. That’s like looking into a crystal ball. If you have bonds from blue chips from earlier years with a high coupon, that’s great. If you go into medium-sized company bonds, it’s not so good. Moreover, bonds and securities are indeed sellable in the short term but are subject to price fluctuations. But you surely know that.

morning "neighbor"

we also live about 50-60km north of hamburg :)

the cost of living will not change. if you pay off a car today, what car will you be driving in 10 years? as a business graduate, you should be able to understand that this is just wishful thinking. a dishwasher is also not a big investment but "standard".
nevertheless, the basic conditions are quite decent. "your" money is currently not considered by the bank, yours with 3000 net of course is. and it is more than enough to get a loan from the bank (permanent contract, beyond probation period, reasonable credit score).
equity capital of ~60,000-70,000€ is also decent, for example, it is enough for the plot of land (that's how we did it).

depending on the fixed interest period, interest rate, etc., there is a flat rate for the loan. for every 10,000€ loan you pay about 50€ monthly installment (5% total, i.e. repayment + interest rate). so 300,000€ loan = 1500€/month. of course, you can go much lower if you reduce the repayment rate. for example, we manage with 4% total on a 270,000 loan at 950€/month, but we will not be finished after 20 years (fixed interest period).
basically, you have to consider yourself how much you can and want to pay permanently! in the coming years, and then see how much house you can get for that. you must not forget the enormous additional costs besides the actual house price during construction and also the ongoing costs afterwards.
the additional costs are usually calculated per sqm, which is about ~2€/m². in addition, you have to save for repairs of a flat rate (depending on taste) of 1-1.5€ and you are at 3-3.5€ per m² and month. for a 150sqm house, that is easily 500€ every month, although you will probably get by with 450€ here... :)

as for house prices here north of hamburg: a typical normal detached house with 140sqm costs, for example, with one of the better companies (e.g. Kage from Hohenlockstedt) about 220,000€ (without additional costs/basement/garage/outdoor area). with 50,000 as additional costs, you are set (without outdoor area and garage/carport). it's best to get a few offers and see what you get for how much anyway. the companies are actually very open about that (before signing :) )

Hello, the house should have at least 2 children's rooms and a study. A guest room is probably not possible. A dream of ours would currently be a Swedish house with about 160 sqm/170 sqm. But realistically, it is probably more like a 145 prefab house.

Yes, most of them are BC bonds that are already a few years old and therefore have decent coupons. Since the house construction might still take some time, I don't want to carry all my money to the bank and only get 0.5% interest.

Generally, desires and budget are not that far apart. If you mention a few key points about what special requests you have in mind (basement, garage, carport, fireplace, electric shutters, etc.), then maybe can make a rough calculation. In 2 years the price will certainly be different again, but at least you have a rough reference.

Hello Musketeer,

good question, we have not dealt with that concretely yet. But we can do without a basement. I find this whole BUS technology exciting. But I can also do without that. My girlfriend is even more modest/economical in this regard than I am. A garage should be included, but it can also come 2-3 years later and be financed from the ongoing income. So we will not want too many extras.

Specifically, the calculation currently looks like this

Plot 800 sqm * €120/sqm approx. €100,000
Swedish house 170 sqm * €2000/sqm approx. €340,000
Additional costs approx. €40,000
Reserve approx. €20,000
= Construction sum approx. €500,000

- Equity approx. €70,000
= Loan approx. €430,000

€430,000 * 5% (interest + repayment) = €21,500 p.a.
21,500 / 12 = 1,800 p.m.
1,800 € + 500 € (additional costs) = 2,300 €

I expect a net household income in 2 years of €4,400 - €4,900. Thus 50% would go towards the house. That is above the recommended rate of 40%. So better only a prefabricated house with 145 sqm and thereby reduce the rate by €500, right?