ᐅ Home Purchase, Home Construction – Fundamental Questions and Considerations

Hello, since I have already read a lot on the forum and seen how some people were advised, I would like to try to present our situation and get your opinion on our plans.

My fiancée and I want to purchase a house. Both buying an existing home and building a new one are options we are considering. I personally prefer building new, even though it is clearly more expensive, because then you really get everything exactly as you imagine and want it. My fiancée is a bit hesitant because of all the work, stress, and of course the costs. That’s why I wanted to ask here which option you would recommend for us.

A little about us: I am 26, she is 24, and we are getting married in April 2019.
Current income: together about €3,500 net per month (both have permanent public sector jobs)
Rent: about €700 including utilities for an 80m² (860 sq ft) maisonette with 3 rooms.
We are still paying off our cars, which will be finished by October 2019.
There are, of course, other fixed costs like internet, mobile phone, insurance, and some small extras (Netflix, gym, underground parking space...), so at the moment we can save about €600 per month, but this will probably go entirely towards the wedding at first.

The apartment fits us perfectly for now, but if our family grows, it will definitely become too small. That’s why we are thinking about homeownership. Larger apartments aren’t available in our town, and in nearby towns they are not affordable. So we are considering building as an alternative for roughly the same monthly expenses.

Equity: Currently, a house with land including arable, grassland, and forest areas from an inheritance is for sale. We expect proceeds of about €100,000 to €120,000.

My plan: First finalize the sale of the inherited property to see how much cash we have available. We have been offered a plot of land for €40,000, about 2,000m² (dimensions approximately 20m by 104m (66 ft by 341 ft)).
If we decide to build new, my idea is to buy the land outright with cash and then use about half of the remaining equity as a down payment for construction financing. Is it advisable to buy the land outright?
Once the car loans are paid off in October 2019, we want to focus on financing the build.

It is convenient for us that the landowner wants to sell only next year because he first wants to let his real estate agent contract expire, which he signed somewhat naively, so the agent won’t get a commission. The agent basically only put up a sign.

The plot is currently used as a sheep and goat pasture. A soil embankment will need to be removed as well as some planting (we are already in contact with the environmental office). Utility connections are available at the street (I believe this is called partially serviced, so the final connection to the actual building site is still missing). The question is, of course, what kind of good-sized house can be built on just 20m width? A building setback of 3m means a building width of about 14m is set.

Since it is a district at the edge of the town and there is a requirement to blend in, our originally planned modern villa will likely not be possible. Since we don’t want any sloping ceilings, we are considering a bungalow. We are thinking about about 130–140m² (1,400–1,500 sq ft) with 5 rooms (1 child planned) and possibly moving in a parent at some point.

Buying an existing house is also an option, but it will be difficult to find something that really matches our expectations, of course within the overall budget but cheaper and probably less stressful.

In short:
1. Should we consider buying an existing house or building new, and is it realistic for us?
2. Is it advisable to buy the land outright if we decide to build?
3. Can you build a decent house on 20m width?

I hope you can help us move our considerations forward or give good tips on how we should approach this.

Best regards,
Tom

Three times yes. :-)

Tips:
- Clarify the building feasibility before purchasing the plot (preliminary building inquiry / check with a local architect).
- Develop a spatial concept and roughly plan the house (with professional help).
- Save diligently; it’s much easier when you don’t have children yet.

That’s quite a lot of questions for one thread. Unfortunately, I can’t answer anything about financing—others will be better suited for that.

Regarding the plot: I would buy the land immediately if you like the location. I would even push the owner for some kind of preliminary agreement or contract. A small down payment or something similar to make sure it’s not gone in six months.

With 20 meters (65.6 feet) width, I don’t see any problem building a bungalow at all. It’s important to know how deep the building envelope of the property is. For 14 meters (45.9 feet) width, you’d need about 12 meters (39.4 feet) depth for 140 m² (1,507 ft²). The deeper, the better. Also, you should ask about possibilities for boundary development for outbuildings.

What I don’t see working: fitting a separate apartment or similar on 140 m² (1,507 ft²) — that will be a mess.

Hello,

So far, you haven’t saved anything from the 3,500 euros and have only spent. In other words, you have negative equity due to the cars. Essentially, you are insolvent as a company.

The positive thing is that you expect to receive equity. Do you have full access to the inheritance or only 10,000 euros?

Basically, you need to calculate the total cost of the new build ALL IN, including all the groundwork and so on, and then determine how much you will ultimately need as a loan. You currently have zero savings and were paying 700 euros warm rent (including heating and utilities). If in the end the loan instalment amounts to 1,300 euros plus ongoing costs that you must cover entirely on your own, you will need to decide if you want to take the risk.

Thanks in advance for the responses.

The preliminary building inquiry for a single-family house has already been approved. Since there is already a large bungalow next door, there shouldn’t be any issues.
On Friday, we are meeting with a construction company (from our acquaintances) to see what would be possible on the plot. Our further interest in the land depends on that.
The location of the plot is perfect, and we would only need to commit once the money from the sale is actually available and we are sure the construction would meet our expectations.
We have also agreed to be number 1 on the list and will be informed as soon as there are other interested parties.
It’s not intended to be a separate apartment, just a "guest room" in case it’s needed. This is not firmly planned.

We have already saved up, but the money will most likely go first towards the wedding (dress, suit, celebration). After that, we will basically start again from zero. Some initial capital should come from gifts and the sale of the inheritance.
The €100,000 (about $110,000) figure is calculated based on what we will actually have. Approximately €250,000 (about $275,000) is expected, which is split between two people. After deducting expenses already incurred, about €100,000 (about $110,000) remains. Hopefully, everything will be finalized by the end of the year.

So, the plot would cost €40,000 (about $44,000) plus taxes, site development, and earthworks. I estimate about €55,000 (about $60,000) just for that. This would leave approximately €20,000 (about $22,000) as equity for the construction. A standard bungalow from the company’s catalog costs just under €150,000 (about $165,000). Adding any customization, a slightly larger size, and a garage, my rough calculations come to about €220,000 (about $242,000). Plus another €20,000 (about $22,000) for external landscaping. I’d rather budget a bit higher than too low.

TR188 schrieb:
Thanks in advance for the replies.

The preliminary building inquiry for a single-family house has already been approved. Since there is already a large bungalow next door, there should be no problems there.
On Friday, we will meet with a construction company (from acquaintances) to see what is feasible on the plot. Our further interest in the land depends on that.
The location of the plot is perfect, and we would only need to commit once the proceeds from the sale are actually available and we are sure that the construction would fit our expectations.
It is agreed that we are number one on the list. We will be informed as soon as there are other interested parties.
It is not intended to be a separate apartment, just a “guest room” for a possible eventuality. But this is not fixed in the plan.

We have already saved money, but this will most likely first go towards the wedding (dress, suit, celebration). After that, we will basically start again from scratch. There should be a small starting fund from gifts and the sale of the inheritance.
The €100,000 (approximately $110,000) is already calculated as what we realistically have. We expect around €250,000 ($275,000) to be shared between two. After deducting expenses already incurred, that leaves about €100,000 ($110,000). Hopefully, everything will be finalized by the end of the year.

So, the plot would cost €40,000 ($44,000) plus taxes, development, and groundwork. I estimate around €55,000 ($60,000) just for that. This would leave about €20,000 ($22,000) as equity for the construction.
A standard bungalow from the company’s catalog costs just under €150,000 ($165,000), plus any customizations, a slightly larger size, and a garage. My rough calculation comes to around €220,000 ($242,000), plus about €20,000 ($22,000) for external works. I prefer to overestimate rather than underestimate.

Is a bungalow sufficient (also later if children are there)?

What would you have to finance in the worst-case scenario? There are various online calculators for that.

Never count on money you don’t yet have, meaning don’t start anything until cash is in the bank and all payments (tax office, etc.) are settled.

My personal advice: never build with friends or acquaintances unless you factor in the possibility that they could become ex-friends.