House construction. Sell or rent out the condominium?

An edit of your post is only possible within the first 10 minutes. It depends somewhat on the area. Most people here would probably be in favor of selling, because renting out a single apartment usually means a concentrated risk and a lot of work for little return. However, if the housing market in the region of your [ETW] is highly dynamic (and preferably expected to rise) and you are not too risk-averse and/or your loan term is still far from the first 10 years, then it might make sense to rent it out. That’s how I do it, at least until my large installment has reached 10 years. However, I have already received several inquiries from my personal circle wanting to rent the apartment, which already limits the risk of rent dodgers, etc.

You should tell us a bit more about yourselves: Are you planning to have more children? Will you eventually return to full-time work? What are your living expenses like? What monthly payment are you currently making for the apartment? (Have you completely paid for it yourselves so far?) How large are the offered plots approximately?

I didn’t want to make the post too long...

So:
Family planning is definitely complete. At 38 years old, we are both already “out of that age”. The girls are slowly becoming easy to care for at 5 and 9, and we enjoy an almost carefree family life.

Regarding finances, we can save at least €2000 every month. We were able to save the €90k in about 6 years. (Although I was on parental leave for 1.5 years during that time). I would rather not increase my working hours to 100%. But it’s not excluded in about 10 years (for example, if our daughter wants to study in a completely different city).

At the moment, we pay €1100 for the current loan + additional costs approx. €250. We bought the apartment from the developer 9 years ago. The price back then was €250k. Last month, our neighbors sold their apartment (same layout on the upper floor) through a realtor. Price: €380k. It was gone after 2 weeks. Our apartment is better equipped, has its own garden, a high-quality glass-front kitchen, Bisazza mosaic tiles in the bathroom, a huge terrace... I assume we can ask for at least the same amount as the neighbors.

The building plots in the new development area are between 500 and 700m², fully developed. We would like to aim for about 550 - 600m². So we calculate around €180k + additional costs = €200k. We would therefore need to finance €100k variable (with €100k equity).

The house should be around 160-180m². No basement. After all, we want to expand. A young relative who is an architect would plan the house (quote: “I’ll design your house for a good racing bike”). Since we have many tradespeople among our acquaintances, we would carry out many services ourselves (tiling, landscaping, garage, roof insulation, drywall, floor and wall coverings...). I think around €400k + additional costs should be enough.

We could comfortably afford a monthly payment of about €1600-1800.

It depends a bit on the area. Most people here would probably prefer to sell, because renting out a single apartment usually always means a concentration risk and a lot of work for little return. However, if the housing market in the region of your condominium is highly dynamic (and preferably forecasted to rise) and you are not too risk-averse and/or your loan term is still far from the first 10 years, then it could make sense to rent it out. That’s how I do it, at least until my big component reaches 10 years. But I have also already received several inquiries from my personal circle wanting to rent the apartment, which already limits the risk of problem tenants, etc.

The location of the condominium is very good. The area is very popular, apartments sell like hotcakes or are allocated "under the table" – both for sale and purchase. Assuming we want to rent it out. What amount can I depreciate annually? 2% of the purchase price or of the current value of the apartment? The apartment is encumbered with a land charge of 170k. About 60k of that has been repaid. The remaining amount could be repaid in a single payment in one year. If we were to rent, are we only allowed to deduct the interest on the unpaid amount, or can we take out an additional loan up to the value of the land charge and deduct the interest on the full 170k from taxes? After all, we have invested about 60k equity in the apartment, which we would now actually need for the new house...

Hi Kati, the depreciation of course only deducts from the purchase price, which is also adjusted for the value of the land. However, there are other advertising costs, you can definitely figure those out. If it makes sense, the free land charge could be offered as additional security, possibly even re-mortgaged. With the current interest rates, I would never sell a good apartment, although this here, as far as I have read so far, is rather an exception opinion.

What contradicts me is that plots cost only 180,000 while apartments cost 380,000 and more. If I apply this to our area, the plots are at least 100,000 euros more expensive with similar apartment prices.

Hi Kati, In our case, the old house is also rented out, good location, sought-after, big city. Because of the depreciation, talk to your tax advisor beforehand. Rental income and appreciation balance each other out, let people around you know that your apartment will be available for rent soon, although it may take 2 years until someone moves in.