Financing Check: Building a House in 2.5 Years

Hi,

actually we wanted to build a bit earlier, but then various things got in our way, to be precise 2 children We now rent a single-family house near Koblenz, but want to move to the outskirts of Hamburg (Neugraben, Norderstedt, Allermöhe, Hashloh, etc.) in mid-2022. Through private contacts (family works in real estate) we have some information about where some plots will be available for purchase in the next few years. Additionally, IBA Hamburg is also building at various locations, we'll see. This post is therefore less about a specific building project and more a check of financing whether my plan works.

General information about you:

Who are you? 4-person family: 32, 31, 2 years, and the little one is 2 months old plus a dog
Are children planned? a latecomer in about 3-4 years is possible
What do you do professionally? Me: salaried IT department manager 40 h / My wife: integration teacher employed (currently on parental leave) (part-time)

Income and asset situation:

What income do you have (net)? Man: €4,500, woman: €800 (currently €225 parental allowance plus until the little one is 2 years old, then working again)
How much child benefit do you get? 400
How much equity do you have? 10,000, have just paid off the family van.

There is also an annual bonus which I will not include here

My income will move into the six-figure range in the next 3-5 years, i.e. a net monthly income of 5-6 thousand is very likely in the next few years - of course I’m not counting on it.

I think I will have about €60,000-70,000 in savings in about 2.5 years. +- 10%

I have been tracking and labeling all our expenses since 2014, have a very detailed overview. The numbers here are summed up, but I can break everything down further.

Expense situation €1,950/month:

Housing costs: €1,250 (880 rent, additional costs, electricity, oil, telephone, miscellaneous)
Insurance & co: €500 (disability, term life, dental supplemental, liability (family/dog), partial and full coverage for the cars (Ford SMax, Ford Focus both paid off), donations and miscellaneous)
Loans: €100 (student loan, which still goes on forever.)
Saving for children: €100

Living expenses €1,300/month:

Food/household: €600
Pocket money: €300
Fuel: €200
Reserves for larger things €200

Daycare costs nothing in RLP.

Income and expense totals:

Total income: 5,100 (in 2 years with both incomes: 5,700)
Total expenses: 3,250
Balance: +1,850 (in 2 years 2,550)
of which sum cold rent and dispensable savings (e.g. savings rate for house): 880 cold rent.

General about the property:

We are planning approximately 150 m². We currently live on 190 m² and notice that is too much for us. Also the 500m² garden is simply too much work. So we are looking for a 350-450 m² plot. Depending on location I plan a maximum of €150,000 for that and another €300,000 for the house. It would be nice if we could manage with €450,000, but €500,000 is probably realistic.

Basically I plan €2,500/month for the house (1,800-2,000 installment + energy, reserves). 15 years fixed interest and then see if the remaining loan can be paid off completely.

Of course this is all initially planned very roughly, but such a project should be properly planned.

Well, why not?
Only the house price might be a bit too optimistic.
Are the salary increases fixed, e.g. through collective wage agreements? Do you need a new employer when moving to Hamburg? Probation periods are financing killers.

Everything looks good, only the house price doesn't fit. I calculate 450,000 for the house in 2.5 years. That will be your 150m2 with additional construction costs and finished garage without basement, medium standard

Hello,

are these 500k in 2.5 years on the outskirts of Hamburg realistic?

Koblenz is not Hamburg....

Yes, you will earn more in IT there, but houses etc. are simply more expensive as well.

I also find your calculation strange. approx. 1,700 surplus net and only 10k equity

No, the arrangement is coordinated with my employer – ultimately, I can also do my job remotely. Even half of our team is currently working completely remotely from Hamburg.

Salary increases are linked to our product success, so not fixed, but likely.

Regarding the house price, I know people who have now built in the outskirts of Hamburg (Neugraben), their location and house are very similar to what we could imagine, and they came to 350k without additional costs and ground/painting as labor. The plot cost 120k. No idea if that’s realistic, I went through some example calculations with a local developer, they are all in that range. Where does the 50% markup come from? Medium quality is completely sufficient.

I was only able to increase my salary by 50% in the last 3 years, and my wife hadn’t had the job long before parental leave. We had many expenses to pay, BAföG, a used car broke down after 9 months (5000 loss), expenses for children, paid off a new car.

A lot of money went in there.

No, the transport is coordinated with my employer – ultimately, I can also do my job remotely. Half of our team is currently working completely remote from Hamburg as well.

Salary increases are tied to our product success, so not fixed, but likely.

Regarding the house price, I know people who have recently built in the outskirts of Hamburg (Neugraben), their location and house is very similar to what we could imagine, and they ended up paying 350k excluding incidental costs and soil/plastering as own labor. The land was 120k. No idea if that’s realistic, I went through a few example calculations with a local builder, they’re all in that range. Where does the 50% markup come from? A mid-range finish is completely sufficient.

I was only able to increase my salary by 50% in the last 3 years and my wife hadn’t had her job long before parental leave. We had a lot of expenses to pay, BAföG, a used car broke down after 9 months (5,000 loss), expenses for children, paid off a new car.

A lot of money went into that.

then take today’s prices times two, then you’ll know what you need. In the worst case, there will be money left over.

Two years ago, we paid €180 per m² for land in the Berlin metropolitan area, now €300.