How to best approach a project when the existing house is the equity

Hello everyone,

I need some basic help on how to approach our planned project, we are currently somewhat overwhelmed with the approach.

Starting point:

Existing house of the parents-in-law.
Value estimated at €680,000 four years ago.
Core renovated: 2018
Debt-free

Planned is a single-family house + extension for the parents-in-law.

My wife and I have a monthly net income of about €9,000.
We are debt-free and have saved about €100,000.

One question.
What is the most sensible way to determine the budget for the new build?

The existing house is to be contributed as "equity."
It’s best if we sell it beforehand, then we definitely know what we get.
But that will be difficult in terms of timing, as the buyer probably won’t want to wait until our new house is finished.

If we do interim financing and sell the existing house later, it is uncertain what we will actually get for it.
Especially at the moment, no one knows where real estate prices are heading.

We look forward to an active exchange.

Sunny Sunday greetings

There are a few constructions:
- sell now with right of residence for months
- build with bridge financing, sell later
- sell, move into a rental apartment, build, move into the house

In the current market situation, I would avoid relying on any plan that foresees that the existing house is financed only later or would plan a very generous buffer.

I cannot recommend selling with a right of residence for months. We only had that for a few months, and somehow it feels unpleasant to continue living in someone else’s house. It feels different than renting.
Also, there were some minor disputes afterwards. The buyer’s wife eventually complained that we hadn’t maintained her garden. I found that pretty cheeky, considering they had told us beforehand that they would bring in a landscape gardener to redo everything differently.

Bridge financing was not an option for us because our house was new and therefore not debt-free. It would have been much harder to get a new financing. Construction and sale would also have been difficult since the locations were almost 600 km apart.

In the end, we solved it with a temporary apartment. So we sold, refinanced, and moved into a temporary rental until our house was finished. Also to be closer to the construction site.
If your house is debt-free, I would consider bridge financing. Moving twice is no fun either, and it costs money and nerves.

The plan is a single-family house + an extension for the parents-in-law.

I would first check whether the new plot and its development plan allow for such a house and whether it won't be too cramped or overbuilt for you.

How do you most sensibly determine the budget for the new construction?

Ask the architect who is doing the planning? Your wishes then define the budget. Only after that, deal with all the other topics.

The existing house should be contributed as "equity". It’s best to sell it beforehand so that we definitely know what we will get. But that will be difficult in terms of timing, as the buyer probably won’t want to wait until our new house is built.

No, any buyer will gladly wait a year or more. That's not a problem at all. Otherwise, there are also flexible interim financings, which are repaid with a later sale proceeds. Besides that, your financial basis is so good that it basically doesn't matter what you do. Secure a flexible half a million on the parents' house as soon as you know what the new construction will cost. The surplus can possibly be used as a special repayment in the new long-term financing. Or for outdoor facilities. Or for new furniture. Or to form a capital buffer for the future.

No, every buyer is also happy to wait a year or more. No problem at all

Is that really your experience or was that meant ironically? Do buyers like to wait until moving in after the purchase price has been paid?

We are currently facing the same considerations as …