Finance and buy or continue renting in the Stuttgart area?

As already mentioned, a cold rent includes reserves for maintenance (significantly less proportionally in a multi-family house than in a detached single-family house) and profit for the landlord. Otherwise, the landlord cannot rent out their property economically.

If you even do such a calculation, I would at best calculate cold rent x 0.6-0.75 = interest.

Because after 20, 25 years, one can expect the first major repair in a single-family house. The heat pump then slowly reaches its maximum lifespan (or is already well beyond it), a facade can certainly be repainted after 25 years, and floors and walls also eventually need some attention.

Otherwise, you live at 90 in a completely worn-out house, which by no means still has a high value. In that case, the land is then worth more without the old building.

There are calculators for that.
But since we had massive interest rate increases in the last 2 years, with only a slight decline in purchase prices, the calculation will currently favor renting in most scenarios. Purely economically considered.
I am still a fan of building/buying, because for me more factors play a role there than just pure economic efficiency.

Hi Kati,

cool calculator - where can you find it on the web? Of course, it’s not just a rational decision. There are also many soft factors that speak for or against buying or renting.

Without current figures, no one can tell you what is better anyway.

And seeing the interest as cold rent. That is possible. But such financing is not designed for the place to belong to you after 30 years.
The Swedes do it that way, but for them it is also common that unpaid properties are inherited.

The cold rent always includes a sufficient (!!) reserve for maintenance and profit for the landlord. Don’t forget that.

Which figures are you talking about? Current cold rent in the region vs. purchase prices of properties? Or our prerequisites to afford a property? In the latter case, I don’t understand why that should be relevant (of course under the assumption that we can afford it financially).

Repayment was not discussed. The interest can already be below a common rent today, and the repayment so high that you’re done in 20 years.

Well, for years we saw a spreading of purchase prices, while rent prices remained comparatively cheap (the gap between old and new contracts was already there). Now everything is different - purchase prices are falling rather, but only a much smaller share of the population can afford ownership – or are unwilling to make the now necessary effort (subsidies, equity & sacrifice). Rental properties remain scarce, demand is growing, and prices are rising rapidly there. So rents quickly exceed the already very high interest payments today – but those are fixed for 20 years.

So in our region, cold rent for single-family houses and row houses is about 15-20 euros per sqm. For 150 sqm, that’s about 2500 euros cold. That would be the monthly interest burden on a loan of 750k euros at 4%. Roughly estimated, the land including incidental costs would have to cost less than 300k.

With a 20-year term, you will be significantly above the usual local cold rents with the annuity. With a financing volume of 400k and 4% interest, that’s a good 2400€ per month, of which about 1300€ is interest.
Theoretically no problem, after all, the place belongs to you at the end. Practically, however, the capital is tied up and rent-free is not cost-free, so I would strongly advise against making calculations that consider the repayment completely as an investment. As long as you don’t plan firmly to sell at an older age, there should always be room for a dedicated retirement provision besides the property.

I agree with you - I don’t want to buy/build a house if I can’t also save separately for retirement. But that’s what I mean when I say the prerequisite for me is to be able to afford it financially.

(...) Which numbers are you talking about? Current cold rent prices in the region vs. purchase prices of properties? Or about our prerequisites to afford a property? In the latter case, I don't understand why that should be relevant (of course on the condition that we can financially manage it) (...)

Both. Because even if you think you can afford it, people tend to paint a rosier picture, and especially the costs associated with children are often underestimated. Because you forget that they occasionally need new furniture, new clothes, hobbies at some point, need a laptop, and so on.

It would be a shame if you miscalculate so badly that there are no vacations for the next 15 years and only pasta with tomato paste because it simply isn't enough financially.

I agree with you - I don’t want to buy/build a house if I can’t still save separately for retirement. But that’s what I mean when I say that the prerequisite for me is to be able to afford it financially.

What does it mean for retirement provision? If, like you, instead of €2,500 cold rent you pay exactly €0 cold rent because the property is free of encumbrances, you have saved up a very substantial retirement provision. Or you sell it for around three-quarters of a million and rent age-appropriately for €2,500 warm (nice apartment). With €750,000 capital and 3% interest, you would have the warm rent plus €650 pocket money every month. In this respect, a property is a retirement provision. On average, even the best one you can have. Because the average retiree with property is significantly better off than the retiree without property. Why? Because the non-owner consumes and does not save, even if saving is more lucrative than ownership. It’s in human psychology. Without compulsion, not much happens. By the way. Thanks to regular salary increases and no rent increases with ownership, you eventually reach the point where you can save again, which tenants cannot do due to rent increases. So please also think from a long-term perspective.

Both. Because even if you think you can afford it. People tend to underestimate a lot, especially the costs that come with children. Because you forget that they occasionally need new furniture, new clothes, eventually hobbies, a laptop, etc.

It would be a shame if you miscalculate so much that for the next 15 years there is no vacation and only pasta with tomato paste because it simply doesn’t financially add up.

I actually wanted to do it without updated figures, as I still believe that this is not relevant to the topic ...

But then like this: A single-family house or semi-detached house currently costs about 750k new plus additional costs.

We would want to bring in about 150k equity.
Annual salary M: about 130k
Annual salary F: about 110k

What does that mean for retirement provision? If, like you, you have exactly 0€ cold rent instead of 2,500€ cold rent because the property is free of encumbrances, you have saved up a more than fat retirement provision. Or you sell for three-quarters of a million and rent age-appropriately for 2,500€ warm (nice apartment). With 750,000€ capital and 3% interest, you would have the warm rent plus 650€ pocket money every month.

Therefore, a property is a retirement provision. On average even the best you can have. Because the average retiree with property is much better off than the retiree without property. Why? Because the non-owner consumes and does not save, even if saving is more profitable than property. It's in human psychology. Without compulsion, it just doesn’t happen as much.

By the way. Thanks to regular salary increases and no rent increases with ownership, you eventually reach the point where you can save again, which the tenant cannot due to rent increases. So please think in terms of the long term as well.

I’m with you ... I would also count property as retirement provision. For me it’s more about risk diversification, and therefore I want to be able to continue investing in other asset classes besides paying off the property. From this ratio, there is therefore a maximum amount we are willing to pay monthly for a house.

Conversely, there are plenty of examples where people live in their paid-off house, but proper maintenance has long become too expensive. The upper floor of the house is permanently empty, heating costs are skyrocketing because heating oil was still cheap in 1970. Now political requirements regarding heating and renovation obligations are also coming into play. Of course, one could sell, but one does not want to, because they have lived there for 50 years and are now attached to it. Half a million or three quarters of a million doesn't help much in that situation. That is what I meant by tied-up capital.