Feasibility Financing Homeownership

Hello everyone,

we are a young married couple from Baden-Württemberg and would like to fulfill the dream of owning a home in a quiet location. For this purpose, we are looking for a property specifically in our home community (3,000 inhabitants), with which we are closely connected through family/friends/club. This considerably limits the selection of possible properties.

Our previous research has mostly focused on existing properties. We have noticed that most of the houses offered date back to the 50s/60s and, despite the need for renovation (bathroom, heating, roof, etc.), cost over 400k euros. The few newer properties that come onto the market mostly cost 650k euros and up.

Now, there are 3 building plots for sale in this community, and we are specifically interested in a semi-detached house plot (see below for details on the plot). We have already excluded another plot for a detached single-family house due to the high costs (larger plot, sloping site) and an unfavorable development plan.

Now we face the decision of whether to buy the semi-detached house plot. The fully developed plot costs 190,000 euros including incidental purchase costs. We can imagine building the semi-detached house in about 3-4 years; there is no obligation to build. The goal is to have fully paid off the plot before building.

Due to the current costs and interest rate situation, we would like your assessment as to whether you see our plan as realistic.

General information about you:

[*]How old are you? young married couple: He 27 / She 29
[*]Do you have children? yes, 1 child (5 months)
[*]Are more children planned? 1 more child planned
[*]What do you do professionally? He employed full-time, She civil servant on parental leave

Income and asset situation:

[*]What income do you have (gross/net)? He 4,200 euros net monthly / She full-time 3,500 euros (currently parental allowance Plus)
[*]How much child benefit do you receive? 250 euros monthly
[*]Other transfer payments like parental allowance, sickness benefit, etc.? 400 euros parental allowance Plus
[*]How much equity do you want to invest in the house project? 140,000 euros

Expense situation:
Total monthly costs: 3,200 euros, including private health insurance, vacation, reserves (car, household, etc.)

Other expenses:

[*]No other loans or similar

Income and expense totals:

[*]Current income: 4,850 euros, prospective in 3-4 years: 6,500 euros (one full-time, one part-time)
[*]Current expenses 3,200 euros (+ prospective daycare fees of approx. 400 euros)
[*]Current balance: 1,650 euros, prospective balance: 2,900 euros
[*]Of which sum cold rent and dispensable savings: 400 euros

General information about the property:

[*]How large is the plot? 366 sqm
[*]What are its dimensions? approx. 11m x 33m
[*]What is the standard land value? 300
[*]New build, old building (year of construction), type of house? planned new build, semi-detached house
[*]Garages? no garage, possibly carport & garden house
[*]How large is the house? 2 full floors (approx. 135 sqm living space) + converted attic for office/guest room (approx. 70 sqm), no basement planned

Construction or purchase costs:

[*]Plot costs: 175,000 euros + incidental purchase costs, total approx. 190,000 euros
[*]Development costs: fully developed
[*]For the semi-detached house without ancillary construction costs, outdoor facilities, furniture, and kitchen, we estimate 400,000 euros (standard equipment, own work planned for painting and flooring). Do you consider this realistic?

Necessary loan information:
It is planned to finance the missing 50,000 euros for the plot with a variable loan and pay it off completely before building. For the construction in 3-4 years, we plan a loan amount of 450,000-500,000 euros. Do you see the financing as feasible in 3-4 years, or do you consider it too risky in view of the uncertain development of interest rates and construction costs?

Thank you for your assessment and Happy Easter!

I think financially you are pretty solid, but what makes me raise an eyebrow is the shape of the plot. Do you have a street on the narrow side? Only then can you fall below the 3m minimum distance to the property boundary and only if there is no established building line of neighboring houses opposing it. Otherwise, your house will only have 5m width if I subtract the two setback areas.

Otherwise your house is only 5m wide if I subtract the two setback areas.

It is about a semi-detached house plot, so it will probably be attached to another semi-detached house on one side. That would also be what I have the most concerns about: If you buy the plot and leave it undeveloped for a long time, then the other half will be built on in the meantime, if in doubt. Something like building together (or at least with the same contractor) then falls through. Everything is possible, but there is more to consider and less freedom than with a detached house. You will probably have to align much more with what the other half has decided and some things may be more expensive (e.g., if you want to build a basement, you may have to support the other half, etc.). It is certainly not great for the neighbors if you only put the construction site there a few years later... Are you aware of that and is that okay for you? I think if I wanted to leave a semi-detached house plot undeveloped for years, it would have to be a really dream location and I would have to be very, very, very sure that I really want to build there. (Otherwise, I would probably rather "keep looking" since there is no huge time pressure.) I really can't say how prices will develop. If I just think about how the estimates in this forum have changed upwards since I joined (3 years ago) ... (3 years ago, the rough ballpark values were still around 2-2.5k per square meter; today, many estimate about 3k, with an upward trend ... -> of course, there are deviations downwards and upwards), then my gut feeling continues to lean towards "if it is possible, I would rather build," but I also see that this is not so cool right now during parental leave with the current interest rates.

I think you are financially quite solid, but what makes me pause is the plot's width. Do you have a street on the narrow side? Only then can you undershoot the 3m minimum distance to the property boundary, and only if there is no existing building line of neighboring houses opposing it. Otherwise, your house would only be 5m wide if I subtract the two setback areas.

Since it is a semi-detached house, we can build up to the property boundary on one side, so 7.50m width is planned for the house and 3.50m for the carport.

That would also be what I would be most concerned about: If you buy the plot and leave it undeveloped for a long time, then in the meantime the other half might be built on. Something like building together (or at least with the same contractor) would then be rather out of the question. It’s all possible, but there’s more to consider and it’s less free than with a detached house. You probably have to align yourself much more with what the other half has decided and some things might be more expensive. (E.g. if you want to build a basement, you might have to support the other half, etc.) It’s probably not great for the neighbors either if you only start the construction site there a few years later... Are you aware of that and is that okay for you? I think if I wanted to leave a semi-detached plot undeveloped for years, it would have to be a really dream location and I would have to be very, very, very sure that I really want to build there. (Otherwise I would probably keep looking because there’s no huge time pressure.)

Thank you very much for the assessment. That is a good point that we had not considered so far. Basically, the plot is in a dream location for us (desired municipality, quiet location in a cul-de-sac, not a typical new development area, job/family/club very close). So far, the adjoining semi-detached plot has not yet been sold, so it is difficult for us to assess the issue.

In general, free plots in this municipality are very rare, which is why we fear that we will not find anything comparable within the next few years. We are aware that leaving a plot undeveloped for a long time is not optimal. This is one of the reasons why the decision is currently difficult for us.

Go for it. If not you, then who, when it comes to realistic wishes.