Pre-investment in a plot of land, is it sensible?

Hello dear community,

I have always wanted to build a house. But I have always waited until I can afford it 100% financially. Always with an eye on the land prices, I worked at a secure job. Anyway; the prices have constantly grown and if I had invested 10 years ago, I would have earned more just from the land than I can save from my salary (let’s say this is just imagining).

So: I have considered securing a piece of land. It costs 59TEUR and is 1000m² in size. If needed, the land could be divided. The rear plot would then have to be accessed via rights of way, driving and utilities.

Family income is 3400€/month. Equity 20TEUR.
The question is whether this all makes sense? As long as I am not building on it, the land is just a f.burden and definitely an investment. I can’t lose more than credit costs and of course incidental costs (what would those be if I don’t build?), or am I mistaken?

Thanks in advance for the answer,
Jury

First: I am not a financial expert, but I can provide some pointers.

First, you need a bank that is willing to finance 30,000 at all. Many banks hardly lift a finger below 50,000. Then you should have it calculated whether it might be sensible to possibly invest the 20,000 differently in order to get a good interest rate later, for example in 4-5 years.

I once used an online calculator and calculated the interest if you borrow 30,000 and pay off the loan within 4 years at an interest rate of 4%. Your monthly burden would be just under 700 €. You would then have paid "only" 2,500€ in interest.

If you now pay back significantly less, the interest will also be significantly higher. This “raises” the price of the property. I don’t know how it is with you, but if I want a property for 50€ per sqm here, I have to drive so far into the sticks that I would definitely be 2 hours by car every day. By how much has the price increased in the last 10 years? Is an S-Bahn planned? Are VW, Daimler, etc. building a factory? These are indicators that it will get more expensive quickly in the future. Then you should strike, but if none of that applies, I don’t think it will be worthwhile.

In the 4 years, with your income, you could certainly save 50,000 €, invest it somehow if you want, feed a building savings contract, etc., and then pay for a property in cash. The expensive part of building is always the interest.

Waiting until you can 100% afford it is a bit of a thing. Right now, interest rates are very low, which means they will rise. It only helps if you can live with significantly higher interest rates in 20 years or even manage to repay the loan within that time. In 10 years, interest could be back where it was 10 years ago: just under 8%. That’s why my tip is: get some advice on whether building now is already an alternative. With 3400 net, it should be possible to handle a rate of 1000€ monthly. That would allow for a loan of about 250,000€. With your equity, that’s 270k. That is enough to put a small house without a basement on the affordable properties. Tight but possible. But of course, I don’t know your financial situation, i.e., what is actually left at the end of the month.

As I said, just a few unsorted thoughts

If anyone is still interested: We have pumped money into the property and have now paid it off for 2 years.... of course, we are not finished yet. But my decision proved to be right today. Last week we got new neighbors, they paid 130€/sqm whereas I paid 55 two years ago. At the end of February, we will also start building. : in hindsight, it became clear to me that you wouldn't have been able to give a right or wrong answer here. The whole project (see above) turned out to be a very special knitwork and probably only works because of that. Today, I would basically advise buying the property first (of course, depending on your own possibilities) and then calmly thinking about everything else. Nothing is worse than "According to the contract, I have to start now, but now I have to buy the property immediately."

Because I read about the land prices, with us it costs a good 45€ per sqm, it's 10 minutes on the highway, 5 minutes by car to the supermarket, and I don't need half an hour to get to Erlangen/Nuremberg.

Yes, I'm still interested! But one more question regarding your topic "100% self-payment." How old are you?

I think it's great that you gave feedback here again after such a long time.