Finance new construction: yes or no?

Hello everyone,

before I start, I will introduce myself first:

I am Meike, 24 years old (no children), working in sales at a bakery with a permanent contract - net income is 1750€. I still live with my parents (no rent).

My partner is 26 years old (no children), works as a truck driver with a permanent contract - net income is 2200€. He also still lives with his parents, in the basement he has his own apartment and pays 250€ rent monthly.

Expenses together currently amount to 1600€ per month.

My parents have 2 houses, one of which was transferred to me; currently my grandma and my godmother with her husband and 2 children live in the house. We have considered 2 possibilities and already discussed them with my relatives, because I would prefer to build new rather than take over the "old house," since then I would have to kick out my grandma and the others living in the house (which I find a bit awkward).

So now to my 2 options:

Option 1:
My godmother and her husband buy the house from me, this was already discussed and basically agreed upon; the price was set at 110,000€, but this would be a lease purchase over 5 years with a final payment afterwards. At the moment we are just not completely sure if that is still current with them, but we will discuss it again with them in the next few days.

Option 2:
If option 1 falls through, we would increase the rent a bit (since she is my godmother she does not pay as much as usual), so we would make it 650€ rent, which would then be additional income for us.

Now to my actual question:
We actually wanted to wait 5 years until we have the full 110,000€, if it stays that they want to buy the house.
But: Quite a few new plots of land will soon be available in our town, and if a suitable one comes up we would want to strike immediately. I can only estimate the price of the land at the moment, between 100,000-150,000€.

My idea is that no matter what happens with my godmother, I would have a monthly subsidy either way. We would both put in a few hundred euros more on top.
Of course, the house would still need to be added, not just the land.

What do you think, would this be feasible or rather not?

Thanks for all answers

First live together, then buy/build together Everything else can go badly wrong

Hello Milka,

apart from Schemelino’s objection, I have a few other questions/suggestions:

Since you haven’t mentioned any additional equity [Eigenkapital], I assume you haven’t saved anything so far - however, that somewhat contradicts your expenses, because the total net income is supposed to be €3,950, the total expenses €1,600 ... there should be approximately €2,300 left monthly. Is that correct, and if so, what are you currently doing with it?

Another point and please don’t take this the wrong way or personally ... but your existing property with Grandma and Godmother living in it looks economically as follows:

1. I assume that your Grandma has a lifelong right of residence or would receive such a right if sold freely. That means that the value of the property is reduced by the residential value of your Grandma, since your Grandma pays no rent. That means ...

2. ... that the rent coming from your Godmother must cover the maintenance of 2 apartments instead of one. Additionally ...

3. ... the rental income of €650 cannot be considered net income, because maintenance, property tax, and also income tax must be paid from it.

For me, the question arises as to how you arrived at the purchase price of €110,000? This may be a very good price for you, but it does not have to be. Equally, it could be a purchase price that is unfair for your Godmother because certain things are not considered ... for example, the value of your Grandma’s right of residence.

I myself am a proponent of clear boundaries - I would always transfer such a property to the Godmother within the family at a fair price, since she lives in the property, and invest the free capital in a land purchase of my choice. You have free capital and your Godmother gets planning security.

If you keep the property, it can be useful for you in financing, but not the full €650 will be considered as additional income. Moreover, the rent may be too low in relation to the tied-up capital (i.e. value of the property minus the value of Grandma’s right of residence), meaning that you would - without realizing it - lose money every month, or be better off if you sell the property because for example you no longer have to bear the maintenance of Grandma’s apartment.

Just a first suggestion, what is optimal for you cannot yet be determined based on the figures you provided.

Best regards
Dirk Grafe

i.e. we would make 650€ rent

A house like that also causes costs ... Is everything understood and clarified in this regard? (I am not interested in the answer any further, but you should be clear about it ...)

First live together, then buy/build together Everything else can go badly wrong

It can also go badly wrong if you already live together before building/buying the house;)

because the total net should be €3,950, the total expenses €1,600 ... there should be about €2,300 left monthly.

That's exactly what puzzles me as well, I just quickly googled. It also shows €1,800 for a bakery saleswoman and €2,200 for a truck driver ... but GROSS. Do we have a misunderstanding here? Otherwise, congratulations on these good salaries and still the question: what happens with the €2,300 surplus?
best regards