Inherited equity, what to do, experiences?

Hello everyone,

this is my first post in the forum :) Thank you very much in advance for your advice!

We are looking for a suitable property in Essen and the surrounding area. Actually, we wanted to forgo ownership partly because of the high property prices and to preserve a bit more flexibility for the future. Now, the parents of my husband have "spontaneously" sold a house and want to leave us equity.

In the last few weeks, we have looked at "EVERYTHING". Condominium with/without garden, terraced middle house, semi-detached house, detached single-family house, prefabricated house, good/bad location...

We would rather not build because my husband is very busy professionally and is rather less skilled in craftsmanship. Despite a large family, except for a turner and an electrician, we have no craftsmen in our close circle of friends.

Now it looks like we can either buy an existing property with a nice mature garden for 300-500k, or a nearly new existing property/new build for 600-800k.

An older existing property we want/have to renovate, so on top of the 300-500k there will be an additional cost of 100-300k ( ? ).

As already mentioned, doing work ourselves will be rather difficult too (the will is there but realistically, there is a lack of time, skills, and helpers).

We also have no idea how to approach such a project. Building surveyor and energy efficiency consultant and then? Maybe an architect? Are there companies that coordinate modernizations, or do we have to commission all trades ourselves and decide how the process goes? How do you do something like that if you have no clue? How do you estimate which companies are “good”? Is there literature on this topic that you can recommend?

General information about you:

Who are you? M 37 / F 35 married

Are there children? A soon to be 1 ½-year-old little boy

Are more children planned? Gladly one more (high risk of twins :D)

What do you do professionally? M: currently specialist physician, from November senior physician university hospital, F: specialist intensive care nurse currently on parental leave

Are you employed: M: permanent contract 100% + overtime, on-call duties, shifts, etc. so average income is somewhat dynamic
F: permanent contract, last year tax class change (3/5), next year possibly part-time without shift work (-allowances), salary is difficult to estimate. We calculate without my income (also because of daycare or possible new pregnancy)

Income and asset situation:

What income do you have (gross/net)? M: from November 8,164€ gross / 5,400€ net

How much child benefit do you get? 250€

How much equity do you have? In total about 350,000€

How much equity do you want to put into the house project? We would be grateful for expert advice/ideas/opinions here

I would still have to add the expenses; my husband has the table on the PC -> we pay 1,000€ rent cold + about 300€ additional costs; we have 2 cars and a motorcycle, but use the cars rather little. We have never taken out a loan so far.

We are currently in irregular contact with a consultant from Interhyp.

My father-in-law is convinced that we should secure a forward loan now. What do you think about this?

The 3 properties that have appealed to us so far were very different.

A semi-detached house, partly from 1926, extended and renovated in 1976. Very good general condition, very nice area. 170 sqm living space and 320 sqm plot. Standard land value 560€/qm. Energy efficiency E with 157 kwh. We were enthusiastic! We could have moved in and lived well for a while; we like old buildings! After reading up on modernization, came some sobering news. Gas heating, windows, doors from 1976. The house is not insulated, although the facade was done last year. Purchase price 640,000€ plus incidental costs. Our bank advisor said the house is too expensive. We asked the owners if we could go through it with a building surveyor and whether they would be basically willing to negotiate. The answer: No. The house was quickly sold; there were many interested parties.

A realtor told me on the phone yesterday: (130 sqm living space, 200 sqm plot, built in 1972, hardly renovated, purchase price 699,000 plus incidental costs) Just upfront: the owners are not willing to negotiate...

-> We are confused; was this just bad luck, or should we have approached this differently? Would you buy such a house at that price and modernize it step by step? We have the feeling that most existing properties built around 1970 in good neighborhoods with modernization needs are not offered below 500-700k€. We are afraid of overextending ourselves with the additional costs.

We have an inspection appointment in Velbert on Monday. A bungalow from 2013, solidly built by Heinz von Heiden for 699,000 plus incidental costs. The plot has 550 sqm. Standard land value is 350€/sqm. 170 sqm living space, no basement, flat roof, in our layman’s opinion top equipped. Energy efficiency A+ with 26 kwh. I have read a lot of negative things about Heinz von Heiden. With purchase incidental costs we would be at 775k and kitchen, awning... supposedly still extra. The price seems very high to me, although the house actually sounds almost too good to be true. I don’t even know if we can finance that. We wouldn’t get a KFW loan or similar for it, right?

The 3rd in the group is a new build project. End of terrace house with 142 sqm living space, 52 sqm usable area, 232 sqm plot, underground parking space. 687,250€ with standard equipment; additional costs will certainly arise during the meeting with the site manager. There are 13 terraced houses, of which all but 2 (financing somehow fell through) are sold and partly already occupied. The plot is very densely built, and during the construction site visit we found the house nice, but I have to admit the view from the window into all the other gardens did not make me particularly happy. Move-in date would be in about 6 months, the realtor told us.

I know no one here has a crystal ball. I would still be very grateful for your advice. The last two houses mentioned are very expensive, but we see a certain security for the future in them. On the other hand, we really like old buildings and are “garden freaks” (we currently live on the ground floor in an end-terraced house for rent with 100 sqm garden). How would you proceed? Keep looking and try to negotiate? Would you go for one of the mentioned properties?

Thanks again very much if you have read this mammoth post so far and want to share your thoughts.

Best regards

Welcome to the forum and congratulations on the financial boost! €350,000 is a solid foundation for your project.

You are really still new to this, so I’ll first give you the most important basics about the current market. Existing properties built after the first Thermal Insulation Ordinance from 1977 already have insulation and are relatively easy to convert to a heat pump (some acquaintances are doing that right now), if you replace windows and insulate the roof at the same time. You can expect to pay around €50,000-60,000 including subsidies. The advantage here: you can move in immediately and avoid construction stress. I would definitely not buy any other houses built before 1977. That can become a money pit like no other. You don’t want to sink several hundred thousand euros into that. Prices are currently very volatile and could still fall. At the moment, there are few interested buyers and properties sometimes remain listed for months at the 2022 prices. So you have no pressure. The right house will come along at the right time because hardly anyone wants to buy now. Overall, prices are currently falling back to the 2019 level (-30%). Since prices had risen by about 30% between 2020 and 2022. However, this only applies to existing properties that are at least 50 years old without insulation and are not renovated. So I would definitely not buy the old semi-detached house. No way. You did everything right. That is overpriced junk.

Regarding your nearly new bungalow, I would say that the price minus the obligatory 10% that every seller adds on is quite realistic. Heinz von Heiden have also built some here in the new development area and they are all still standing. Also, the buyers are generally not dissatisfied. Anyone who builds many houses sometimes makes mistakes. It’s not a premium provider, but the bungalow is already built. I would only look at it carefully with a building surveyor to check if there are already defects that could also reduce the price. The value of the bungalow has surely doubled since 2013 and the owners will certainly take home €300,000+ profit. But the point is that you avoid construction stress and a new build would now be much more expensive. They say roughly €3,000 per square meter of living space plus additional costs. That would already be €510,000. Plus the plot (which is also hard to find in a location like that), you would easily have to spend over €750,000. If I didn’t want the construction stress and the bungalow fits your requirements (in terms of floor plan), I would offer around €700,000 and see what the owners say. Although you have more competition on the market for buildings built after 2000, it is not comparable to a year ago. It’s worth negotiating. Otherwise, from today’s perspective, the bungalow is also worth €750,000 or more. And the sellers could certainly get that. So you can go for the bungalow.

I advise against the end-terrace house. You wouldn’t improve your current situation and with underground parking spaces there will be no actual subdivision of the plots, but probably a condominium owners’ association. A condo ownership (WEG) is not recommended if you want to live in your own house. Because you always have to coordinate with others and never decide on your own. And as you already say, the direct view to neighbors is actually a deal breaker for a home. You want peace and not to hear the neighbor’s conversations. Also, current prices of new builds from developers are sky-high. This is an absolute rip-off in terms of price. Spending €750,000 for a terraced house with a condo owners’ association — never in my view. Three years ago you could get such houses for €500,000. Now hardly anyone pays those prices anymore and it is not advisable.

Last but not least, you can also definitely try building on a suitable plot. Because with €350k equity and your income you can afford a small house (150m2) built according to your wishes (floor plan, bathrooms, etc.) in an area with a land value of €350 per sqm. And for example with Viebrockhaus, you can have the paperwork and construction stress taken care of very comfortably and move in truly turnkey and hardly have to worry about anything. The same applies to prefab houses from, for example, Bien-Zenker. With the cheaper providers (Town & Country, Danwood) you naturally get a lot of tasks (finding a construction manager, dealing with authorities) that no one takes off your hands. But with a premium provider you have peace of mind in many areas, even though a construction period is of course always exciting and eventful. But your parents-in-law (or your parents) could supervise the construction and watch the craftsmen and make coffee. Several in the development area do that. A construction site should be checked at least once a week, preferably every day. So that nothing goes completely wrong. Small problems happen on every build.

I would advise you either to buy a young used house. Not necessarily the bungalow. In the next 12 months many younger houses will surely come onto the market at similar or lower prices, looking for buyers. Because there are currently very few buyers and many want to sell quickly. You can also take an older house built after 1977 and just invest another €50k-100k. That must be considered when negotiating. And that works well again nowadays (there are almost always 10-20% discounts on houses built before 2000). And finally one important tip: find yourself a tax advisor to avoid gift tax if you are also to be listed in the land register. Although I would not necessarily do that as a parent, since it’s the inheritance of the son. But you have to arrange that among yourselves. But your financial starting position is very good and clearly better than most. I’m happy for you and hope that my text isn’t too long or even longer than yours and that I was able to help you.

For married couples, no gift taxes are due on gifts up to 500,000€ (total within 10 years).

For married couples, no gift tax is incurred on gifts up to €500,000 (total within 10 years).

And that was exactly my intention. The son has this exemption. But not the parents-in-law. I wanted to warn that in the end the parents-in-law might give the property to both of them as a gift.

Assume that the son receives the money. And then he buys a house/land. Otherwise, as you pointed out, it would be subject to gift tax.

We would rather not build because my husband is very busy with work and is not very skilled in handiwork. Despite having a large family, we have, apart from a turner and an electrician, no craftsmen in our close circle of acquaintances.

That’s why there are architects, draftsmen, site managers, building experts, construction companies, house builders, prefab house manufacturers, property developers, etc. Most people simply have the house built and only choose what they want to have in the house.

How much equity do you have? Approximately 350,000,- How much equity do you want to invest in the house project? We would be thankful for expert advice/ideas/opinions

That means you are in a very comfortable position and do not need to worry at all about whether you can afford a house. The income is definitely more than sufficient for the necessary loan.

My father-in-law is convinced that we should secure a forward loan now. What do you think about that?

Complete nonsense. Forward loans are loans that you conclude today for a payout in up to 3 years (usually). They mainly serve to refinance existing loans when you want to secure the conditions today. If you do not have a specific property to finance, you will not get a blank loan from any bank. How should the bank set the conditions? Will the house have a lending value closer to €400,000 or rather €600,000? How much credit do you actually need? Etc. You cannot answer these questions without a concrete property, and without a concrete property, there is no loan. Now to the question of new build, old building, or newer used house. In the Ruhr area or the region where you are searching, there is indeed good demand. Houses are still quite affordable due to moderate land prices – despite being a metropolitan region. However, newer properties or new builds are in demand. Old buildings should by now have the necessary renovation work reflected in the price. I would not want to buy the example you mentioned above. Velbert would be too expensive for the house builder and the location for me personally. I actually find the new build interesting. Don’t view the proximity to other parties too negatively. Children will usually feel wonderfully at home there. New builds in developments with several parties also offer the possibility of forming a community right away (terraced houses are ideal for families with young children). This is sometimes not so easy with existing properties. When I occasionally pass by a larger settlement from Dt. Reihenhaus or Area/Clavis (140 houses), there is always lively activity. Whether it’s communal barbecues or kids running around everywhere. So either old building with immediate renovation – moving in and fooling yourself that you can do everything gradually once you live there makes no sense – or new build up to 10 years old (where you already have the first worry-free years behind you and no more warranty applies). New builds up to 10 years old hardly differ in price though. A bit of building stress with a free garden area or the slightly used finished nest.