Financing - Proposals for complicated situation

Hello everyone,

after having looked in here a few times purely out of interest, now it’s about a concrete problem:

We have found a plot of land in Berlin that we would like to buy, demolish the existing building, and rebuild. We have already clarified building law issues, etc., and we also have a rough calculation for the new construction costs. Since we are receiving generous subsidies from both sides of our parents, this is very feasible in the overall volume. However, the seller of the land now wants to see his money as soon as possible; otherwise, we are out of the running. He has already reduced the price twice.

Currently, two problems stand in the way:

1. We will only receive part of the subsidies after selling an apartment in Munich, which will likely take a few more weeks/months. So initially, we can only plan with the funds from our own account and one side of the parents.

2. I am currently unemployed but have a signed employment contract for 01.03. With that, our household income would be about €5,800, but currently, it is only around €3,000, and we are currently living in a rented apartment (warm rent about €1,450).

So we cannot take out a loan for the entire amount but need to urgently arrange the money for the land purchase (+ a bit for the demolition). We would like a loan of €340,000, with equity of €200,000. According to a financial advisor, this would be a "tight squeeze" with only one income, with a positive household budget of about €200 (or impossible if the current rent is included). He definitely wanted to speak verbally with banks first before submitting anything. At my suggestion, he also recommended inquiring at my local bank at my birthplace, where I still have an account and my parents are well known.

I have two questions for "the forum":

1. How realistic is our plan to take out a loan for the land purchase? Does the fact that I have an employment contract starting in March (of course, probation period…) play any role at all? Is there a bank you would particularly recommend?

2. What should we consider with a two-part process (Loan 1 for €340,000, Loan 2 then about €280,000 with equity from the apartment sale)? They would basically need to be with the same bank (because of the land charge), and such a split is generally advised against, if I am correct. However, it does not seem possible to carry out our project any other way due to the time pressure. I also considered whether the second loan might be possible with KFW alone (2x €120,000 from the Efficiency House 40 program – we are still planning a rental apartment – and the remaining €40,000 might also come together somehow or would possibly require another loan). Is it conceivable that a private bank and KFW would participate in such a model?

Honestly, I am a bit at a loss. Actually, I believe that our project is very financeable, but this special situation threatens to ruin everything. It would really be a shame to lose the land. Currently, the realtor is supporting us, but if we don’t have financing soon, it will probably go to someone else.

Thanks in advance for all help, and I will try to respond promptly to any questions.

And one more question for understanding afterwards: 3. My brother-in-law said you could also take out a loan without special repayment options and thus at a slightly lower interest rate, because thanks to the special termination right you can simply set the money aside and then "pour in" whatever you can after 10 years and continue special repayments without, for example, the interest agreement agreed for 20 years being revoked. From everything I find online about this, that seems to me to be too positive an interpretation for the borrower (i.e., simply making special repayments without the rest of the contract being adjusted). Until now, I had understood it as you could simply exit the contract completely after 10 years but would have to look for a new financing for the remaining debt (which probably does not make sense given the then higher interest rates). Which interpretation is correct?

An interim financing with a very short term (until the apartment is sold) and the apartment owners as guarantors should be feasible. Or have the (parents-in-law) take out the interim financing themselves (if they are willing to do so). If you then also choose a bank that handles the real estate brokerage for the apartment itself, they also have a potential additional income as motivation.

Selling a normal apartment in Munich is also quickly possible in the current market; as soon as the thing appears online, you won’t be able to escape interested buyers.

What surprises me a bit is a land seller who voluntarily lowers the price and at the same time creates time pressure. If buyers are lining up, there is no reason to lower the price twice in a row.

Your interpretation is correct. My post must have 5 words...

Has cold calling been conducted in the neighborhood of the property to find out who the owner might be in order to possibly negotiate with them without pressure?

: That referred to my subsequent question, right? I had already thought that it was too good to be true. Thanks for the answer.

: Also a big thank you to you for the quick response. Now there is additional information about the apartment that I accidentally omitted: Currently, the almost 100-year-old mother of my father-in-law has a usufruct on it. Not that she needs the money, she is cared for at home, but this was arranged many years ago and must be relinquished first. My father-in-law has already made a notary appointment for this, but it is only in mid-February, so probably too late, especially since that would start a longer process if I understand the relevant regulations correctly. This usufruct is probably an obstacle for the mentioned arrangement, or am I wrong?

What surprises me a bit is a seller of real estate who voluntarily lowers the price and at the same time creates time pressure. If buyers are lining up, there is no reason to lower the price twice.

Well, he went down twice, each time by 10%. We jumped in after the first reduction and were pleased to hear that there would be a second one. According to the neighbor, there is currently a "big crowd" on the property and the broker also said he expects a conclusion soon. If not with us, then with someone else (there were apparently also company inquiries). Whether I believe that or not is somewhat irrelevant, because we might have done the deal even at the higher price and apart from the annoying financing situation, there is nothing speaking against a quick conclusion.