Financing review construction project (sole earner, two residential units)

Hello everyone,

of course, I have seen the extensive list of questions, which I would like to provide at an appropriate time, but first I want to hear a few critical voices on the fundamental plan, as I calculate everything a hundred times and still come to no decision.

Situation: My parents own a building plot which will be transferred to me as a gift. On this, a single-family house (150 sqm) + flat-roof "bungalow" (50 sqm) will be built. The small residential unit is planned in case the house becomes too big for my parents, one of them dies, etc. The building preliminary request has already been approved. It will basically be a "simple" prefabricated house, offers of 475k including incidental building costs (estimate) are available.

Some numbers:

Plot: 650 sqm, land value 180€, flat location.
House: Prefab house, 198 sqm living space, no basement, two separate residential units, KfW 40
Garages: Double garage (22.5k €) + single garage 9.5k €)

The outdoor area has not yet been calculated, but will be done by a landscaping and garden construction company of a friend. The first (!) round of offers amounts to 507,000 € – since I am generally a suspicious person and the exterior is still missing, I calculate with 575,000€.

About me: 28 years old, computer scientist (permanently employed at a corporation), net 4,300€ per month without additional payments etc., which I would like to leave out of the planning for now. Total about 95,000€ gross p.a. Currently, I have a rental apartment for 940€ warm. This allows me a savings rate of 1,600€ currently without problems. Paid-off new car is also available, although I would only factor in minimal amounts for it, since the house is more important to me than a "new" car, so please calculate only with minimal amounts.

The construction and financing are to be handled entirely by me as an individual, so it must also be calculable as an individual.

Key data on financing:

[*]Equity = 250,000€ (I would like to withhold 25,000€ for the kitchen etc., furnished with furniture for the time being) – part of the equity is invested in ETFs which I would only dissolve if it would bring significant advantages. The equity will under no circumstances fall below 200,000€.
[*]Loan requirement = 350,000€ (calculated without possible KfW subsidies)

Of course, I could write more numbers about myself, as I am quite aware of my finances, but I don’t want to clutter you unnecessarily, but rather get a critical view on the project first. Does the gift possibly cause problems with the bank? In the land register, I would be sole owner. A first conversation at Interhyp went very positively, especially since the property significantly leverages the total value. I have another meeting there in the next few days, as well as one at the local savings bank.

The target was a monthly rate of 1,300€ + special payments.

Am I committing financial suicide? I am by nature relatively risk-averse, but in my eyes there is relatively little speaking against it...

Thanks a lot for now! Just ask if you want more info.

Supplement to the standard land value: According to Interhyp 180€, according to the municipality as of 2018 240€ for the respective plot.

There is nothing against your numbers. For the rental apartment at 940 warm, I assume about 700 cold. 600 are still missing for the future installment. If you actually save about 1,600 monthly so far, then you know yourself that your calculation easily works out. And your (saved-up?) equity also speaks for itself. So go ahead with the project!

The equity consists of both my saved portion (about 100k) and the portion of the "bungalow" which my parents are taking over - ownership rights remain unaffected. Currently, it's about €700 cold rent and besides the regular savings rate of €1600, there is still quite a lot left for "venture investments." Is there anything to consider due to being a single person that I should definitely avoid doing at the bank?

Hello :-) Financially, at a quick glance it sounds good at first.

I find two things worth considering: Are your parents involved in the planning of the granny flat? You don’t want to build something that won’t be used. Because even people living alone often stay in the big house as long as they can.

From the way you write, I assume you are single, correct? If you build as a single person and don’t remain single, it could be that you are using the land in a way now that won’t fit later.

You don’t have to explain yourself, it wasn’t your question after all. But I would include this in your thoughts if you haven’t done so yet.

Yes, my parents "earn" the granny flat through the equity subsidy. Whether renting it out will be pursued or not is still up in the air. I am currently single, that's correct, but of course the idea is there to use both living units myself if needed, which would easily provide space for two children – I wouldn't expect more :D Even though things often turn out differently. Since the parental home is anything but barrier-free and my father will probably reach his limits there in the foreseeable future, I am already assuming the intended use.

In the age of minimalism, 198 sqm of living space must suffice even without a basement :D Currently, the single-family house is decadently planned with an office + fitness/hobby room, while I still have 3m of "storage space" by the double garage for a small workshop, etc.

To be honest, the project is driven by the reasons to sensibly invest the equity and to escape my annoying neighbors... Probably not the noblest reasons for building a house, so I am very pragmatic about the fittings etc. – I already have concrete ideas, but embellishments will be kept to a minimum. Since I can decide alone, that works quite well.