Finances for building a house okay? Please provide an assessment

Hello,

this is my first post in this forum. I have been browsing for a few days now because my boyfriend and I have been thinking about concretizing our shared future for a few months. This also includes that we both wish for a home of our own.

First of all, I would like you to assess how well we are doing financially. Here are some key points about us and of course about our income.

I am 21 years old and my boyfriend is 23. We have both finished our training a year ago. In our company, it is common to initially be employed on a fixed-term contract for one to a maximum of two years before a permanent contract follows. Since we are intensively involved in the company’s future projects, it is clear that we will have permanent contracts starting in the summer. However, we are not taking any steps toward signing anything until we have written confirmation. The risk is just too high; you never know.

At the moment, we are still at the lowest salary level. That means for me €1450 net and for my boyfriend €1400 net. Each of us has agreed to additional tasks in the company. Our net income would increase by a total of €250 in bonuses, expected from the middle of the year. At ages 24 and 26, respectively, we will each get an increase of €100 net, as the salary levels depend on age. So that makes a total of €400 net more than now in 5 years. I am leaving aside increases due to length of service for now, as these vary, as well as salary increases due to other areas of responsibility or "promotions." Also, the usual 13th and 14th salary bonuses that are common for us I do not want to include in the calculation.

We live south of Kassel. Our monthly expenses are currently as follows:

€735 rent including heating
€35 electricity
€100 phone/mobile/TV etc.
€300 food
€200 petrol
€520 car loans (still running for 3.5 years)
€250 insurance and similar
€300 savings

~€400 therefore remain currently for entertainment; mostly we don’t need that much, and the surplus goes into savings. Often we do spend it though, for example when we go on a big shopping spree or away for a weekend. Here we can easily limit ourselves.

These values come from our household budget book; I usually rounded up generously.

Starting a family is still far away; ideally, for me the first child would come in 8-10 years, but maybe never.

Plots of land are available from €19/sqm here; I am planning with an "upscale" price of €60-70/sqm. Preferably sized 500-700 sqm.
What an average house costs is better known here than by me. We want nothing special, perhaps about 120-140 sqm of living space, no bay windows, conservatories, or garages. Rather a small, nice terrace and a carport.
Existing properties are currently not particularly worthwhile in our area. If that does not change, we have no choice but to build.

Topic equity capital: Since we have only been working for about a year, we haven’t been able to save much so far, and the little we had went into furnishing the apartment and the down payments on the cars.
We currently have a buffer of almost €3000 that I do not want to touch.
The option is on the table to borrow some money for the ancillary construction costs from my parents. I think other relatives would also be willing to give us a little, but I don’t want to count on such unknowns. If it happens, that’s nice; if not, then not.

So.
At what point is it worth thinking about building? Is it worth it at all? In 5 years, when our net income is at the highest level? If we have at least amount x of equity?

If you need any more information, just let me know!

Thank you very much for reading

House: €180,000
Land: ~€40,000
Additional costs: €40,000
Painting work: €10,000
Sample buffer: €10,000
Outdoor facilities in own work: €10,000
New kitchen: €10,000
Furniture: €10,000
Lamps: €1,000
...

Roughly estimated altogether: €311,000
Let's assume you get the additional costs for free and not borrowed, leaving about ~€270,000.

In a few years, you would have about €3,200 net total. To properly finance the €270,000, you can calculate roughly €1,200 monthly installment.

Then €2,000 would remain, from which your expenses would still have to be deducted. You do save the rent, but the house also needs to be maintained. In addition, you should also build reserves.

It can work, but I see it a bit critically. When children come into play, part of the income immediately goes away, the costs increase, child care is not exactly cheap...

In your case, I would save for a few more years and then think about it again. You are still young.

I hate to destroy dreams, but you might want to take a little more time with this.

You are still young and perhaps haven’t been together for very long. Building a house together is a serious matter. On the other hand, your current income situation is not in a region where you should be thinking about building a house.

Maybe save for a few more years first, wait for the salary increases, and then consider a condominium..

Sorry if I’m being so "harsh," but a foreclosure is harsh too.

Thank you for this overview.

I also think that it is possible, but very tight. It is true that we are young, but our jobs are in a secure industry with the market leader, and although the income is low, it is steady (of course, assuming the contract extension in summer goes through). None of us want to move to another area, which is why we will either live forever in our current apartment (4 rooms, 107 sqm) or move into ownership.

I have also considered a (cheaper) condominium, which we could pay off quickly and later either provide capital or rental income. However, I am extremely undecided here, and such an apartment would have to be found first.

Is there maybe someone here with similar equity who has succeeded? Or someone who completely messed it up? People don't like to admit that, but it would help me to hear from those people.

I have to correct my statement above after all: €1,200 installment with a max income of €3,200 corresponds to almost 38%. As a rule of thumb, you can roughly say that the installment should not exceed 1/3 of the income. But it already does that anyway. If you should become pregnant, it will get really tight in 5 years. Take your time with it.