ᐅ Building a House and Selling Existing Residential Property

... and you still have the work to do.

It would only be an option if significant value increases (from 10% per year) are expected. However, this depends too much on the region and the property.

Now the criticism is coming from all sides...

nordanney schrieb:

Why? What advantages would it have? For example, when the property is free of liens, to declare rental income at the top marginal tax rate and add on the operating costs?

At the time the property is actually free of liens, the situation must be reassessed. No one knows how rental income will develop until then – it will likely continue to rise... Depending on the location, even disproportionately compared to operating costs.

Besides, nowadays nearly all (attractive) private pension options are subject to deferred taxation.

In my opinion, the situation should be reassessed at the earliest when the property is free of liens or at the latest upon retirement.

K1300S schrieb:

Apart from the financial aspect, I simply don’t see myself as a landlord. I just don’t want the stress that can arise, so I wouldn’t recommend it to anyone as a better alternative – especially not without consulting an expert.

I’m not recommending anything here. This is a mindset issue everyone has to decide for themselves. However, in my opinion, this alternative is worth at least some consideration.

Tassimat schrieb:

Renting out a single property with a single residential unit is risky. Rental defaults, renovations, repairs, etc., can hit you hard.

Rental risk? That’s factored into the rent. Otherwise, it’s location, location, location... We know people who own a condominium in a really bad location and haven’t had a single month without rent payment in 25 years. If you don’t completely neglect the property, you will always find tenants.

Regarding renovations and repairs, you build up a reserve – just as you would for your own single-family home. Since the duplex is currently owner-occupied, it should be in good condition and shouldn’t require major investments for the next few years.

nordanney schrieb:

What advantages would it have?

For me, the clear advantage is that wealth can be built up with little to no personal capital involved. Additionally, I believe that investments for retirement should be diversified as much as possible. In my opinion, anyone who has the financial means should own, alongside the state pension, a company pension plan, a retirement fund plan, and residential property used by themselves or rented out.

If the original poster already writes that selling the duplex is necessary in order to buy/build a single-family home, then that can only be due to insufficient monthly surplus. And here rental of the property can help (depending on remaining mortgage, initial repayment rate, possibly achievable future rent, etc.)...

Tolentino schrieb:

It would only be an option if significant increases in value (from 10% p.a.) are expected. However, this depends too much on the region and the property.

That, in turn, is pure speculation and, in my opinion, truly risky.

Selling or renting out a self-used condominium/semi-detached house or self-used detached house is always a case-by-case decision and strongly depends on the individual situation!

Since condominiums/semi-detached houses are generally easier to rent out, I would tend to keep these. In contrast, selling a detached house usually makes more sense. Incidentally, this is why the rental yields of condominiums/semi-detached houses are usually higher compared to detached houses, or conversely, the asset values of condominiums/semi-detached houses are correspondingly lower compared to detached houses.

DaSch17 schrieb:

If the original poster already states that selling the semi-detached house is necessary in order to buy/build a single-family home, then this can only be due to insufficient monthly surplus.

... and therefore, if the OP does not sell the house, they would have to finance significantly more. Although they might be able to do this thanks to rental income, their financial situation is essentially the same as if they sold the house. How a bank evaluates this when rental income is reduced by taxes and operating costs is another matter. Not to mention the risks involved with renting the property.

DaSch17 schrieb:

Since condominiums/semi-detached houses are always easier to rent out, I would generally tend to keep those.

There is practically no difference.

DaSch17 schrieb:

In contrast, selling a single-family home usually makes more sense.

A semi-detached house and a terraced/townhouse are also types of single-family homes. They are generally cheaper because the plot of land is smaller. It is not due to the market value of the house itself.

DaSch17 schrieb:

Incidentally, this is why the income values of condominiums/semi-detached houses are usually higher compared to single-family homes, or why the market values of condominiums/semi-detached houses are correspondingly lower compared to single-family homes.

???

We are in the same situation as you. The bank offered us bridge financing for the portion we want to use as equity after selling the semi-detached house. However, the interest rate for the bridge financing is correspondingly higher.