Hello everyone,
I have been an active reader here for a long time. I have already discovered many useful tips and learned a lot from you. Thank you for that.
Now to the actual "problem."
We live in a nice 4-room condominium, which we have almost paid off – the value of the apartment is about 380,000 euros (approx. $410,000), with current debt of around 115,000 euros (approx. $124,000). There is about 90,000 euros (approx. $97,000) in our bank account. After the fixed interest period ends (beginning of 2022), we could make use of the special repayment option and pay off the remaining amount in full. That is the background.
Our municipality will sell about 50 plots of land in a new development area this spring (the infrastructure work is in full progress). Since we have two children, our chances of getting a building plot are good.
Price: about 300 euros per square meter (approx. $325 per square meter).
We would like to build. Since I am a teacher, I need a dedicated home office. I am tired of constantly working at the kitchen table. School materials are scattered all over the living room.
I estimate that the dream of owning a home would cost us about 600,000 euros (approx. $650,000).
About our income:
Monthly net income: he earns 2,600 euros (approx. $2,800), I earn 2,500 euros (approx. $2,700) working 75%, private health insurance already deducted, plus child benefits of 400 euros (approx. $430), totaling 5,500 euros (approx. $6,000).
How should we best proceed now?
a) Pay off the apartment completely, sell it, and finance only the difference?
b) Keep the apartment, rent it out (rent about 900 euros (approx. $975)), do not pay it off, but take on additional debt to finance part of the house?
c) Use the equity as a down payment for the land (+ a small variable loan), sell the apartment after the fixed interest period ends, pay off the remaining debt with the proceeds, and put the remaining "profit" into the new house...
d) ???????
I know that was a lot. I hope you can help me a little...
I have been an active reader here for a long time. I have already discovered many useful tips and learned a lot from you. Thank you for that.
Now to the actual "problem."
We live in a nice 4-room condominium, which we have almost paid off – the value of the apartment is about 380,000 euros (approx. $410,000), with current debt of around 115,000 euros (approx. $124,000). There is about 90,000 euros (approx. $97,000) in our bank account. After the fixed interest period ends (beginning of 2022), we could make use of the special repayment option and pay off the remaining amount in full. That is the background.
Our municipality will sell about 50 plots of land in a new development area this spring (the infrastructure work is in full progress). Since we have two children, our chances of getting a building plot are good.
Price: about 300 euros per square meter (approx. $325 per square meter).
We would like to build. Since I am a teacher, I need a dedicated home office. I am tired of constantly working at the kitchen table. School materials are scattered all over the living room.
I estimate that the dream of owning a home would cost us about 600,000 euros (approx. $650,000).
About our income:
Monthly net income: he earns 2,600 euros (approx. $2,800), I earn 2,500 euros (approx. $2,700) working 75%, private health insurance already deducted, plus child benefits of 400 euros (approx. $430), totaling 5,500 euros (approx. $6,000).
How should we best proceed now?
a) Pay off the apartment completely, sell it, and finance only the difference?
b) Keep the apartment, rent it out (rent about 900 euros (approx. $975)), do not pay it off, but take on additional debt to finance part of the house?
c) Use the equity as a down payment for the land (+ a small variable loan), sell the apartment after the fixed interest period ends, pay off the remaining debt with the proceeds, and put the remaining "profit" into the new house...
d) ???????
I know that was a lot. I hope you can help me a little...
tomtom79 schrieb:
What puzzles me is that plots cost only 180,000, but apartments are 380,000 and more. Transferring this to our area, the plots are at least 100,000 euros more expensive with similar apartment prices. We are talking about a rural area, directly by the highway, about 60km (37 miles) from Stuttgart.
It is a new development area, managed by the local municipality. Private building plots are sold for around 500€/m2 (about $47 per ft2) and are very rare. 20km (12 miles) further, the price per m2 is about 500€ (set by the municipality). Prices for building plots have nearly doubled over the last 10 years.
New apartments are also scarce. A new 4-room condominium (standard, not luxury) costs around 450,000€ (plus garage or underground parking space 20,000–25,000€).
You can always talk the rental situation up or down. In this case, I would personally lean towards renting, since the value suggests it’s a desirable location.
The best approach is to thoroughly plan the entire financial mix. Calculate both options completely with concrete numbers, and include some estimates for the future to see what happens if things go well or poorly. Then you can decide whether you prefer security (selling and having a smaller loan) or a bit more opportunity and risk through renting (increased income versus default, vacancy, etc.) for peace of mind.
Simple, right?
The best approach is to thoroughly plan the entire financial mix. Calculate both options completely with concrete numbers, and include some estimates for the future to see what happens if things go well or poorly. Then you can decide whether you prefer security (selling and having a smaller loan) or a bit more opportunity and risk through renting (increased income versus default, vacancy, etc.) for peace of mind.
Simple, right?
I would keep the apartment. It does not pose any risk. Lower the repayment amount so that the monthly payment and reserves are covered by the net rent.
Possibly even hire a property management company.
The return might be low, but the tenants are effectively paying off your debt. Given your situation, definitely keep the apartment!
Possibly even hire a property management company.
The return might be low, but the tenants are effectively paying off your debt. Given your situation, definitely keep the apartment!
Joedreck schrieb:
I would keep the apartment. It doesn’t pose a risk. Lower the repayment amount so that the monthly payment and reserves are covered by the net rent.
Maybe even hire a property management company.
The return might be low, but the tenants are essentially paying off your debt. Given your situation, definitely keep the apartment! Assuming we keep the apartment and it pays for itself...
We would need to take out about a 600,000 euro (about 650,000 USD) loan for the house. Interest plus repayment at around 4–5% means roughly a 2,300–2,500 euro (about 2,500–2,700 USD) monthly payment. Did I calculate that correctly off the top of my head?
With a family income of about 5,500 euro (about 5,900 USD)?
That’s definitely not feasible for us!
Are there alternatives where the monthly payment is a maximum of 1,800 euro (about 1,900 USD) and we don’t have a remaining debt of 300,000 euro (about 325,000 USD) after 20 years?
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