Financing private real estate purchase

Hello everyone,

unfortunately, I was a bit too quick with the publication of my first post and was unable to correct missing or incorrect information afterwards.

We have the opportunity to purchase a terraced end house from 2002 (from distant relatives, no real estate agent, and initially without urgent time pressure).
The bathrooms and kitchen are fine and will suffice for the next few years. The condition of the living spaces requires renovation, but I am a trained craftsman myself and have enough craftsmen in the family, etc.
Normal renovation (walls, ceilings, floor covering in the ground floor) can all be done by ourselves. Furniture would mostly be moved as everything is relatively new purchases.
The gas heating system was renewed in 2023 and the general building structure is good.

The property is located in NRW (Rhein-Kreis Neuss), very rural, about 30 minutes from Düsseldorf.

General information about you:

[*]Who are you? Married couple
[*]How old are you? 34/30
[*]Are there children? 1
[*]Are more children planned? 1 (in 1-2 years)
(Current net level is approximately maintained through collective bargaining/pay raise at M even with future planned 1 year parental leave)
[*]What do you do professionally? Office employees
[*]Are you employed, self-employed, retired, housewife, househusband, etc.? Employed at DB AG and an employee affiliated with public service
[*]How many hours do you work? 40/20

Income and asset situation:

[*]What income do you have (gross/net)? €4150 net
[*]How much child benefit do you receive? €250
[*]How much equity do you have? €35,000
[*]How much equity do you want to invest in the house project? €25,000 - €30,000

Housing costs:

[*]Current warm rent €1300 (including electricity & heat pump)
[*]Telephone, internet, mobile phone €80

Mobility costs:

[*]Insurance €90
[*]Taxes €30
[*]Fuel €200

Insurance costs:

[*]Insurances (excluding motor vehicle) €160

Living expenses:

[*]Groceries €650
[*]Care/drugstore/medicine €200
[*]Clothing €150
[*]Daycare/school fees (and meal fees) €250
[*]Leisure and miscellaneous €700

Savings:

[*]Vacation €200
[*]Increasing emergency fund €100

Total income and expenses:

[*]Total income €4400
[*]Total expenses €4100
[*]Difference €300 (Sometimes saved, sometimes used for unplanned purchases as needed)

Purchase costs:

[*]Property price €350,000
[*]Acquisition ancillary costs (notary, property transfer tax) ~ €27,000 - €30,000
[*]Renovation and/or refurbishment costs (material and disposal costs only as own labor – financed by third parties (parents/grandparents, etc.)
[*]Total costs €380,000

We would appreciate an active discussion in the comments and hope to get a good overview of how you assess our situation.
Appointments for professional advice have already been made.

Best regards.

Do not change the statement about your first (half-finished) thread. With the restriction that you have to be a little careful with your expenses. If you do not come down there, at least €1,500 cold rent (= installment) plus additional costs are not feasible - or there is still Christmas bonus etc. that are not taken into account.

Have you already looked at what kind of rate you can expect approximately? I would rather not do it with that income. Until recently, we had a similar net income with 2 kids and a rate of €1200, and honestly... there was rarely really anything left over in a meaningful way, so that you could build something up in the long term alongside the necessary maintenance reserve. Food prices have simply gone up a lot lately, and in the first years in the house, you constantly notice what you still need to buy here and there, and of course all that has its price. I’m glad that after the current parental leave with child number 3, we will both work and then have over €5000 net due to a job change in the meantime, wage increases, etc. That will ease things financially, because in the long term the situation would not be nice otherwise, especially when the kids get older and then hobbies might possibly not be affordable, clothing doesn’t go as well second hand anymore, and so on. So depending on how high your rate would have to be, that would be too tight for me.

Equity 35,000 euros.

You want to use 30,000 euros of that. Honestly, I wouldn’t start such a major financial project with 35k, and if I did, I would feel a bit tight with only 5,000 euros of remaining equity.

35k today is practically nothing, and 5,000 even less. Of course, it is very difficult for a young family with a child to build equity. Gross, you certainly have enough money, but net there is far too little left.

Unfortunately, there is no family support in the sense of building equity. For example, through tax incentives or a tax-free savings reserve for young families.

In [Thüringen] there is something like that.

According to the now developed funding guideline, the subsidy granted to families with children for home purchases amounts to five percent of the purchase price agreed upon in the notary contract. The subsidy is limited to purchase prices up to a limit of 400,000 euros for owner-occupied houses or condominiums and 100,000 euros for plots of land. The maximum funding amount is therefore 20,000 euros per household.

That would, for example, help you a lot.

I believe the AfD also made good proposals here and even wanted to abolish the property transfer tax in [Thüringen]. However, the other democratic parties did not want that.

I don’t know why the social, liberal, or Christian Democrats don’t simply do something like that. We finally need to support our families again. But that’s just by the way.

I don't know why the social, liberal or Christian Democrats don't just do something like that.

Because the real estate transfer tax is the only freely settable tax of the federal states and thus their most important independent tax. But the AfD would already notice that if billions are missing (referring to the whole of Germany, it is a double-digit billion amount).

You want to invest 30,000 euros from it. Honestly, I wouldn't start such a major financial project with 35k and if I did, I would feel somewhat tight with only 5,000 euros of remaining equity, let's say.

The amount of equity does not determine the feasibility of a project. The viability is relevant – which is mathematically given, although the expenditure side would have to be somewhat reduced.

I did not speak of the abolition of the real estate transfer tax as a whole, but of its abolition for young families who buy their own plot of land or house. The AfD intends nothing else within the framework of family support.

It was rejected in Thuringia by [Rot Rot Grün] and [CDU].

If one wants, one could already support young families with children. What is particularly lacking in young years is equity capital.
Those who do not inherit at a young age have a problem, especially if there are still children.