Good morning HF,
We have been considering for some time how to manage a family-owned property currently developed in a suburb of a large city in a long-term and sustainable way. Unfortunately, we have no experience in this area, so we hope to gain some helpful ideas from this post. Many thanks in advance for any advice.
Background: The property covers an area of 700 sqm (7,535 sq ft) and is partly occupied by an almost square building with 8 m (26 ft) side length, 3 floors (including raised ground floor) plus a basement. The basement is only partially underground (approx. 1.4 m (4.5 ft)). The attic with a gable roof was added in the 1990s to the existing building, which dates back to the post-war period. On the property, there is also a former utility building now used as an apartment, as well as a single garage. Due to financial and personal reasons, the modernization including the attic conversion was only partially completed, so some interior work (e.g., in the stairwell) is still unfinished. The property is encumbered with a mortgage, with an outstanding balance of around 240,000 euros at the end of 2019. The building is currently occupied by my mother-in-law (retired), and some rooms are rented out. Some rooms are empty or used by the family as guest rooms. It is likely that some renovation work is needed, as only the essentials have been addressed due to financial constraints.
From our point of view, there are basically three options for the future:
We have considered renovation. This would mean that my wife and I could live on one floor, one floor would be rented out, and my mother-in-law would remain on the ground floor. The conversion would, of course, have to be barrier-free. Against this option is the fact that the family does not really want to rent anymore (one floor would remain unused since all my wife’s other siblings already own their homes). Also, the house does not really meet our expectations, and the barrier-free conversion (external elevator?) would certainly be expensive.
Therefore, we are currently thinking about option 1—that is, tearing down everything on the property and starting from scratch. The idea is to build two bungalows of about 60 sqm (645 sq ft) each for own use on the plot. Since we do not want a basement, we would like to build a small utility building with laundry facilities, storage space, and a bike cellar. Additionally, there is a dream to build one of them in the style of Mies van der Rohe (or also Neutra, Ruf, etc.).
The question, of course, is what we can realistically afford. We are the only ones in the family still renting. Everyone else already owns property and is actively repaying loans. In about five years, we could provide an equity share of 80,000 euros and a monthly payment of around 1,000–1,200 euros, plus 300 euros for reserves and additional costs. My mother-in-law could contribute around 500 euros from her pension. By then, we would have reduced the existing loan to about 100,000–120,000 euros (a bank change by payoff would only be possible after 8 years). Since we will be in our mid-40s then, we want to have the new loan paid off within 15 to a maximum of 20 years.
Assuming an interest rate of 1% in five years and a monthly payment of 1,700 euros, we could plan for a full repayment loan with a term of 15 years and a loan amount of around 285,000 euros. Plus the equity share and minus the existing loan, this leads to a maximum investment sum of 265,000 euros. It is probably easy to dismiss any illusions with this figure. By extending the term to 20 years, we could increase the amount to 350,000 euros.
So, our current question is whether option 1 is feasible with a budget range of 250,000 to 350,000 euros and, if so, how. Prefabricated house, architect-designed house, perhaps even the mentioned dream house? And how should we best prepare financially during this time—building savings contracts, extra repayments, etc.?
We have been considering for some time how to manage a family-owned property currently developed in a suburb of a large city in a long-term and sustainable way. Unfortunately, we have no experience in this area, so we hope to gain some helpful ideas from this post. Many thanks in advance for any advice.
Background: The property covers an area of 700 sqm (7,535 sq ft) and is partly occupied by an almost square building with 8 m (26 ft) side length, 3 floors (including raised ground floor) plus a basement. The basement is only partially underground (approx. 1.4 m (4.5 ft)). The attic with a gable roof was added in the 1990s to the existing building, which dates back to the post-war period. On the property, there is also a former utility building now used as an apartment, as well as a single garage. Due to financial and personal reasons, the modernization including the attic conversion was only partially completed, so some interior work (e.g., in the stairwell) is still unfinished. The property is encumbered with a mortgage, with an outstanding balance of around 240,000 euros at the end of 2019. The building is currently occupied by my mother-in-law (retired), and some rooms are rented out. Some rooms are empty or used by the family as guest rooms. It is likely that some renovation work is needed, as only the essentials have been addressed due to financial constraints.
From our point of view, there are basically three options for the future:
- Demolition and new construction
- Renovation
- Sale
We have considered renovation. This would mean that my wife and I could live on one floor, one floor would be rented out, and my mother-in-law would remain on the ground floor. The conversion would, of course, have to be barrier-free. Against this option is the fact that the family does not really want to rent anymore (one floor would remain unused since all my wife’s other siblings already own their homes). Also, the house does not really meet our expectations, and the barrier-free conversion (external elevator?) would certainly be expensive.
Therefore, we are currently thinking about option 1—that is, tearing down everything on the property and starting from scratch. The idea is to build two bungalows of about 60 sqm (645 sq ft) each for own use on the plot. Since we do not want a basement, we would like to build a small utility building with laundry facilities, storage space, and a bike cellar. Additionally, there is a dream to build one of them in the style of Mies van der Rohe (or also Neutra, Ruf, etc.).
The question, of course, is what we can realistically afford. We are the only ones in the family still renting. Everyone else already owns property and is actively repaying loans. In about five years, we could provide an equity share of 80,000 euros and a monthly payment of around 1,000–1,200 euros, plus 300 euros for reserves and additional costs. My mother-in-law could contribute around 500 euros from her pension. By then, we would have reduced the existing loan to about 100,000–120,000 euros (a bank change by payoff would only be possible after 8 years). Since we will be in our mid-40s then, we want to have the new loan paid off within 15 to a maximum of 20 years.
Assuming an interest rate of 1% in five years and a monthly payment of 1,700 euros, we could plan for a full repayment loan with a term of 15 years and a loan amount of around 285,000 euros. Plus the equity share and minus the existing loan, this leads to a maximum investment sum of 265,000 euros. It is probably easy to dismiss any illusions with this figure. By extending the term to 20 years, we could increase the amount to 350,000 euros.
So, our current question is whether option 1 is feasible with a budget range of 250,000 to 350,000 euros and, if so, how. Prefabricated house, architect-designed house, perhaps even the mentioned dream house? And how should we best prepare financially during this time—building savings contracts, extra repayments, etc.?
With an 18 m (59 ft) wide plot, your calculation doesn’t add up. Due to setback requirements, the house probably cannot be wider than about 12.5 m (41 ft).
A 6x10 m (20x33 ft) footprint for 60 sqm (645 sq ft) of living space results in a larger external dimension.
I think first the ownership/inheritance situation should be clarified, then you should discuss the possibilities for a new build with an architect. Preliminary discussions can certainly be done here, but a site plan with measurements and building regulations (floor area ratio, site coverage ratio, building envelope, number of storeys, ridge heights, etc.) is absolutely necessary.
However, you should be aware that for bungalows in particular, you need to calculate at least 2000 €/sqm (around 186 USD/sq ft) of living space. In addition, demolition costs, temporary housing expenses, and landscaping of the property must be considered.
A 6x10 m (20x33 ft) footprint for 60 sqm (645 sq ft) of living space results in a larger external dimension.
I think first the ownership/inheritance situation should be clarified, then you should discuss the possibilities for a new build with an architect. Preliminary discussions can certainly be done here, but a site plan with measurements and building regulations (floor area ratio, site coverage ratio, building envelope, number of storeys, ridge heights, etc.) is absolutely necessary.
However, you should be aware that for bungalows in particular, you need to calculate at least 2000 €/sqm (around 186 USD/sq ft) of living space. In addition, demolition costs, temporary housing expenses, and landscaping of the property must be considered.
Who owns the land (meaning: who is registered in the land registry) where your house is built is not you, but the person listed in the land registry.
Who is the heir? How much will they inherit? Who else besides you might have a claim?
Do you really want to live there (both in terms of location) and next to your mother-in-law?
IF I were you, I would avoid this, wait until your mother-in-law has passed away or moved into a care home, then sell the property and use the money to pay off the mortgage and the care home. Depending on how long she stays in the care home and where the land is located, the money might already be gone by then.
Who is the heir? How much will they inherit? Who else besides you might have a claim?
Do you really want to live there (both in terms of location) and next to your mother-in-law?
IF I were you, I would avoid this, wait until your mother-in-law has passed away or moved into a care home, then sell the property and use the money to pay off the mortgage and the care home. Depending on how long she stays in the care home and where the land is located, the money might already be gone by then.
R
Ruferianer7 Oct 2019 19:51kbt09 schrieb:
I think first the ownership and inheritance status should be clarified, then you should discuss the possibilities of a new build with an architect. Preliminary discussions can certainly be held here, but a site plan with dimensions and building regulations (floor area ratio, plot ratio, building envelope, number of floors, ridge heights, etc.) is absolutely necessary for this. If we should clarify that first, I will take care of it.
fragg schrieb:
Who owns the land (meaning: who is listed in the land registry)? The house built there does not belong to you, but to whoever is listed in the land registry.
Who is the heir? How much do they inherit? Who else besides you is claiming rights?
Do you really want to live there (both location-wise) and next to your mother-in-law? I cannot (yet) answer the first questions, but the last one I can: Yes, that would be possible. However – and this is also the reason for the idea of having two houses – some spatial distance (which doesn’t have to be very large) would be preferable.
I need to ask again, who currently owns the land—just the mother-in-law? The bank is not involved; they only lead me to the second question: How much is the land worth?
In the case of inheritance: How many people legally have a share of the inheritance? Simply put: How many children and grandchildren does the lady have? Please also note that you will not be the one inheriting, but your spouse. You will have to buy out everyone: value minus debts.
In the case of inheritance: How many people legally have a share of the inheritance? Simply put: How many children and grandchildren does the lady have? Please also note that you will not be the one inheriting, but your spouse. You will have to buy out everyone: value minus debts.
I would say, just leave it. If you put even one euro into it, it could get messy for you in case of inheritance disputes.
Or you do something along the lines of "we live there, we take care of it, we inherit." But you have to want that, and the notary must also include it like that in the will.
Or you do something along the lines of "we live there, we take care of it, we inherit." But you have to want that, and the notary must also include it like that in the will.
R
Ruferianer12 Oct 2019 12:48Tassimat schrieb:
I also need to ask again, who currently owns the land, only the mother-in-law? The bank is not involved, they are just leading me to the second question: What is the value of the land? The value of the land is currently unknown to me. Excluding the bank, the property belongs solely to the mother-in-law.
Tassimat schrieb:
In the case of inheritance: How many people legally have a share in the estate? Simply put: How many children and grandchildren does the lady have? Please also note that it is not you who will inherit, but your spouse. You will have to pay out everyone: value minus debts. Four children and two grandchildren. We understand that this will probably not be easy to resolve and that there will be claims. But we were also considering this approach:
fragg schrieb:
Or you do something along the lines of "we live there, we care for her, we inherit." But you have to want that, and the notary must also include it in the will accordingly.