From 0 to 100 in 3 years realistic? | Building obligation

Hi everyone,

For several years, my long-term girlfriend (we have been a couple for 10 years) and I have dreamed of having our own four walls near both of our parents' homes. Now that we have both finished our training/studies and are in the middle of our professional lives, we want to seriously pursue this plan and realize it in the coming years.
In the mentioned city, there are still large, affordable, and available plots of land to buy, unfortunately with one drawback – a building obligation within 3 years. Now we would like to hear your opinion on our project and whether we might be a bit too motivated about it.

TLDR: We want to build in 3 years and have built up the corresponding equity by then. Now the details of our financial situation.

General information about you:

[*]How old are you?: 26 (m) and 25 (f)
[*]Do you have children?: No
[*]Are children planned?: Maybe one in 5 years, max 2
[*]What do you do professionally?: (B.Sc.) Software developer working 100% home office (m) / Health and nursing care professional (f)
[*]Are you employed, self-employed, retired, housewife, househusband, etc...: Permanently employed & full-time
[*]How many hours do you work?: Each 40h

Income and asset situation:

[*]What income do you have (gross/net)?: Together €5,900 net / €3,600 (m) / €2,300 (f) / private health insurance already deducted / bonuses of €3,000 p.a. not included
[*]How much child benefit do you receive?: None
[*]Other transfers such as parental allowance, sickness benefit, etc...?: None
[*]How much equity do you have?: As of today €25,000 ETFs + €25,000 cash (finished studies 3 years ago and significantly increased salary last year. Therefore only started building substantial equity this year)
[*]How much of this equity do you want to put into the house project?: 90%

Expense situation:
Housing costs:

[*]Current warm rent: €900 all-inclusive thanks to an apartment from a relative

Mobility costs:

[*]Monthly ticket for bus and train (also for children!): €50
[*]Car loan (or saving rate for new car): Car was sold as it is not needed in the city

Insurance costs:

[*]Private health insurance (also supplementary insurance, daily sickness allowance, etc.): already deducted from net (€333)
[*]Liability insurance (also pets): €50
[*]Disability insurance: €50
[*]Household insurance: €30 p.a.

Living expenses:

All costs have been recorded in an app for years. The average expenses over the last 3 years amount to €650 per month for food + streaming services and so on. Vacations are paid from not included bonuses and private health insurance reimbursements. To avoid writing a book here, please calculate with the savings amount we have indicated per month.

Savings:

Since I (m) sold my car, my personal savings rate has been 65% = €2,800 since this year.
My partner has a monthly surplus of also 65% = €1,500

I do not want to consider other income as it is irregularly earned.

Other expenses: No other expenses that would deviate from the amount stated above. As mentioned, we have been using a household book for years.

Income and expense totals:

[*]Total income: €5,900
[*]Total expenses: €1,600
[*]Balance: €4,300
[*]Of that, amount for cold rent and dispensable savings (e.g., savings rate for house): €800 cold rent
[*]Planned equity in 3 years: €50,000 existing equity + 36 * 4,300 = €200,000 + money from grandfather €20,000

To reach our goal, we would like to give up unnecessary luxuries from our point of view for 3 years such as our previous 4 vacations + flight per year as well as an expensive car (already sold). The reason is the aforementioned building obligation. It should be mentioned that we are not frugalists but are content with our consumption behavior. If the plan for owning a house were not in my/our heads, we would invest our money 100% in ETFs. Since I have only been working for 3 years now, there is certainly room for salary improvement in IT. My partner is currently not aiming for a higher position.

The following budget is what we envision:
Plot: 800 sqm at €175 per sqm developed land = €140,000 + incidental costs (buy this year as long as still available)
House: these costs depend on the feasibility of our plan. Planned is an upscale standard + basement
Including incidental costs + safety buffer + furnishing, we want to set a limit of around €750,000 minus our equity

I hope you can talk some sense into us or maybe even encourage us to seriously pursue the project now! Should we not rush anything? Is it realistic to get financing in 2 years in order to comply with the building obligation? Many thanks in advance!!!

Your income is good, equity is still being built up. I would calculate more realistically; saving like berserkers for 3 years with over 70% (!) savings rate doesn't sound healthy with that salary.

I see the following points here:
1. How is the construction obligation defined? For me, it says "shell construction within 2 years," but there are other variants. Depending on the variant, you might have to start well before 3 years and finalize the financing clearly.
2. Are you calculating the 750k including the land?
3. How realistic is it that you can still get upscale standard and a basement within the budget in 3 years? At today’s prices, depending on the house size and the exact definition of your standard, you’re already quite close to the limit. It’s unlikely to get cheaper.
4. Fundamental uncertainty due to the interest rate situation.

Basically, I see few problems regarding equity and the possibility to get financing. But I would consider whether it makes sense to carry out the house construction now with a high loan-to-value ratio and make significant prepayments. That way, you have today's prices and can already fix the interest rates now.

Brief addition to the construction obligation. This is defined as follows: "The building plots must be built up with a building permissible according to the development plan and ready for occupancy within three years after the conclusion of the purchase contract."

Then you don’t have 3 years but rather about 1.5 years. And correspondingly less saved equity. In that case, the balance shifts even more towards starting right away. By the time you have agreed on a suitable floor plan, general contractor/architect, etc., and obtained a building permit, it already takes easily half a year.

Your income is good, equity is still being built up. I would calculate more realistically, saving berserk for 3 years with over 70% (!) savings rate doesn’t sound healthy at that salary. ...

Thanks for your feedback. Yes, the savings rate certainly sounds very high but we lack nothing. Actually, from my point of view, I consume relatively unnecessarily (the newest iPhone every year, new consoles, many flights, etc.). Of course, the savings rate is only that high because we want to realize our plan as quickly as possible.

The purchase price is planned to include the land. I am aware that the basement in particular is a cost driver. However, from our point of view, it would be important. On the one hand for storage space, on the other hand, I have personally dreamed of my own home cinema for years. I must say, however, that I would gladly save for another 1-2 years to ultimately enable myself/us to have the perfect house.

I just see, as you might also, the rising prices and every additional year would ultimately reduce our possible budget.

Then you don't have 3 years but rather about 1.5 years.

I would therefore want to postpone the purchase of the property as long as possible (artificially). The location is really perfect for us, and it would be a shame to build a house now that would not fully meet our expectations for a home of our own.

Unfortunately, we have not yet gained any experience with banks regarding how much credit we could already take out today. Perhaps we should obtain a framework from a financier in order to plan more realistically.