Question about financing existing properties

Hello,

After some browsing here in the forum, I have come to the conclusion to describe my situation to you directly.

We, my wife and I, can buy her father's parental home, or rather dissolve the community of heirs.

The property in question is a single-family house with 190 sqm living space, built in 1926, in need of renovation. A barn in still good condition where the viticulture equipment is stored. Attached to this barn is an apartment in the old fruit storage. Built around 1970, about 70 sqm living space, no urgent renovation needed.
The whole on 2000 sqm of land (20m x 100m) of which 800 sqm are building land (170 euros/sqm), the rest is garden land.

The property was valued at 210,000 euros a few years ago.

If we are lucky, we can acquire everything for 120,000 euros.

The scope of renovation will be about 120,000 euros (heating, electricity, water, insulating and finishing the roof, complete replacement of windows, possibly exterior insulation, small layout changes). However, no architect has yet made such an estimate. That is still pending after the bank meeting and the next meeting with the community of heirs. Some work will also be done by ourselves.

These are therefore the following items:
120,000 euros house and land
120,000 euros planned renovation
20,000 existing loan
15,000 new kitchen

Makes 275,000 euros financing need

There is essentially no equity. Only the difference between purchase price and property value and a building savings contract partially saved with 50,000 euros and still 5 years until allocation.

In addition, there would be Kfw funds of 50,000 euros plus possible credit participation in the renovation costs if the requirements are met.

Possible repayment monthly 1000 euros (500 euros existing loan + 500 euros current cold rent). Of this, we only want to use 800 euros to have 200 euros more monthly for reserves. All garnished with special payments when my wife works again.

Does that sound like "feasible" or a "pipe dream"?

A new building would be even more expensive for us, hence the decision for existing real estate. There is also the emotional factor, since the property would then not be sold or left to decay.

Regards Sven

275K without equity at 800 per month sounds to me, just off the cuff, like a pipe dream. But maybe there's still a financing expert here in the forum who can say otherwise.

Immowert without renovation is 210000, but we only need 120000 for the house itself. The 120000 renovation costs are partly value-increasing or value-restoring. That’s why it’s not completely without equity. Or am I so wrong there?

I also tend to think it's a pipe dream.

There are still some questions:
1. Why are you getting the house for €120K instead of €210K?
If you already own part of it, that could be equity, otherwise I don't think the bank will consider that as equity.
2. Renovation costs don't necessarily increase the value. The question is, what is the house worth after renovation.
3. What kind of loan installment is €500 per month? Is the loan then paid off?
4. You forget the incidental costs when purchasing (property transfer tax and notary fees).
5. In your case, the kitchen probably shouldn’t be included in the financing.

So the property has been estimated at 210,000 euros and belongs to a community of heirs consisting of my father-in-law and his two brothers. If the property stays in the family, an amount of over 180,000 euros was agreed upon, which will be taken as a basis. The brothers would each have to be paid out 60,000 euros. It looks as follows: my father-in-law receives 120,000 euros from us to pay out his siblings. He will cover the notary costs required there. Then the property is transferred to us by gift. We will cover these notary costs, but no property transfer tax applies.

This results in 90,000 euros equity for the property or a loan-to-value ratio of 57%.

The 90,000 euros equity must be offset against the 100,000 to 120,000 euros renovation costs. Since the property will be worth at least 280,000 euros after the renovation, it would even be fully covered. However, the expected renovation costs still have to be reduced by the own contributions. Since, as mentioned, no architect has been commissioned yet and no bids from the tradesmen are available, I cannot give final figures on the actual amount of own contributions to be applied. But one can assume 20,000 euros, which we will save through own work (roof insulation and expansion, sanitary installations, tiling and flooring work, laying electrical cables, removing and installing windows).

The current loan is the one indicated in the above calculation. I would try to include this outstanding amount in the property financing.

This would eliminate the current monthly installment of 500 euros, which would then be added to the 500 euros of eliminated rent payments. This is how I arrive at 1,000 euros monthly.

This amount is calculated solely from my income. Since my wife is not working because of our 2-month-old son. The property is also interesting for us because my wife can convert a room into a hair salon and thus work from home. The income generated here would also be included as additional repayments. But I can only calculate and commit to the 1,000 euros monthly.

Immowert ohne Sanierung sind ja 210000 wovon wir aber nur 120000 fürs Haus selbst brauchen. Die 120000 sanierungskosten sind ja teilweise auch wieder Wertsteigernd oder Wertwiederherstellend. Deswegen ist nicht ganz ohne Eigenkapital. Oder lieg ich da so falsch?

I think we misunderstood each other. You spoke of a financing requirement of 275K. I consider this amount unfeasible with a possible monthly rate of 800 EUR. Even with an assumed interest rate of 2.5% (which you probably won’t get) and a term of 30 years, you end up with just under 1100 per month if you want to pay off the loan completely. Of course, you can still juggle the numbers a bit now, with less regular repayment, possibly special repayments, etc. But I’m not in favor of loans where a huge residual debt remains at the end of the term. On the contrary, I consider them irresponsible...