Financing - Renovation of old stock with high costs: Realistic?

Hello dear forum,

my husband and I own a debt-free property of great age that is listed as a historic monument. The building was last inhabited in the 1970s, heated at that time with solid fuel (fireplace + small stoves), and has hardly ever been renovated since its construction around 1750. There is no insulation, no hot water, and the electrical system is literally from the pre-war period. The property is very beautiful, and we have long dreamed of actually living there. Our current apartment is now (after child 2) far too small, and we need to move out here in the medium term.

I would now like to describe the situation here and basically have only one core question: is this financially realistic? The question of whether one should put so much money into such an old property (risk) is actually secondary for us. We are basically courageous and very much in love with the house.

Information about us

[*]35 / 32 years old, living in Thuringia
[*]2 children (1 year, 3 years), family planning completed
[*]employed engineer, permanent contract & civil servant for life
[*]currently both working full-time, but we want to reduce working hours in the future if possible

Income situation

[*]Net income from employment together approximately €7,950 per month
[*]Child benefit €510
[*]€40,000 equity, all available for the house

Expenses (monthly):

Item	Amount	Notes
Rent (including utilities)	€900
Childcare	€700	Daycare + meal provider
Electricity	€100
Savings rate	€100
Groceries / daily shopping	€550
Car	€300	Diesel + insurance
Insurance	€100
Internet	€20
Leisure / hobbies	€300
Purchases	€400	Clothing, electronics, kitchen appliances, etc.
Travel / miscellaneous	€400
Total	€3,870

One point regarding this:

[*]if we move into the house, a second car might become necessary since we currently live in the city but the property is in the countryside

Bottom line

Item	Amount
Income	+€8,460
Expenses	-€3,870
Total	€4,590
Total without rent	€5,490

The current situation

The land and property, as mentioned, are already fully paid and owned by us. Therefore, purchase ancillary costs, agent fees, etc., no longer apply. We have commissioned an architect to calculate what it would cost to renovate the property to a (for a historic monument) modern standard, insulate it, and improve its energy efficiency so that it can be lived in comfortably.

Since the property is quite large (converted 230 m² living space, 3,000 m² plot), we have instructed to renovate only 2 of the 3 floors for now, and to prepare the attic only (renovation, insulation, but no conversion), primarily to save costs. Additionally, we have excluded other services from the architect that we want to do ourselves:

[*]Cleaning inside and outside
[*]Laying tiles / laminate
[*]Painting

The architect comes to a total of about €640,000. This includes the complete shell renovation, electrical system, heating system, solar system, insulation, etc. With our equity, we would therefore have a financing requirement of €600,000 for the renovation. The bank has made an offer in which we would pay €2,500 monthly for this amount until retirement, currently with a 10-year interest rate fixed.

However, it should be added that the land is overgrown, there is no enclosure, the attic will—as mentioned—not be converted. A carport would be interesting in the future, perhaps also a garden house. And, of course, the DIY work. The latter is intentionally planned because we do not trust ourselves with a monthly rate higher than €2,500 and prefer to calculate defensively, which is why the loan cannot be higher.

The architect is already very advanced with the planning, and we even have the building permit (including monument protection authorization). We are basically at the point that after signing with the bank, the architect will send out the invitations to tender for the trades, and it can begin.

Thoughts

My husband’s job as a civil servant is actually quite crisis-proof, but you never know what might come, and with a projected monthly burden of around €4,000 and the fact that we will have to invest many thousands more into the property and land, we are simply afraid that we might not manage. Furthermore, it will not stop at the €2,500 monthly, but on top of that there will be building insurance, water, possibly higher electricity costs, repair costs, etc. So realistically, it will probably be more than €4,000 per month. Maybe €4,500.

Another major point is: we currently only have the architect’s cost calculation. If this is wrong, which can easily happen when renovating such an old building, it will be an underfinancing and thus very critical for us.

We have already invested several thousand euros in the architect, permits, and the maintenance of the property over the past years (probably about €40,000), but we could now of course still say: we accept the loss, pull out, and simply look for a larger rental apartment. However, this is also painful because we will never find an apartment that even remotely meets our needs (4-5 rooms with a small garden) with 2 children and costs less than €1,500 per month (probably more like €2,000). With our currently very old rental contract at €900 per month, we are absolutely spoiled.

So now the question: what do you think? Is the calculation and financing realistic? Are there any obvious major points that we have overlooked?

Best regards,
Moni

we have a monthly burden of prospectively around 4,000€

I only see question marks there.
You have 2,500€ "rent" including savings (repayment). All other payments are the same as for a tenant. So realistically, after renovation, 3,000€ warm rent.
After that, with 5,500€ for living expenses, of course you hardly have any room to breathe (that’s irony!).

Another big point is: we currently only have the cost calculation from the architect: if that is wrong, which can certainly happen with the renovation of such an old property, there will be underfunding and it will be very critical for us.

True. Then maybe you only have 5,000€ per month to live on (irony again!).

The latter, however, is also painful, since we will never find an apartment that even remotely meets our needs (4-5 rooms with a small garden) with 2 children, and will be under 1,500€ per month (probably rather 2,000€ per month).

That corresponds to the interest on the loan. So the renovated own house is just as expensive (prospectively or probably already now) or cheaper, or significantly cheaper in 10 years than the rental apartment. Interesting.

Are there any obvious bigger points that we have overlooked?

Yes. Your income (irony!). And that you are standing in your own way. Where is the real problem? So not "with 5,000€ it gets tight per month." But really the real problem? Do you spend too much money?

Sorry that I am so ironic. But maybe it helps you understand.

Now it should be added that the plot is overgrown, no fencing, the attic will not be developed as mentioned.

Move in, make a nice 500 sqm garden and the rest will come. You have money coming in by the bucketload every month. I usually expect such questions here at an income of 5,000€, whether it fits. But not at 8,500€.

There is little to add to the words. Except perhaps: please, for heaven's sake, do not put laminate flooring in the beautiful old house!

@nordanney s words leave little to add

except for the question of how there can be only 40k equity with a monthly surplus of 4,500 euros. Either the current household income has only been available for a short time or your expenses are very incomplete. I would seriously reconsider that. Nevertheless, with 8.5k net, a new property (including monument protection renovation) should be easily feasible.

I even suggest enormous tax reliefs under §10f Income Tax Act in connection with monument protection and the salary!

I'll put it this way. Together, with 3 kids and 2 cars, we have about the same total income that you have left each month and we finance a house with a €1200 installment. So even if I mentally add another €2000 (because of your higher installment, etc.), your income would still be more than enough for us and we are currently even managing to save €500 or more per month. So there should be plenty of leeway for you.

I only see question marks there.
You have €2,500 "rent" including savings (repayment). All other payments are like those of a tenant. Realistically, after renovation, it will be €3,000 warm rent.
After that, with €5,500 for living expenses, you naturally have hardly any breathing room left (that's irony!).

True. Then maybe only €5,000 per month remain for living (again irony!)

Of course, then there would not be €5,500 left.
€5,500 would be what remains if the rent were gone now/today, but I have (through negligence) nowhere said what the situation with the loan looks like then. You can of course figure that out, but effectively it would be €5,500 minus €2,500 (loan installment) or rather €3,000 with additional ongoing costs. So, (€5,500 - €3,000) leaves €2,500 per month.

And that you are standing in your own way. Where is the real problem? So not "with €5,000 it gets tight in the month." But really the real problem? Are you spending too much?

Effectively, it is primarily our security mindset that stands in our way here.
Loan installment + all other previously mentioned living costs then amount to about €6,000 per month.
From my point of view, that is enormous. And sure, there is still about €2,500 per month left to live on, but we have concerns about whether that is enough if we also still have to continue renovating/expanding, and yes, unexpected expenses sometimes arise as well.
Or with the wish mentioned in the initial post to maybe switch to part-time at some point, the €2,000 buffer can quickly become tight.

Of course, we did not ask here in the forum because we are looking for someone to talk us out of it. We want to live in this house.
But (even if that might be hard to understand) such an obviously simple decision is not for us.

's words need little addition. Except maybe: for heaven's sake, don't put laminate in the beautiful old house!

That made me laugh. "Laminate" was an idiomatic word, but since 99% underfloor heating is planned as the heat source, unfortunately we cannot lay historic/thick floorboards because the heat transfer would be greatly impaired otherwise (that's what we were told). It has to be something "thin," then.

Except for the question of how only €40k equity is available with a monthly surplus of €4,500. Either the current household income has only existed for a short time, or your expenses are very incomplete.

The latter is the case. In addition, we invested in a new (used) car and were on parental leave until recently.