Finance barn expansion through rental?

Hello,

I would like to know if renting out can cover the loan for the construction measures. Maybe someone has experience with this.

On my father's property (approx. 5000m²) there is an old barn that I (30 years old) would like to convert and live in. After conversion, about 450m² would be available, of which I would use half. That would leave about 225m² for 2 rental apartments. According to the local rent index, I would get approximately €1500 to €1800 in total cold rent for both.

From my salary, I can afford at most €400 per month for loan repayment, no more is possible.

Since I am not completely unskilled in craftsmanship and also own all kinds of machines (from circular saw to vibrating plate), I can contribute a lot of own work to the barn renovation.

Nevertheless, the loan amount would be about €160,000 - €200,000. There is not much equity, about €15,000.

Can this be profitable? What do you think?

Regards Benny

Question: Do you really get up to 8 EUR cold? Barn doesn't really sound centrally located.

Sure, it can be worth it IF there is demand for rental there. Are 390-480 EUR per sqm enough for the conversion? Including architect fees, structural engineer, building permit, utility connections, outdoor facilities with parking spaces, etc. - I doubt that.

Hello

I see problems here with the financing and the property. It is more of a niche property with uncertain rental prospects. Both are points where it will be difficult to find a bank. Most likely your house bank.

Your father does not want to provide his property as collateral (Grundschuld)?

I see two possible problems here:

[*]Do you really get 450 m² at a modern standard for 200,000 euros? Have you ever made a calculation for that? From my (layman's) perspective, it will already be tight just for the materials (windows, doors, insulation, roof, etc.). Then there's the whole surrounding stuff (architect, energy certificate, structural engineering, etc.). And we haven't even talked about the furnishings (cows) and outdoor facilities (parking spaces, paths).
[*]Are you sure that you can rent both apartments long-term at this price? What will you do if a rent is not paid for a longer period or simply remains unrented?

The rental is not a problem. The community is very popular and nice living space is scarce. The connection to Hannover is excellent and the highway can be reached in 5 minutes. The rent price is rather in the middle range. I do think that the approx. 200,000€ (ok, 160,000 is indeed too little) is sufficient because the biggest item, the roof, will be done by myself. A friend who is a roofer is helping me and fortunately, all the roof tiles are still in good condition. Only about 280-300 m² will be converted for now ("only" the 1st & 2nd floors on my side can follow later). I haven’t included the costs for the architect and structural engineer yet. What can one roughly expect for a timber-framed house (just a very rough estimate)? The architect doesn't need to design anything but only has to create the technical drawings. It is true that if the tenant doesn’t pay for a long time, problems will arise. Once the conversion is finished and I can live there, the current rent will no longer apply and I could contribute about 1,000€ for the repayment, which I think is already quite tight. A few months this goes, but longer... ;-( I believe it mainly comes down to the bank granting the loan. The only question is what they think about repayment through the landlord?!

I rather think that the expansion will become your problem! At 280-300 sqm, I estimate it more at TEUR 300 than at TEUR 200. Fachwerk does not make it cheaper (house insulation).