Save more or buy???

So you need the money in 2018. What will you do then? Sell the apartment?

no, will continue to be rented

Buy a single-family house - the income fits. Simply mortgage the apartment as well. 25 K€ liquid and the 50 K€ security from the apartment are enough. If you wait another 7 years, you won't need a house anymore because your children will just be stuck in the room anyway.

Renting out the apartment probably doesn't make any sense. You would have to borrow the 50,000 tied up in it again, and just the interest on this 50,000 would easily eat up 2/3 of the rental income. On top of that come taxes, maintenance, reserves for vacancy, and a little return should also be included. Even though I wouldn’t put it so drastically, Steffen80 is right: the purchase was probably a bad investment. Unless drastic value increases are expected in the future, but I can hardly imagine that with a 1-room apartment. Try to get rid of it, then the equity will fit – further saving probably wouldn't make sense.

Hello,

does it make a difference for the bank whether I have equity of 50,000 in cash or as a paid-off apartment?? Isn't the apartment considered as collateral anyway??
We bought it back then because there was a bit of money available and we got the apartment relatively cheaply.
If I were to buy something, I would have to borrow 50,000 more and at 3% that would be 1,500 per year / 125 per month in interest to pay.
The rental income per month is about 300. Reserves and property tax are covered by the rental of the garage.
If I were to sell now, I could save the 125 in interest. Or am I thinking wrong??

Johann

Hello,

does it make a difference for the bank whether I have equity of 50,000 in cash or as a paid-off apartment?? Isn’t the apartment considered as collateral anyway??

For the bank, it actually makes hardly any difference, but for the seller. They want money and not just a piece of paper on which someone scribbled "I have an apartment!" ;-)

We bought it back then because we had some money and got the apartment relatively cheaply.
If I were to buy something, I would have to borrow 50,000 more, and at 3% that would mean paying 1,500 per year / 125 per month in interest.

You are right, I mixed up installment and interest, both were low amounts :D That obviously improves the starting position, but I would still not be sure if it pays off for you. But I also know too little specifically about the apartment and in general too little about real estate valuation to be able to assess that with certainty. Definitely have it checked.

The rent income per month is about 300. Reserves and property tax are covered by renting out the garage.
If I sell now, I can save the 125 interest. Or am I thinking wrong??

Which "garage" again?! If I were you, I would stop mentally "subsidizing" all kinds of stuff, it clouds the view of the actual profitability of things. The apartment incurs costs and these have to be covered by the income from this apartment. If in this setup only the garage makes money, just buy more garages, but no apartment ;-)

If you sell the apartment, you definitely save the interest initially, yes. But you also improve your equity ratio and get a better interest rate for that, which saves money again. And in the end, you are debt-free faster, or can agree on a lower monthly installment, which increases your flexibility. And of course, you avoid the risk of even making a loss with the apartment; with the small profit it (if at all) yields, just one single "problem tenant" can ruin your balance for years.