Increase in rental costs vs. loan installment

Hello,

as I already wrote in another thread, I am currently considering buying a plot of land and building a house. Since life down here on the edge of the Swabian Alb is not exactly cheap, I keep wavering whether I really want to fulfill this dream.

Currently, we (E + K) live in a fancy 86 sqm new apartment in a rather unattractive small town. The location of the apartment is okay, but nothing special. Unfortunately, we also don’t have a garden part. I currently have to pay €1215 warm for it. The cold rent increases every 2 years by a fixed percentage. The additional costs are currently rising rapidly.

If I now take out a loan, I assume that the rate will remain the same until the end of the fixed interest period (unless I want to increase it). In the end, the house hopefully belongs to me. In addition, my salary in the public sector increases regularly and also by the percentages negotiated by the unions, which then also apply to civil servants. Looking to the future, I see a rate that will decrease percentage-wise against a rent that will increase percentage-wise. In addition, my apartment belongs to the bank. If they want to sell it, I might have to pay significantly more for an equivalent apartment. So I see a clear advantage in acquiring ownership. Is that really the case or am I just that naive???

As an example, I take my parents: 35 years ago they bought/built a house for about 350,000 DM. Their rate was relatively low at the beginning due to parental leave and little equity. After thirty years, the house was paid off and their rate compared to their salary was only “ridiculously low.” They were still able to save a lot and enjoyed life. With rent, they certainly wouldn’t have managed that way. Now in retirement, they live very comfortably and financially worry-free. Whether they would get everything they invested over the decades if they sold, no one knows. But the rent would have gone completely to the landlord.

How do you see it? I often read that acquiring ownership brings no advantages over renting.

Best regards

Well, owning a property means forced saving. If you rent, you could, for example, save money through usually lower expenses, which the average German does not do. The additional costs in your own property increase 1:1 like in a rental apartment. Over time, repayment is offset by the need for renovations. In a rental apartment, the landlord pays for new windows, the roof, the heating system, and all repairs.

You are absolutely right about everything!

If you only consider your own parents, whose installments and reserves, or renovations today only amount to a fraction of their income respectively, or the house is paid off and the cash assets are high, then you ask yourself this question.

Inflation will rise, and salaries at least as well, although not sufficiently. Rent prices will also continue to increase, but the installment remains the same.

And of course, the additional costs are initially completely separate from that. Here I also pay for a property manager, a janitor, an elevator, stairwell cleaning, a gardener for the communal areas, etc. These paid services are certainly comfortable, but they are also becoming more expensive.

You must not consider [Nebenkosten]. They increase with rent and ownership. You only have the advantage of being independent, for example, in choosing the gas supplier. So compare cold rent vs. installment. Then don't lie to yourself, after 15 years the investments begin. You have to pay everything yourself and are immobile. So it has advantages and disadvantages.

I don’t want to lie to myself, I’m way too much of a realist for that ;-).

Sure, additional costs are negligible except for a few exceptions. However, the typical additional costs that only occur in an upscale residential complex will still be eliminated or partially consumed by the reserves.

It was more about whether the necessary renovations and refurbishments correspond to the difference between an "old" rate and the rising rental costs. After all, the landlord somehow passes on his costs.

I really should estimate that. For example, my parents have done 1x all windows, 1x roof with insulation and solar thermal, 1x attic conversion, 1x all interior doors + front door, 2-3x floor coverings and wallpaper and ceilings, 1x facade, 1x main bathroom, 1x heating.

Wow... that really adds up when you write it all down like that. Despite being 35 years old, my parents’ house is in very good condition and would be immediately habitable without immediate renovation needs. But energetically, something could definitely still be done.

I don't want to lie to myself, I'm way too much of a realist for that ;-).

Sure, additional costs except for a few exceptions are negligible. However, the typical additional costs that only occur in an upscale residential complex will still be eliminated or partly eaten up by the reserves.

My concern was rather whether the necessary renovations and refurbishments correspond to the difference between an "old" rate and the rising rental costs. After all, the landlord somehow passes on his costs.

I really would have to estimate that. For example, my parents have done the following: replaced all windows once, the roof once with insulation and solar thermal, converted the attic once, replaced all interior doors plus front door once, replaced floor coverings and wallpaper and ceilings 2-3 times, the facade once, the main bathroom once, and the heating once.

Wow... that really adds up when you actually write it down like that. My parents' house is still in very good condition despite being 35 years old and would be immediately habitable without immediate renovation needs. But energetically, there is definitely something that could still be done.

What are typical additional costs in an upscale residential complex?? No, reserves are not transferable. But as a homeowner, you should build them up.