House construction. Sell or rent out the condominium?

The girls are slowly becoming low-maintenance at 5 and 9, and we are enjoying the almost carefree family life.

And for the coming time, is "simply" renting a house not an option? The girls will possibly move out again at 18 anyway. By the time the house is ready, one daughter will certainly already be 11.

5,500 euros family income is only average and not really a lot. Many high earners already have that just from one person working.

Oh man, you can really see how out of touch this forum sometimes is.....
I’ll quote from a recent study: "With a monthly net income of 5,294 euros or more, couples without children belong to the richest ten percent in Germany."

Since I am currently a landlord of one apartment and from next year of three apartments, I would rent out. You simply have to calculate (or have calculated) exactly what rent income you still have available after all costs and taxes. You can then add that to your 1,800 euros. When your fixed interest period runs out, you can refinance the remaining amount. I would then take a relatively low repayment. That way you have a good surplus and can add that on top of your 1,800 euros. Nowadays you don’t necessarily have to repay at 4-5%, you can also take less. You pay almost no interest anyway. You can possibly also take 100,000 euros from your existing apartment as equity share with a mortgage to lower your interest a bit.
What you also have to consider: with this variant the tenants continue to pay off the apartment for you. So the value you can get out later, if you ever sell, is higher. And exactly that you can do at any time anyway. Just sell the apartment if it becomes too tight for you or something else doesn’t fit.
So that’s how I would do it. But I like renting and I try to make money with it over the years.

Now, what I still have to say. If you really would like to move back into the apartment after the kids have moved out because it is ideal for you and you find it great, then I don’t think ’s idea is so bad at all.
Because, honestly, what do you need later as a couple in such a huge place with 160 - 180 sqm?
Unless, of course, you plan it so that it becomes two residential units. Then you could take advantage of the KfW loan twice and later, when the kids have moved out, rent one unit. If you can imagine having tenants in your retirement home. They would then help you pay off the loan again.

After describing the overall situation, I recommend selling the apartment. You have too little debt capital open, whose interest you can write off. The new debts on your own house cannot be deducted at all because of personal use. It makes more sense to sell the apartment, use part of the equity in your house construction, and buy another property with debt capital and a small remainder of equity from the apartment sale. Currently, you have a very low return. The only hope is the increase in value in the apparently good location, although rural. But down there, I think everything is insanely expensive :-P Real estate investment mainly makes sense when leveraged with debt capital.

I also think that without the proceeds from the apartment as equity, a house is not affordable for you. And planning a surplus from renting... that is simply risky in case you get the wrong tenant. You can only ever see so far into people’s heads. In the building where my brother owns a condominium, several apartments were purchased for renting out. One of them was rented to a doctor, a younger man, family, working at the clinic. Everything done right as a landlord, right? But in this case, the tenant got into gambling addiction, which led to rent loss, etc. You can’t just get rid of the tenant overnight either, that can possibly drag on for years. And then what? Then the apartment still causes costs. You would have to finance both properties from the family income. As mentioned earlier, a single apartment is particularly risky in this regard.

How about you first inquire whether there is even a possibility to keep the apartment and still build the house (financing advisor, bank that financed your condominium). This question might be resolved very quickly. That’s how it was for my brother; he also considered "switching" to a house, family income better than yours. Apartment also increased in value by about €100k compared to the purchase price, the same amount had been paid off, so there was a considerable value there. Nevertheless, it turned out that it was not possible to keep both properties. This was probably because a standing house with extremely high purchase-related additional costs was being discussed. These would have completely used up the equity and suddenly the whole thing was no longer financeable.

You can also first apply for a building plot – in the end, you might come up empty-handed and then it was all much ado about nothing anyway. And if you get one and then decide not to pursue the project, another family will be happy, no harm done.

Thank you very much for your answers.

As you can see, the statements were polarizing. We are also very undecided but first have to wait to see if we even get the building plot. I know... 5500€ family income is rather average in our area. With a full-time job, I might earn about 400€ more. As long as the girls are not independent, I don’t want to put them in full-day care just so mom can take care of other children to earn a little more. It may sound very cynical in today’s times of teacher shortages... but that is a different topic we would rather not go into here.

I have very cautiously indicated the 900€ rent here. Of course, I could also add the rent for the underground parking space + outdoor parking space. I could also ask for something for the fitted kitchen... But I wanted to play it safe here with the 900€.

What is left for us now? We wait for the allocation of the building plots, then we plan the house, calculate all expenses and income, look at what remains in the end, and make a decision... I hope we will not regret it...

You approach the matter very rationally and not at all naïvely. I like that; it is not often seen here. I am sure that you will make the right decision. Good luck.