ᐅ Living in and Renting Out a Detached House: Request for Opinions and Experiences
Created on: 8 Jul 2021 22:03
M
MatjesImSemmel
Hello,
I’m new here, so first a brief introduction about myself/our family. I’m 36, married, with two small children. So far, we have rented various types of housing across the country. Currently, we live in a semi-detached house as first occupants. We are planning to move to Bavaria next year and finally want to move into our own house. Due to the “interesting” current prices for existing properties, a new build is currently the most likely option for us (even though we would only move in during 2023). We have become accustomed to a modern standard, and I’m (still) not the type to renovate. Also, I cannot estimate the costs for that due to lack of experience and contacts.
Now I have the opportunity to purchase a plot of land. This was offered to me by phone through a timber-frame house provider. I’m still an absolute beginner when it comes to the different cost structures, so at the moment I can only work with rough estimates.
The following framework conditions apply:
Plot: 900m² (possibly extendable), price around 460,000€ (according to the real estate agent)
This leads to several options for me:
1. Single-family house
In prefabricated construction, about 330,000€ according to the provider, I’m simply estimating 400,000€ (exact offer still to be prepared)
+ risk surcharge of another 50,000€
Total investment: 910,000€
2. Semi-detached house
I estimate 2 x 350,000€
+ risk 150,000€
Total investment: 1,300,000€
Now to the financial situation:
Net income: 5,000€ (one income, excluding child benefits), my wife plans to work again after the move, but we do not want to include her salary in the financing.
Equity: 260,000€ (max. 300,000€) in more or less liquid assets. The extra 40,000€ is actually saved for my two boys (for a world trip in 18 years 🙂
Our target monthly payment is about 1,800€. This rules out many offers in the desired region if we want to be done before retirement. Even option 1 with a single-family house will probably push the payment above that.
Now to my thought experiment with the semi-detached house, for which I would like to get your opinions.
I’m trying to finance the remaining 1,050,000€ with a monthly payment of about 3,000€. The local rent index is 8.80€/m² (8.80 €/ft²), so for 120m² that’s roughly 1,000€ cold rent. Because it would be a first occupation, 1,200€ is probably realistic (but I deduct two months’ rent for maintenance and vacancy, so back to an average of 1,000€). The building plot is a 30-minute drive to Munich Airport, the nearest large city is 15 minutes away. However, the location is very rural.
With the rental income, I could almost reach my actual goal: a new house in a reasonable location. The market does not offer that at the moment.
Specifications, offers, etc. will be clarified in the coming weeks. Talks with lenders have gone smoothly up to 800,000€. Next week I’ll ask about a million. To be honest, my interest in the rented semi-detached house is not a minimum return of x%, but rather the potential possibility to move into the desired own house. It would be a great “side effect” if each boy could end up with one half.
Am I a genius or a complete fool?
Do you have any valuable advice for me, perhaps your own experiences, tips, warnings? I am very grateful for any input.
Regards,
MatjesImSemmel
I’m new here, so first a brief introduction about myself/our family. I’m 36, married, with two small children. So far, we have rented various types of housing across the country. Currently, we live in a semi-detached house as first occupants. We are planning to move to Bavaria next year and finally want to move into our own house. Due to the “interesting” current prices for existing properties, a new build is currently the most likely option for us (even though we would only move in during 2023). We have become accustomed to a modern standard, and I’m (still) not the type to renovate. Also, I cannot estimate the costs for that due to lack of experience and contacts.
Now I have the opportunity to purchase a plot of land. This was offered to me by phone through a timber-frame house provider. I’m still an absolute beginner when it comes to the different cost structures, so at the moment I can only work with rough estimates.
The following framework conditions apply:
Plot: 900m² (possibly extendable), price around 460,000€ (according to the real estate agent)
This leads to several options for me:
1. Single-family house
In prefabricated construction, about 330,000€ according to the provider, I’m simply estimating 400,000€ (exact offer still to be prepared)
+ risk surcharge of another 50,000€
Total investment: 910,000€
2. Semi-detached house
I estimate 2 x 350,000€
+ risk 150,000€
Total investment: 1,300,000€
Now to the financial situation:
Net income: 5,000€ (one income, excluding child benefits), my wife plans to work again after the move, but we do not want to include her salary in the financing.
Equity: 260,000€ (max. 300,000€) in more or less liquid assets. The extra 40,000€ is actually saved for my two boys (for a world trip in 18 years 🙂
Our target monthly payment is about 1,800€. This rules out many offers in the desired region if we want to be done before retirement. Even option 1 with a single-family house will probably push the payment above that.
Now to my thought experiment with the semi-detached house, for which I would like to get your opinions.
I’m trying to finance the remaining 1,050,000€ with a monthly payment of about 3,000€. The local rent index is 8.80€/m² (8.80 €/ft²), so for 120m² that’s roughly 1,000€ cold rent. Because it would be a first occupation, 1,200€ is probably realistic (but I deduct two months’ rent for maintenance and vacancy, so back to an average of 1,000€). The building plot is a 30-minute drive to Munich Airport, the nearest large city is 15 minutes away. However, the location is very rural.
With the rental income, I could almost reach my actual goal: a new house in a reasonable location. The market does not offer that at the moment.
Specifications, offers, etc. will be clarified in the coming weeks. Talks with lenders have gone smoothly up to 800,000€. Next week I’ll ask about a million. To be honest, my interest in the rented semi-detached house is not a minimum return of x%, but rather the potential possibility to move into the desired own house. It would be a great “side effect” if each boy could end up with one half.
Am I a genius or a complete fool?
Do you have any valuable advice for me, perhaps your own experiences, tips, warnings? I am very grateful for any input.
Regards,
MatjesImSemmel
H
HilfeHilfe9 Jul 2021 06:55With a net income of 5,000, I don't see financing over 1 million. It's not foolish, rather naive.
H
Hausbautraum209 Jul 2021 06:58For 400,000, you can’t build much of a house in the greater Munich area anymore.
Or rather:
House 400k
Additional construction costs: 30k–50k (basement?)
Carport/garage: 10k–30k
Outdoor facilities: 20k–50k
Kitchen/furniture: 20k
=> at least 480k
Then, with a linked purchase, you’d have another 50k in additional acquisition costs.
So overall, at least 1 million for your project.
As you described it, I would never do it that way.
Friends of ours recently bought a townhouse for the mentioned million, and the crucial difference compared to you is that the wife also contributes over 2,000 net income.
Their mortgage payment is then 4,000 € (euros).
By the way, we also pay 1,800 € (euros) monthly with about 5,000 € (euros) net income. However, that is only for a 470k loan with the bank having offered us a maximum limit of 500k–550k.
The semi-detached house option works even less. At 1,000 € per month cold rent, you will never recoup the cost of the land and house.
You need a much smaller and therefore more affordable plot of land.
Or: divide the 900 sqm (9,700 sq ft) plot and build one half of a semi-detached house.
Or rather:
House 400k
Additional construction costs: 30k–50k (basement?)
Carport/garage: 10k–30k
Outdoor facilities: 20k–50k
Kitchen/furniture: 20k
=> at least 480k
Then, with a linked purchase, you’d have another 50k in additional acquisition costs.
So overall, at least 1 million for your project.
As you described it, I would never do it that way.
Friends of ours recently bought a townhouse for the mentioned million, and the crucial difference compared to you is that the wife also contributes over 2,000 net income.
Their mortgage payment is then 4,000 € (euros).
By the way, we also pay 1,800 € (euros) monthly with about 5,000 € (euros) net income. However, that is only for a 470k loan with the bank having offered us a maximum limit of 500k–550k.
The semi-detached house option works even less. At 1,000 € per month cold rent, you will never recoup the cost of the land and house.
You need a much smaller and therefore more affordable plot of land.
Or: divide the 900 sqm (9,700 sq ft) plot and build one half of a semi-detached house.
Hausbautraum20 schrieb:
Or: Divide the 900sqm (9700 sq ft) plot and build a semi-detached house.MatjesImSemmel schrieb:
With the rental income, I could nearly reach our original goal of a new house in a reasonable location. The market doesn't offer that to me right now.Exactly. Divide the plot and sell the other half, then your remaining loan will be much smaller and you'll have your house in a reasonable location 🙂M
MatjesImSemmel9 Jul 2021 09:00Hello,
Thank you for your replies. The term “naive” probably fits quite well. As I mentioned, I am still at a very early stage and have a lot of reading ahead of me. A forum like this helps me to be nudged in the right direction early on. I will take a look at the topic of short sales over the weekend.
My wife and I had already considered Plan B as well. And we also saw it as a stress-free option. But I wanted to get the forum’s opinions on buying the semi-detached house.
I am really curious about the first concrete offer. On the phone, the lady from Okal Haus quoted €330,000 for a detached house, turnkey shell stage. I somehow expected this to be a bait offer, but plus €150,000… I am very curious.
Thanks and best regards
Thank you for your replies. The term “naive” probably fits quite well. As I mentioned, I am still at a very early stage and have a lot of reading ahead of me. A forum like this helps me to be nudged in the right direction early on. I will take a look at the topic of short sales over the weekend.
Tassimat schrieb:
Exactly. Divide the plot and sell the remaining half, then the remaining loan is nicely small and you have your house in a reasonable location 🙂
My wife and I had already considered Plan B as well. And we also saw it as a stress-free option. But I wanted to get the forum’s opinions on buying the semi-detached house.
Hausbautraum20 schrieb:
For 400,000 you won’t get much house built in the greater Munich area anymore.
Or rather:
House 400k
Additional construction costs (building permit fees, site setup, etc.): 30k–50k (basement?)
Carport/Garage: 10k–30k
Landscaping and external works: 20k–50k
Kitchen/Furniture: 20k
=> at least 480k
I am really curious about the first concrete offer. On the phone, the lady from Okal Haus quoted €330,000 for a detached house, turnkey shell stage. I somehow expected this to be a bait offer, but plus €150,000… I am very curious.
Thanks and best regards
M
MatjesImSemmel9 Jul 2021 09:10Hausbautraum20 schrieb:
... that the wife also contributes over 2000 net.
Her monthly payment is then 4000€ (about 4400 USD)...
By the way, we also have a monthly payment of 1800€ (about 2000 USD) with a net income of just over 5000€ (about 5500 USD). However, we only have a loan of 470k and the savings bank told us back then that our maximum limit was between 500k and 550k. As I said, we deliberately want to leave my wife’s income out of the financing. There is still life outside of the house. Of course, this limits our options, but I rather imagine myself riding the Pan-American Highway on a motorcycle with the boys in 18 years.
My bank also mentioned the 550k€ (about 605,000 USD) figure.
N
nordanney9 Jul 2021 09:16MatjesImSemmel schrieb:
My wife and I had already set Plan B aside. And we also considered it the stress-free option. But I wanted to hear the forum’s opinions on buying a detached house. This is not Plan B; it has to be Plan A for you.
MatjesImSemmel schrieb:
We have gotten used to a modern standard. Then expect around €2,500–3,000 per square meter (about $2,700–3,200 per square yard) of living space to maintain your standard. So a 140 sqm (about 1,500 sq ft) house (sufficient for four people) would cost between €350,000 and €420,000. Plus additional costs of about €50,000, as well as garage, landscaping, and kitchen.
MatjesImSemmel schrieb:
The rent index in the region is €8.80 per sqm. That doesn’t match the land value. There’s neither yield nor a reasonable investment left to partly finance your own house as a bonus. Rent for a 120 sqm (about 1,300 sq ft) house should be at least €1,500 per month excluding utilities.