Terraced mid-terrace house in Baden-Württemberg needing renovation, financial feasibility

Because people like to have something like this as a buffer to be able to pay for miscellaneous expenses.

If you reliably record your income and expenses, you don’t need a separate buffer. Because you see it in the bottom line. I don’t want to make my calculations worse on purpose, but be realistic – so consider all income (and also a savings item AO – although the original poster still has his substantial buffer in the portfolio and can tap into it at any time).

I also find the distribution of insurance very suspect. Instead of necessary insurances like supplementary health insurance, occupational disability, or household insurance, there is a litigation insurance and a fun insurance. In your place, I would check what should be done to have advantages. Because when I read this here, you are probably on the wrong track by mistake

Which one is the fun insurance? Legal protection is one for traffic. I once had a total loss that was not my fault. It turned out well for me, I didn't have to pay anything extra for the lawyer. The other is for the profession, since my wife's employer is undergoing wild restructuring. They want to ensure that after parental leave there is a position and the home office contract remains. I don't think much of occupational disability insurance. My employer does offer comparatively good conditions but still: expensive, mediocre performance, in the best case a lot of money sunk, and if it goes badly (illness) you have to fight a legal battle in a vegetative state. I haven’t seen the need for supplementary health insurance yet. On the contrary, I am on a deductible plan and get a small slice of the big premium chunk back.

It’s about getting an insured subsidy for necessary new purchases. Even if your sofa, for example, was bought used for €60 from an acquaintance, you need a new one if, for example, your apartment is sooty due to a short circuit or defect in the electrical system. Ultimately, everything has to be new, and that can really strain the household budget. It’s worth calculating everything, including bedding, technology, hobbies, etc. But the question wasn’t about the usefulness of a household insurance, although such a sentence shows

Yes. I would probably actually get one if unforeseen costs of a few thousand euros disrupt my household planning. They’re just not the type to take out insurance for every eventuality.

What I find somewhat lacking is the financial perspective: You write that the second car is being acquired, although mobility should be with 2 kids. Then not to factor in costs for the kids, I also don’t think is right. When you have finished the renovation, one child will start school and costs tend to grow. But that has already been said. It doesn’t hurt to do a real cost calculation again when the child starts school. Because people like to have such a buffer to be able to pay for other things.

The second car is currently driven occasionally out of convenience or due to poor planning (about 2,000 km/year). Therefore, it might possibly go away. Public transport is quite good here (tram).

I'm no professional....

But maybe then look for a property without renovation measures etc?

Bring in more equity? For a better interest rate?
3.5% interest... That means you have to make a secure 5% per year (capital gains tax solidarity surcharge)

We find our loan, for example, disturbing and want to be free of it as soon as possible.
3.65% effective
That could also be your approach.

And without rent, only with low ongoing costs, you can reduce working time, have enough money to invest again, etc.

(with interest rates around 1-2%, I would have chosen the ETF option too)

If we put everything into repayment for the next 10-15 years, compound interest simply has 10-15 fewer years to unfold its effect.
We want to manage the balancing act between self-used residential property (=luxury) and retirement provision (somehow also luxury if you don't want to work until 67).

If you write down your income and expenses reliably, you don't need a separate buffer. Because you see that at the bottom line. I don't want to calculate myself poorly on purpose, but be realistic – so consider all income (and also a savings position AO – although the OP still has his mighty buffer in the depot and can tap it anytime).

The figures are reliable as well. We have kept a household book with GnuCash for many years.

But maybe then look for a property without renovation measures etc?

I forgot to address that. The renovation is actually our wish. We can do it (have done it before) and would also like to renovate our property according to our ideas. Apart from that, it's simply much cheaper. The workload alongside a 40-hour job and two children is another matter. Although the manual work is a nice balance to the office job.

The workload alongside a 40-hour job and two children is just a different matter. Although the manual work is a nice contrast to the office job.

Yes, it works quite well for us too, for example. However, my wife was completely at home for 3 years now. And is only just starting again with 10-12 hours. When both work full-time, that’s quite something.

Otherwise, I would say, for you it’s not a feasibility question but rather an optimization question, how to get the best out of everything. Of course, you can definitely think about where you get the better return. I do that too. But on the other hand, sometimes you shouldn’t overdo the optimization or just keep things simple and just do it.

They are simply not the types to take out insurance for every eventuality

There is a big difference between every eventuality and prudent precaution.

That’s why it might possibly be dispensable. Public transport here is quite good (tram).

And does that cost nothing? Is the car readily available if one of the children is sick?

If you reliably record your income and expenses, you don’t need a separate buffer. Because you can see it at the end of the day. I don’t want to calculate myself badly on purpose, but be realistic – that means considering all income (and also a savings position AO – although the OP still has his substantial buffer in the portfolio and can access it at any time).

Yes, you are right. But that’s just how people are.