Where is the return on the property hidden?

Hello to everyone who fills this forum with your experiences and great tips.
It would be great if you could give us your assessment of the following situation.

We own a 1000 sqm plot without any buildings in a municipality (has everything, from kindergarten, all schools, shopping center, doctors, highway connection, etc.) south of Munich (S-Bahn, 25 minutes to the city), quiet location in a single-family house settlement with 90% old buildings. Building inquiries have shown that the municipality is aiming for densification and we are therefore allowed to build "almost" anything on it: 2 single-family houses, a triplex, or a semi-detached house and 1 single-family house. The triplex was immediately ruled out, not valuable enough. Obviously, everything is for rental. Since it is a family property, we would like to keep it and later pass it on to our children.

The problem seems to be the return, as land prices are almost reaching €1000 per sqm, but the achievable rental income (also difficult to determine) does not reflect this. This is probably between €11 and €12 per sqm (source: architect, apartment seekers, Immoscout). We do not want to build it up completely, but still build it sensibly, but that’s exactly the big question here. I find the return calculation difficult and don’t want to sugarcoat anything. We are not aiming for maximum return, but no matter which construction variant I calculate, I don’t come up with anything that makes me really want to build on it. Or I just don’t get it.

Here are the basic data:
Plot, value ~ 900,000
Equity ~ 600,000
Cost per house ~ 400,000 (including incidental building costs) (regardless of whether single-family house or semi-detached)
Financing: 1.67% for 10 years, you can probably get better and also without Euribor or building savings contract dilution
Financing solely through rental income
Variants:
- two single-family houses, e.g. 180 sqm each (is something like that actually rentable, since you’re already beyond €2000 rent, the air must be thin, right?)
- one single-family house of 180 sqm and one semi-detached house with 140-150 sqm each

So, it would be financeable. But what about the return and especially what is the situation after, for example, 10 years, depreciation etc.? According to my "calculation" with two single-family houses at €400,000 each and €200,000 credit, it almost comes out to a break-even game, at least after 10 years (credit would be paid off in just under 6 years). At most, I get 1%, which is tight for me and therefore not tempting.

Hope I haven’t forgotten anything. Would be nice to read your assessment.

Martin

12 Euro maximum rent in the Munich suburbs with land prices around 900 euros/sqm for a single-family house?

Sorry, but you are doing something wrong or the sources are incorrect.

The rent is also being charged here in Mönchengladbach in the new development area in a good location. And that is not Munich.

However, it is also clear that for maximum returns, living space must be denser than a single-family house on a 1000 sqm plot.

That means you want to have it built yourself and rent it out? What's the point of the stress. Sell the land to the highest bidder and that's that. I think developers are also willing to pay more than 1000 euros per square meter as long as it's a great location.

And then you have a million in the account and then? I want to see the return to be achieved on that. On the classic German safe investment path, it is not present there either.

With that amount, however, one can consider a dividend strategy.

But that is also the reason why currently no one wants to sell [Grundstück-Eigentum], because the alternative liquidity (without need) is pointless.

Tip, which I have already experienced with some of my clients. Turn the property into a heritable building right and sell the heritable building right.

Investment costs: none (except for notary/land register)
Trouble during construction: none
Trouble with tenants and during re-rental: none
Return: should be around 5% (before taxes) on the property value
Property: ownership remains in the family

And then you have a million in the account, and then? I want to see the return that can be achieved from that. On the classic German safe investment path, it is also not present there.

With that amount, however, one can consider a dividend strategy.

But that is also the reason why currently no one wants to sell property ownership, because the alternative liquidity (without need) is pointless.

with all due respect, those are luxury problems. You can also practically play the developer yourself, make large investments, let tenants move in, and play property manager.

Let's see if that boosts the return, nerves, and mood :p