Is the construction project feasible?

Dear Internet community,

we (21 and 29 years old) would very much like to build on an existing plot of land.

The plot (family property) is about 700 m² and partially developed. Sewer and gas connections are just nearby (gas connection will soon be extended to 3-4 neighboring households anyway). The value should be around €30,000 to €45,000 in its partially developed state. Normally, fully developed plots cost about €100-120 per sqm around here. The value would thus have to be appraised by the bank or an expert, etc.

In addition, by the start of construction we will be able to "scrape together" about €25,000, half of which is an interest-free loan from my employer. No further funds are currently in sight. I have only been employed again for a few months (previously studying).

My current monthly net income (unmarried) is about €2,000 x 13.7 monthly salaries p.a. In addition, there are monthly expenses for a car amounting to €300 to €600. There is always something left over since I maintain everything myself.

There is also an annual sales commission, which currently cannot be estimated and which I will calculate as €0. (--> between €2,000 and €20,000 net p.a. depending on sales) --> Position is permanent (Dipl. Ing.).

The gross salary increases annually by about €50 and the percentage sales commission also by 1%. But as mentioned, for now I can only count on the base salary, which increases slightly each year.

Student loan debt amounts to €10,000, which is almost offset by a loss carryforward of over €25,000 during studies (second degree!).

Furniture and kitchen are completely new. Car (mid-range, 5 years old) is also available and fully paid in cash.

In addition, I am obliged to pay child support for my little son. He urgently needs a children's room, which we currently do not have.

She currently earns €1,100 net full-time (also a permanent position). All in a rural area. On a long-term basis, €1,300 to €1,400 are possible. Nothing more. Child wish in about 5 years (but who knows). :-D

We currently pay no rent or anything similar.

I estimate the costs for building the house (about 120 to 140 sqm) at €250,000 minus own contribution, which due to manual skills will certainly amount to €20,000 to €30,000. (Prior knowledge, already completely renovated 2 apartments, equipment available, friends who are carpenters/joiners, painting company in the family, etc.)

Because of my secure and relatively well-paid (in the long term), recession-proof job (usually for life), we must (and want to) stay in the region and unfortunately there are hardly any free rental apartments in the vicinity that have both an office AND a children's room and cost less than €700 or €800. (rural area!)

Since we have no experience, we would like to hear your opinions. Is the plan realistic? After all, this is not a decision you just make "like that."

The current living situation is untenable for various reasons and we have been looking for a rental apartment for months, unfortunately without success.

This weighs heavily on us and takes a toll on the relationship :-D

Thanks for your help!

Summary:
- Good €3100/month net; secure employment
- Plus child benefit or minus alimony, I did not understand that
- Equity €25,000
- Land available ("family property," ownership not further specified)
- Currently no rental burden (mentioned because it is special)

==> Not bad conditions, not great either, but IMHO basically feasible (subject to the uncertainties).

- Current acute housing situation:
With a house construction, you can move in at the earliest (from today) in one year (this may vary in individual cases). Is that enough to solve the problem? Time pressure is not a good starting point for building a house. I would somehow try to solve the current emergency situation in the short term; afterwards comes the house construction.

Addition to Bieber's summary:
- Probably plus an "half" child benefit, minus alimony (how much?)
- "Equity" including employer loan - What is the actual amount of equity, has an "emergency fund" already been taken into account, how high is the employer loan, repayment rate? -> Net decreases due to repayment
- Property available, but costs for development unknown. If the usual price for developed land is 100-120 €/sqm, does the difference to the current value then correspond to the development costs?!

I didn't quite understand the part about Bafög and the loss carryforward. Is the Bafög repaid through a tax refund? In that case "debt-free."

How do you come to the €250,000 costs for the house? I hardly believe that will be enough. €30,000 equity is also set very high, despite your background.

I would start with the income. Keep a household budget book (or is it available?), don’t cheat yourself and determine how much you can afford for the house (installment + additional costs). Then take a closer look at the property. Development costs, value. Then you can go ahead with the planning. Or discard... .

Does not have anything directly to do with financing, but: if the current living situation is already affecting the relationship, then construction stress and financing risks will certainly not ease the situation. You don't want to end up with a lot of debt but without a partner in the end ...

I actually understand that equity is only the property. Scraped together money, half of which? would also be an interest-free loan (which would have to be paid off), should rather represent an emergency fund.
30000 in equity alongside a partnership and a full-time job will take time and nerves and should not be doable just like that. 30000 € roughly amounts to 500 hours for a craftsman. You will need more than twice as long. You can calculate for yourself how long that will be spread over the weekdays.

In principle, we currently have about €50,000, of which we need €35,000 for the purchase of the land and the rest for the connection to the sewer, demolition of the garage, natural gas connection, notary, acquisition tax, etc.

This means we effectively have a "building-ready" plot of about 700 sqm.

The loan from my employer of about €15,000 is interest-free, and in addition, by the start of construction (planned end of 2016/beginning of 2017), about €10,000 of saved capital will be added. I currently have about €900 left monthly, since I do not have to pay rent. My girlfriend has about €400 left, which goes into a building savings contract (this was only taken out three years ago and very little has been paid in so far).

In 2016, I am expecting a tax refund for the €20,000 advertising expenses accumulated during my studies (loss carryforward 2011 to 2015). However, this will go into a separate account as I will need this money in six years to repay BAföG.
For my son (4 years old) I pay €274 monthly.

I am secured by a disability insurance through my employer combined with an occupational pension. The disability insurance is currently set at €2,000 per month. I previously had my own disability insurance (with repayment upon retirement). This currently has a "value" of about €2,700. However, I am letting this lie dormant since I already have one from my employer.
My life insurance has a surrender value of €6,200 (taken out in 2000 with 4% interest) but will only be paid out in 2041. :-D

What is still available is a vintage car worth at least €10,000 and a coin collection worth at least €2,000 (gold, silver, old coins). I could or would have to part with both.

During the construction period, I can continue to live rent-free. The private circumstances have nothing to do with our relationship but are due to the fact that we live with my ill brother and my parents in a WG-like situation. This is very difficult for all involved.

From my own experience, I know that even long-term relationships can suddenly be at risk of ending. However, this relationship has already survived several real crises and a complete major renovation of our current apartment, where we had neither money (I was a student, she was a trainee) nor space (months spent living out of suitcases in a single room).

In the long term, my income will gradually increase from the current €3,450 gross to €4,500 gross over 18 years. This is without expenses and without the aforementioned commission, which is actually expected in my job (testing engineer). I cannot say how high it will be. I know colleagues who get so much annually that it is enough for a mid-range new car, others enough for a longer annual vacation. Unfortunately, this is not predictable, but the special repayment definitely makes sense in my case.

In about 10 years I will inherit a renovated and energetically upgraded guesthouse with 4 holiday apartments and several single rooms and apartments.