House construction with multiplier > 30?

The factor comes from the field of capital investment. You have a 4-party rental building. Rental income before taxes cold: 50 thousand per year. The house is to be sold. What is its fair value? 50 thousand times 25 equals 2.5 million. The building would be paid for with 25 cold rents. The market value may be different.

: Location is exactly the issue. It’s simply not Berlin, Hamburg, or Munich. That means I probably wouldn’t achieve that value upon resale.

: Multiplier = purchase price / annual cold rents. Probably no one will tell you that during the mortgage financing either. They want to sell you a loan...

I mean, similar to a new car, we would practically lose 120K just by moving in

You don’t lose anything initially by moving in. It is merely an unrealized gain or loss. If you live there until your death, you have lost exactly €0 over time but gained an incredibly great feeling of life.

How do you live if renting is not an option, but buying is not for you either?

How do you calculate the factor? I’ve never heard of it... not even during mortgage financing talks

Only the OP calculates that for themselves. House price divided by fictitious annual rent. Such calculations don’t interest mortgage advisors either. They only look at the market value / lending value or calculate it.

That you have to consider construction costs in relation to the local rent index is indeed true. The financing advisor also looks at that during the evaluation. Building an expensive house in a region with low rents and land prices is a big risk. In the town where we build, an amazing house (built in 2014) has been listed online for a while with all the bells and whistles. Just unfortunately for €420,000 – and they can’t sell it because of that. Because before I pay that, I’d rather build myself or enjoy the cheapest rents.

That’s only partly true. Around here rents are about €6, I sold my place two years ago for three quarters of a million – rents low, prices high because it’s half an hour to three quarters hour from Düsseldorf, where there are no reasonable plots left. You only have that risk if you build well above average (a passion project) or really want to live at the lending value (greetings to structurally weak, rural areas in the East, deep in the Eifel or Sauerland, etc.) AND want to sell the house.

Hello, thank you very much already for your many answers.

: Renting is unfortunately not an option, as there are no relevant properties there either.

: Yes, land with a max. of 100K is available.

: rather rural, otherwise the comparable rent wouldn’t be so low.

: The child is only 2, so we still have a few years. But we are aware of your point.

I understand the previous comments to mean that owning a home in the province is currently more of a lifestyle decision than an economic one. So more of a consumption than an investment object. It used to be different (?). Back then a house was always seen as an asset. That would probably not be the case with us with a multiplier > 30. Meaning, similar to a new car, we would effectively lose 120K upon moving in. It’s more like buying a 5-series BMW instead of a VW Golf (this is not a judgment of the cars, just a price example). The premium is "luxury".

Right?

Well, when your child reaches adulthood, hopefully you will have paid off your loan. And then? This is when the investments in the house really begin, you might possibly not want to work on the house yourself anymore. We increasingly observe that when children leave the house, the parents move into new age-appropriate apartments, dispose of their houses or directly buy the condominium. It’s basically a swap.

& : we live in a 3-room apartment with kitchen and bathroom. We do not want to sell the house for now, but financially it would be, as mentioned, a calculated loss. At the latest when inheriting or similar.

At the latest when inheriting

Inheriting? That should be the last thing you think about when building a house.

In old age: sell the house, rent a nice small apartment and LIVE!