Hello everyone, we are Ina and Philipp. We both want to take the next step and build our own home.
We are intentionally moving away from the big city back to the countryside (Ina comes from a rural area). Perhaps some of you remember we have posted here before and shared some bad experiences with looking for land. Thanks to your advice, we quickly figured out what to watch out for. We want to actively share our journey toward homeownership here and are grateful for any tips and tricks.
What is the current status?
We are currently in contact with an owner (over 70 years old) of a plot of land who is willing to sell us 1,400 square meters (15,070 square feet) for 50,000 euros. All utility connections except for gas are already available at the site. The land is currently farmed as agricultural land. The plot is located next to a low-traffic federal road.
Yesterday, we spoke with potential neighbors. They also bought from this gentleman in 2011 and are still very satisfied with the quality of living and housing in the area. The neighbors were in the same situation back then—the land was also used as farmland.
Next Tuesday, we have an appointment with the bank. We will discuss whether to finance the land or possibly pay in cash. The advisor told us on the phone yesterday that we should generally consider paying for the land in cash rather than financing it.
If everything goes well, we will call the owner on Tuesday and hopefully tell him that we want to buy the land. He said yesterday he would then send us all the documents.
We have a specific idea we want to realize: a bungalow (the neighbor’s house is already a bungalow) modeled after a Swedish-style home.
Currently open questions:
Do you already have any advice on what we should pay attention to?
I (Philipp) have some doubts and would prefer to finance the land because the €50,000 should serve as equity/reserve for building the house.
There is a sewage access point right at the edge of the property. The owner said—if I understood correctly—that he would also talk to the water utility company to see if we would not have to buy that part of the land.
Thank you very much for reading this far. We wish you a nice weekend and will continue to report here openly and regularly. We appreciate any feedback or suggestions on things we can clarify early on.
We are intentionally moving away from the big city back to the countryside (Ina comes from a rural area). Perhaps some of you remember we have posted here before and shared some bad experiences with looking for land. Thanks to your advice, we quickly figured out what to watch out for. We want to actively share our journey toward homeownership here and are grateful for any tips and tricks.
What is the current status?
We are currently in contact with an owner (over 70 years old) of a plot of land who is willing to sell us 1,400 square meters (15,070 square feet) for 50,000 euros. All utility connections except for gas are already available at the site. The land is currently farmed as agricultural land. The plot is located next to a low-traffic federal road.
Yesterday, we spoke with potential neighbors. They also bought from this gentleman in 2011 and are still very satisfied with the quality of living and housing in the area. The neighbors were in the same situation back then—the land was also used as farmland.
Next Tuesday, we have an appointment with the bank. We will discuss whether to finance the land or possibly pay in cash. The advisor told us on the phone yesterday that we should generally consider paying for the land in cash rather than financing it.
If everything goes well, we will call the owner on Tuesday and hopefully tell him that we want to buy the land. He said yesterday he would then send us all the documents.
We have a specific idea we want to realize: a bungalow (the neighbor’s house is already a bungalow) modeled after a Swedish-style home.
Currently open questions:
Do you already have any advice on what we should pay attention to?
I (Philipp) have some doubts and would prefer to finance the land because the €50,000 should serve as equity/reserve for building the house.
There is a sewage access point right at the edge of the property. The owner said—if I understood correctly—that he would also talk to the water utility company to see if we would not have to buy that part of the land.
Thank you very much for reading this far. We wish you a nice weekend and will continue to report here openly and regularly. We appreciate any feedback or suggestions on things we can clarify early on.
P
philipp199024 Aug 2019 11:21MayrCh schrieb:
~35€ per m² (approx. $35 per sq ft). Are you sure this is building land (including all natural and legal requirements for development)?According to the gentleman, yes. The neighbors also said they had no restrictions. If we know by Tuesday whether and how we proceed with financing, he plans to send all documents by mail. We can freely choose the plot size; I assume the land will still need to be surveyed.
Scout schrieb:
Paying for the plot directly from equity has the advantage that you can plan calmly, calculate the financing needs, and then have the mortgage lender enter the land registry first with the appropriate loan amount. The downside: your equity is (almost?) gone, and you might have problems with the bank regarding reserves and services not covered by the financing.
If you finance the plot through a mortgage lender: then you should already know the loan amount and agree on a long availability period. As long as you stick to the amount, there is no problem. A problematic situation would be like Bookstar described: plot financed by bank A and bank B holds second charge for house construction—that gets expensive...
But with €50,000 (approx. $55,000), I could also imagine this scenario since completion will take about 18 months: with an assumed savings rate of €1,500 (approx. $1,650), you pay €30,000 (approx. $33,000) from equity and take out a small loan for €20,000 (approx. $22,000), which you repay within 18 months. After that, the house is finished, and you pay your regular mortgage installment. When financing, the plot counts as equity, minus the small loan.That is something to consider; the plot still needs to be developed and surveyed. So the equity would be completely used up.
Scout schrieb:
I would contact the building authority to inquire if the land is developable as desired and if a development plan exists. Then also call the utility companies to check if connections (water, sewage, electricity, telephone) are available.Should I do that after I receive the documents from the gentleman, or already before?
hanse987 schrieb:
I would speak with the municipality or building authority beforehand to find out about developability and whether there are any restrictions.Should I do that after I receive the documents from the gentleman, or already before?
philipp1990 schrieb:
Would you do that once you have the documents from the gentleman, or already beforehand? It doesn’t really matter, but definitely before the notary appointment! Otherwise, you might end up buying a meadow next to the developed area... and even if it becomes buildable later, you’d still have to pay for a 60-meter (200-foot) sewer connection, and so on.
This will probably be a larger parcel now, right? Then take a site plan and mark your probable boundary line on it. Use that for your inquiries. But make sure you buy exactly the piece shown on that plan!
We also purchased and developed agricultural land back then. It is essential to talk to the utility providers before buying to ensure that development is feasible. We had the buildability included as a condition in the purchase contract for the land.
For example, we faced the problem that the water pressure could not be easily increased by the water supplier. We were the last on the street where it still worked. The person after us then had to have the entire street dug up to install larger pipes.
For example, we faced the problem that the water pressure could not be easily increased by the water supplier. We were the last on the street where it still worked. The person after us then had to have the entire street dug up to install larger pipes.
P
philipp199024 Aug 2019 11:37Scout schrieb:
It doesn’t matter, but definitely before the notary! Otherwise, you might end up buying a meadow next to the developed area... and even if it becomes buildable later, you’ll still have to pay for 60 meters (197 feet) of sewer connection, etc.
This will probably be a larger plot, right? Then take a site plan and mark your likely boundary line on it. Use that for your inquiries. But make sure you buy exactly the section shown on that plan!kaho674 schrieb:
We also bought agricultural land and connected utilities back then. Be sure to talk to the service providers before purchase to confirm that connection is definitely possible. We had the land’s buildability included as a condition in the purchase contract.
For example, we had an issue that the water pressure couldn’t easily be increased by the water supplier. We were the last ones on the street where the pressure was still sufficient. The next buyer had to have the entire street dug up and larger pipes installed.Thank you very much! You’re all a great help. The checklist is taking shape!
Everything important about the buildability has basically been covered.
Regarding financing: the plot of land counts as equity. However, if paying in cash depletes your available reserves, consider financing the land with a variable interest loan (repayable at any time). When you arrange the mortgage for the house, increase the loan amount by the outstanding balance on the variable loan. This way, you can repay it with the mortgage. This allows the financing bank to take first lien position.
Regarding financing: the plot of land counts as equity. However, if paying in cash depletes your available reserves, consider financing the land with a variable interest loan (repayable at any time). When you arrange the mortgage for the house, increase the loan amount by the outstanding balance on the variable loan. This way, you can repay it with the mortgage. This allows the financing bank to take first lien position.