Hello everyone,
Since I started exploring the topic of house construction two months ago, I have now registered on this forum.
A brief introduction about me and my wife: We are both employed (civil engineer and real estate assistant) with a net income of 4xxx.
Equity capital: 50,000 euros.
One would actually assume that with this equity and net income, buying a property should be easy. However, since I do not want to repay a loan over 30-35 years but rather a maximum of 25 years, and I don’t want to fully stretch the limit, the monthly installment and therefore the total amount quickly become restricted. A total of 250,000 net plus additional construction costs equivalent to the equity capital would be the limit here. In Berlin and its surrounding area? Practically unthinkable.
I am a civil engineer (although specializing in concrete repair and thus not an expert in single-family houses, etc.) and can therefore assess construction prices, combined with my wife’s interest in the real estate sector, allowing us to understand the high general prices for land.
With 250,000 net plus additional construction costs, there is generally not much you can do nationwide for new builds — this is my initial assessment.
There has already been a lot of discussion here in other threads about construction costs, potential capital, and what is needed. When I see bargain houses on TV, I also facepalm. My assumption is that such homes don’t bring much joy. Heating systems, plumbing, electrical installations, thermal insulation — these are often overestimated.
Currently, I am researching prefabricated houses with self-finishing options. However, I do have some concerns, even though I assume that nowadays the materials at least meet certain standards.
So, what are the options?
Being bound for 30 years and pushing the loan to the limit?
House auctions?
Hoping for a bargain plot including an affordable prefab house as a self-build (lots of work and potentially many worries)
Since I plan to start building within the next 24-36 months, my initial findings are sobering.
At least the construction company I work for could provide the foundation slab plus groundwork like drainage, etc., at a low cost. I also know structural engineers and others involved. Maybe the project can be realized with a “small” budget thanks to these circumstances.
Has anyone managed to do this before?
Since I started exploring the topic of house construction two months ago, I have now registered on this forum.
A brief introduction about me and my wife: We are both employed (civil engineer and real estate assistant) with a net income of 4xxx.
Equity capital: 50,000 euros.
One would actually assume that with this equity and net income, buying a property should be easy. However, since I do not want to repay a loan over 30-35 years but rather a maximum of 25 years, and I don’t want to fully stretch the limit, the monthly installment and therefore the total amount quickly become restricted. A total of 250,000 net plus additional construction costs equivalent to the equity capital would be the limit here. In Berlin and its surrounding area? Practically unthinkable.
I am a civil engineer (although specializing in concrete repair and thus not an expert in single-family houses, etc.) and can therefore assess construction prices, combined with my wife’s interest in the real estate sector, allowing us to understand the high general prices for land.
With 250,000 net plus additional construction costs, there is generally not much you can do nationwide for new builds — this is my initial assessment.
There has already been a lot of discussion here in other threads about construction costs, potential capital, and what is needed. When I see bargain houses on TV, I also facepalm. My assumption is that such homes don’t bring much joy. Heating systems, plumbing, electrical installations, thermal insulation — these are often overestimated.
Currently, I am researching prefabricated houses with self-finishing options. However, I do have some concerns, even though I assume that nowadays the materials at least meet certain standards.
So, what are the options?
Being bound for 30 years and pushing the loan to the limit?
House auctions?
Hoping for a bargain plot including an affordable prefab house as a self-build (lots of work and potentially many worries)
Since I plan to start building within the next 24-36 months, my initial findings are sobering.
At least the construction company I work for could provide the foundation slab plus groundwork like drainage, etc., at a low cost. I also know structural engineers and others involved. Maybe the project can be realized with a “small” budget thanks to these circumstances.
Has anyone managed to do this before?
N
nordanney15 Jun 2019 14:58Bardamu schrieb:
I don’t know if I’m just too dumb to understand this calculation. You mentioned 10 years, which I used as the basis for my calculation.
Bardamu schrieb:
When I enter these numbers into an interest calculator, I get:
Paid interest after 29.5 years: 127k euros Yes, after 30 years = the owner’s paid net rent equivalent.
As a tenant, you pay 875€ x 12 months x 29.5 years = €310k (thousand). So, the tenant pays about 2.5 times what the owner pays over 30 years (assuming no rent increases, which is unrealistic). But the owner ends up with a house, while you only have a flat.
Find the tenant’s mistake.
Bardamu schrieb:
You can set aside the €30k for maintenance and renovation. That’s possible, but in the first 10 years usually nothing major happens. With new builds, you can expect renovation work starting around years 20-30. Cosmetic repairs are the same as for the tenant.
Bardamu schrieb:
Why has the owner saved €110k but the tenant hasn’t? Is that money in your bank account, or is this another hypothetical gain caused by inflation and low interest rates? Because the owner reduced their mortgage from €400k to €290k in 10 years. They have increased their net worth (assuming constant house value) by €110k. As a tenant, to achieve the same equity increase after 10 years, you would have to, in addition to your monthly rent of €875, save roughly another €700-900 per month. So you spend significantly more for the same result over 10 years than the owner.
Bardamu schrieb:
And why would an owner save more than a tenant? That all depends on the monthly savings amount taken from the salary, or am I mistaken? That again depends on income and the saver’s willingness. I’m not interested in hypothetical or theoretical savings. The owner is forced to save by the bank (through mortgage repayments). The tenant has to overcome their own resistance and limit their consumption in favor of a savings rate (amount as above). That’s possible. BUT: the average person doesn’t do this.
This is the problem and the reason why owners generally have a better quality of life in retirement than tenants.
Bardamu schrieb:
Honestly, just for house costs and interest, I could easily rent in our area for 40 to 50 years (800-900 net rent) without restrictions. My calculations show this is not quite true. The net rent equivalent = owner’s interest cost is lower than your net rent to the landlord, combined with (subjectively) higher living comfort.
Bardamu schrieb:
Then fall into the grave with no stress. Who has stress? The problem for you as a tenant might be that you don’t save for retirement and then have to pay rent for 20 years in retirement, while the owner lives in their mortgage-free home. Or even better, the owner moves to a smaller property and can spend the surplus wealth without having experienced stress during their working life.
nordanney schrieb:
If calculated correctly, the interest is around €75,000 (approximately $75,000) and not €110,000 (approximately $110,000). In addition, as an owner, you have contributed nearly €110,000 (approximately $110,000) in equity.
During the same period, you have paid €105,000 (approximately $105,000) in rent excluding utilities—so more than the interest you pay as an owner. Do you also save the same amount on top of that?
For the extra €30,000 (approximately $30,000) you pay (without rent increases), I, as an owner, easily go on vacation every year. Personally, I would call that an optimistic calculation. During this time, you have hopefully saved a good part of the remaining €30,000 (approximately $30,000), or spent it on maintenance.
After 10 years, you might need a heat pump. Modern gas heating systems also no longer offer much durability.
Looking 20 years ahead, you will also need to replace the windows.
The garden is always good for expensive projects, or repaving the driveway.
These are costs that tenants mostly do not have directly. If at all, they bear them through rent increases.
A homeowner does not save money compared to a tenant. Unless the owner lives in the house themselves, the house primarily incurs costs.
Whether a tenant actually saves money or not is irrelevant. In principle, they could.
And YES, this is comparing apples to oranges.
The tenant simply does not have a garden or a yard. It is a different (for me, better) way of living than an apartment.
But treating mortgage repayments as a form of saving with a house is, to me, an absolute myth.
N
nordanney15 Jun 2019 15:57Joedreck schrieb:
But the idea of counting mortgage repayments as savings when owning a house is, to me, an absolute myth Haha, a debt-free property by retirement is a myth?
So, as a renter, you save enough to pay cash for a house at retirement? I don’t think that’s a myth; it’s the reality for 90% of renters.
Well, I can’t say that I’ve saved money just because I’ve paid off my debts to the bank—that’s something I’ve never heard before. That’s what I meant by fictional and theoretical savings capital. You can’t buy anything with that.
And the value of a house usually doesn’t stay the same, especially not over decades. Nowadays, prefab houses start to show mold both inside and out after just 15 years. So you can be glad if the place is even still livable when you retire.
I have to say, no reasonable person can take your calculations and arguments seriously. The idea that life is easier in old age just because you’ve paid off a house is also a fictional rumor. Just because I don’t give the bank €120,000 in interest as a renter doesn’t mean I’m not investing in retirement. But there are other ways to do that. What you’re saying here is very generalized.
And the value of a house usually doesn’t stay the same, especially not over decades. Nowadays, prefab houses start to show mold both inside and out after just 15 years. So you can be glad if the place is even still livable when you retire.
I have to say, no reasonable person can take your calculations and arguments seriously. The idea that life is easier in old age just because you’ve paid off a house is also a fictional rumor. Just because I don’t give the bank €120,000 in interest as a renter doesn’t mean I’m not investing in retirement. But there are other ways to do that. What you’re saying here is very generalized.
Joedreck schrieb:
But using the loan repayment as a savings rate when buying a house is, to me, an absolute myth.That’s exactly how my financing is structured. The initial interest rate corresponds to the monthly rent excluding utilities, and the repayment is slightly less than my previous savings contribution.
N
nordanney15 Jun 2019 16:46Bardamu schrieb:
Well, I can’t say I’ve saved money just because I paid off my debts to the bank — I’ve never heard that before. What would you call it if, after 20 to 30 years, you own a house? The money has to come from somewhere for it to be YOUR house.
Then call it building retirement savings.
Or do you not consider it saving if you pay money to the bank as a savings plan, or to an insurance company, or in a stock savings plan? In the end, it’s always about building assets. It’s not saving if you simply pay rent to a landlord.
Bardamu schrieb:
That’s what I meant by fictitious and theoretical savings capital.
You can’t buy anything with that. No? You can’t buy anything with a debt-free house? After 30 years, is the house just theoretical or actual wealth (no matter what price you get if you sell it)? Am I living in theoretical wealth right now? When I touch the walls that are free of any liabilities, it feels very real to me and my family.
Bardamu schrieb:
And the value of a house usually does not stay the same. Especially not over decades. Nowadays, prefab houses start to mold both inside and out after 15 years.
So you can consider yourself lucky if the place is even still habitable at retirement age. Then you clearly don’t know much about real estate, especially prefabricated houses. Sorry, but that’s complete nonsense. Just take a look at property listings on sites like ImmoScout. There are plenty of houses and apartments over 30 years old that are still perfectly livable...
Bardamu schrieb:
I have to say, no reasonable person can take your calculations and arguments seriously. Are you one of those?
Bardamu schrieb:
The idea that life is easier in old age just because you’ve paid off a house is also a fictitious myth. Just because I don’t pay the bank 120,000 euros in interest as a tenant doesn’t mean I’m not investing in my retirement. But you can do that in other ways. No, you’re giving your landlord multiples of the interest I pay to the bank. Ever thought about that?
Of course, you can invest in your retirement differently, but you still have to pay diligently. Do you pay as much as in my example? Do you have a one-to-one living comparison between your small apartment and a larger, subjectively nicer house?
If you save well, that’s fine — but you need to do it. And many people don’t. They “live cheaply” renting and spend their money. They are not forced to save like homeowners are.
Unfortunately, I haven’t received any solid arguments or calculations from you to support your statements. At most, just tales or rumors — basically alternative facts without evidence. By the way, it is statistically proven that people who own property live more comfortably and have more money in old age. Just saying.