House sale with reinvestment in new construction?

Thanks in advance for opening the thread!

My aunt (older generation) owns a 3-family house from the 60s that will need renovations in the near future. Apart from a boiler replacement, nothing has been done so far. She lives off the rental income but has no money to invest in renovations. Ergo, it comes down to selling.

She herself does not want to do this due to her age; two real estate agents she contacted were unsympathetic to her.

1. Acting as a real estate agent as a nephew – pitfalls?

I don’t want to make a fortune like a real estate agent, but only do this ONCE for my aunt. According to §35 I am probably allowed to do this; I "only" have to state that I do not charge VAT and declare it in my tax return. Is this correct so far? I can manage an exposé, and the required time is not an issue.

2. What do you consider a reasonable compensation for the time invested? Please give numbers.

Again: I don’t want to profit from this, only be compensated for the time needed. You can also give me a time estimate, then I will calculate it based on my hourly rate. She wants at least €400,000 for the property. The two agents would have charged 5.95% from the buyer, unless my aunt covers part of the costs, which she does not want to. But €20,000 pure profit for a sale is just outrageous, sorry.

3. New multi-family house according to energy standards?

She actually does not want to leave the money sitting in the bank. Stocks are not an option. So reinvestment in a new building follows. It also fits that she owns another building plot in a sought-after location, which she may and would like to develop.

From here on, however, I start to struggle:

For 3-family houses with high energy efficiency, information is scarce online. Due to the effort involved, she would like to have it built turnkey. What total costs can be roughly expected? The plot has a slight slope. (May I link Google Maps for this?)

4. Basic plan as far as it makes sense?

For now, it’s about establishing a basic plan. It is clear that a 3-family house will cost more than the available €400,000. However, KfW subsidies would still be added, and a newer property should also generate higher rental income. Currently, these are €1,900 cold per month. If she achieves higher rent in the future, which after deducting the additional loan amount still comes down to €1,900, that would be fine for her.

5. Why not renovate?

For anyone who spontaneously thinks she should just sell the plot and put the money into renovation:
a) The tenants have lived in the house for a long time without rent increases. Such increases would not be easy.
b) Organizing renovations with contractors herself would then fall under my responsibility, which honestly I don’t want to take on. She herself can no longer manage this.

6. For those who want even more complexity, I’m also looking for an apartment:

For those who don’t find this complex enough: I would also like to buy an apartment myself. Possibly also because of the aversion to agents who want a lot of money for no good work! In any case, it would be an option to invest the €200,000–€250,000 I aim for in the 3-family house so that I can realize a loft apartment upstairs. So it would become a 4-family house then. Does it make more sense to have my aunt fully finance this and then buy the apartment from her? Or how does financing work jointly? Who advises on this?

I hope I was able to express myself clearly. Thanks in advance for the help!

Phew.

Regarding 1.: Proper real estate agent service is worth their money. From that you can gauge how much effort it can be to sell the house. The current market situation of course benefits private sellers – in most locations the sale is possible quite quickly. But a proper exposé is not typed up in two hours...

Regarding 2.: That depends too much on the property, the location, and luck for any estimate to be possible here. Otherwise see the first sentence of my post.

Regarding 3.: High energy standards cost more than the subsidies bring back into the cash register. So I would leave that alone, especially if it is to be rented out. Otherwise it says everywhere here: €2000/sqm + incidental construction costs at a normal standard.

Regarding 4.: No. If one could live off two (I guess she occupies part herself?!) rental apartments, everyone would do that. She already proved with the old house that it does not work. Better to build a small single-family house just for herself and live off the rest. Lower risk, more liquidity. If that is not enough, also sell the land (which is in a good location AND on which a 3-unit house fits!!) and enjoy life in splendor.

Regarding 5. a: Yes, that is possible. You can pass on a lot of renovations and also regularly raise the rent. If she cannot or does not want to do that, she should not rent out. (Inflation 2017: 1.8%. That means last year alone she would HAVE to raise by €34 per month.)
b: You do not have to do it yourself. There are site managers, architects for that.

Regarding 6.: That would then be a homeowners’ association (WEG - Wohnungseigentümergemeinschaft). That is nothing unusual. Everyone pays their share (corresponding to the self-used sqm) and then is owner of a part of the property and the commonly used areas/technology.

thanks first of all.

Now about inflation, I will tell her that she simply MUST raise it. She just thinks that since she has never really done much to the house, she is satisfied that the current tenants pay reliably every month.

In addition, I should clarify that she herself does not live in the rental building. She lives in a single-family house a few streets away, which she had completely renovated in 2010 and is paid off. That means she has rental income from the 3 apartments (which are really cheap compared to the rent index).

Regarding "broker activity": I'll put it this way: we would like to try it without a broker at first, since with the high purchase price it really means extra money. The assessment of what good broker activity is is probably subjective. Neither I nor anyone in my circle of acquaintances has had good experiences with a broker yet. I even asked around if anyone could recommend a broker.

What I read online is that for such a service, significantly less money should be charged than a broker would demand. However, I can't find an example of what "significantly less" actually is in practice. But even if I demand "only" €5,000, that's just a quarter of what a broker charges, and I don't even think that high. An idea would be two months' rent, ergo €3,800. If I can't manage that, we can always still fall back on a broker. There is no time pressure anyway. Since I have already had enough exposés in my hands myself, I know what goes into it. Not even a broker gives guarantees, bought as seen...

The note about whether a 3-4 unit house is allowed there at all is good; I should find out about that, I haven’t even thought about it yet. I thought it was only about complying with the number of floors and roof angle. I’ll ask...

Hmm, I’m surprised that multi-family houses don’t get good subsidies regarding efficiency houses. Do you have anything for me to read up on besides what’s on KfW? That’s too little detail for me to make use of.

It wouldn’t just be about financial benefit yet, but you also have some responsibility towards the environment, and being independent from grid operators is also worth something. So if it breaks even overall but is just more expensive upfront, that would be okay too.

For me that means that if I don’t want to spend more than €250,000 on the apartment, in a 4-unit house (equally sized apartments for easier calculation), the total costs must not exceed €1,000,000. But then the land value has to be taken into account, right? So if the land is worth about €150,000, the building may cost €850,000, is that correct?

Would it be an idea here that I only build the loft apartment for KfW subsidy? I have read that KfW40+ for rental apartments is difficult, since then you would have to act as an electricity provider to the tenants because of the storage etc. But if I move into the apartment upstairs myself and have the energy storage directly in the apartment… is there anything on that?

Which contact point can actually provide good advice on this?

Offer to the tenants?

Regarding remuneration: If you do not want to make a profit from it, you should simply calculate your opportunity costs based on the time spent.

Calculate the working hours you invest in the project (whether personal further education through online research and forum posts is included, rather not) and the hourly wage you usually earn.

Hmm, I’m surprised that multi-family houses don’t get good subsidies regarding efficiency houses.

I didn’t say that. I just believe that it doesn’t pay off ecologically or economically already from the minimal standard. But there is plenty of reading material about this here in the forum (and possibly even other opinions ;-) ).

For me, that means that if I don’t want to spend more than 250,000 on the apartment in a 4-unit building (equally sized apartments to calculate better), the total costs must not exceed 1,000,000€. But the land value must then still be calculated in, right? So if the land is worth about 150,000€, the building may cost 850,000, do I understand that correctly?

I don’t understand that now. You can agree with your aunt and/or the construction company on almost any conceivable division and cost structure. That you as the owner of one of the apartments also have to buy a part of the land is clear. How expensive that will be with your aunt I can’t estimate. But she seems very nice... ;-)

Would it be an idea here that I only build the loft apartment for KfW funding? I’ve read that for rental apartments KfW40+, for example, is difficult because then you have to act as an electricity provider to the tenants through the storage, etc. But if I move into the apartment upstairs myself and have the energy storage directly in the apartment... is there anything about that? Which contact point can actually advise well on this?

Whether that works, how sensible it is, and what it costs is best told to you by an architect. You need one for the project anyway.