ᐅ Is Buying Land and Building a House Too Risky in the Current Situation?
Created on: 24 Jun 2022 10:14
J
Julchen7393
Hello everyone,
After quietly reading along for a long time, I finally want to reach out to you with my first post to ask for advice.
My partner and I currently live in an end-terrace house (end townhouse) that we rent cheaply from my boyfriend’s parents – who inherited the house themselves. Since the size of the house is not sufficient for our long-term plans and a lot of money would be needed for renovations, we have been looking for a plot of land to build our own home for some time.
Now, a building plot in a new development area of our municipality has been returned, and we are eligible to apply for it. Because the plot is provided by the municipality, it is significantly cheaper (€420 per m² (approx. $440 per sq yd)) than the market price (€600–1000 per m² (approx. $630–1050 per sq yd)). All other plots are already developed or have building permits/planning permission applied for, so it’s unlikely that any more plots will become available.
Although the plot is probably a unique opportunity, we are very uncertain about the feasibility under the current circumstances and would appreciate your assessment.
General information about us:
Female, 29 (Controlling) and Male, 30 (Engineer)
No children yet, but we plan to have two children within the next 4-6 years (which is why we want more living space)
Financial situation:
Net income: €7000 (approx. $7400)
Current expenses: €3400 (approx. $3600)
Surplus: €3600 (approx. $3800)
Equity: €250,000 (approx. $265,000) – of this, we plan to put €200,000 (approx. $212,000) into financing; part of the remaining €50,000 (approx. $53,000) is tied up in retirement savings and should remain there
Construction costs:
Plot: 621 m² (6679 sq ft) at €420 per m² (approx. $440 per sq yd): €260,820 (approx. $277,000)
Additional purchase costs: €18,257 (approx. $19,400)
House construction: 150 m² (1615 sq ft) at €2600 per m² (approx. $270 per sq ft): €400,000 (approx. $425,000)
(We have an appointment with a construction company next week to see if this is feasible with significant DIY work)
Basement: €40,000 (approx. $42,500)
Garage: €25,000 (approx. $26,500)
Kitchen: €25,000 (approx. $26,500)
Outdoor facilities: €30,000 (approx. $32,000)
Total costs: €800,000 (approx. $850,000)
Financing requirement:
€800,000 - €200,000 = €600,000 (approx. $425,000 - $212,000 = $638,000)
The bank would approve a loan with our desired monthly payment of €2,500 (approx. $2650), but depending on interest rate changes, the repayment period without early repayments would be between 30 and 35 years.
We are particularly worried that our estimated construction costs are too low and that significant price increases may follow.
Also, the long loan term concerns us – given the planned children, we find it difficult to consider a higher monthly payment, especially since we both earn roughly the same and will face significant income reductions due to parental leave benefits.
For days now, we have been torn between “taking this once-in-a-lifetime chance to get an affordable building plot in town” and “the financial risk is too high in the current situation.”
We would be grateful for your thoughts on our plan and the expected construction costs.
Best regards,
Julia
After quietly reading along for a long time, I finally want to reach out to you with my first post to ask for advice.
My partner and I currently live in an end-terrace house (end townhouse) that we rent cheaply from my boyfriend’s parents – who inherited the house themselves. Since the size of the house is not sufficient for our long-term plans and a lot of money would be needed for renovations, we have been looking for a plot of land to build our own home for some time.
Now, a building plot in a new development area of our municipality has been returned, and we are eligible to apply for it. Because the plot is provided by the municipality, it is significantly cheaper (€420 per m² (approx. $440 per sq yd)) than the market price (€600–1000 per m² (approx. $630–1050 per sq yd)). All other plots are already developed or have building permits/planning permission applied for, so it’s unlikely that any more plots will become available.
Although the plot is probably a unique opportunity, we are very uncertain about the feasibility under the current circumstances and would appreciate your assessment.
General information about us:
Female, 29 (Controlling) and Male, 30 (Engineer)
No children yet, but we plan to have two children within the next 4-6 years (which is why we want more living space)
Financial situation:
Net income: €7000 (approx. $7400)
- Female: €3400 (approx. $3600) and Male: €3600 (approx. $3800) – both full-time 40 hours per week (with additional variable bonuses not yet factored in)
Current expenses: €3400 (approx. $3600)
- Fixed costs: €2200 (approx. $2350)
- €600 rent, €350 utilities incl. heating, internet, and electricity, €500 car expenses incl. insurance, €400 retirement savings, €350 other fixed costs (insurance, streaming services, etc.)
- Variable costs: €1200 (approx. $1265) – budgeted quite generously; we usually spend significantly less
- Living costs, vacations, leisure activities
Surplus: €3600 (approx. $3800)
Equity: €250,000 (approx. $265,000) – of this, we plan to put €200,000 (approx. $212,000) into financing; part of the remaining €50,000 (approx. $53,000) is tied up in retirement savings and should remain there
Construction costs:
Plot: 621 m² (6679 sq ft) at €420 per m² (approx. $440 per sq yd): €260,820 (approx. $277,000)
Additional purchase costs: €18,257 (approx. $19,400)
House construction: 150 m² (1615 sq ft) at €2600 per m² (approx. $270 per sq ft): €400,000 (approx. $425,000)
(We have an appointment with a construction company next week to see if this is feasible with significant DIY work)
Basement: €40,000 (approx. $42,500)
Garage: €25,000 (approx. $26,500)
Kitchen: €25,000 (approx. $26,500)
Outdoor facilities: €30,000 (approx. $32,000)
Total costs: €800,000 (approx. $850,000)
Financing requirement:
€800,000 - €200,000 = €600,000 (approx. $425,000 - $212,000 = $638,000)
The bank would approve a loan with our desired monthly payment of €2,500 (approx. $2650), but depending on interest rate changes, the repayment period without early repayments would be between 30 and 35 years.
We are particularly worried that our estimated construction costs are too low and that significant price increases may follow.
Also, the long loan term concerns us – given the planned children, we find it difficult to consider a higher monthly payment, especially since we both earn roughly the same and will face significant income reductions due to parental leave benefits.
For days now, we have been torn between “taking this once-in-a-lifetime chance to get an affordable building plot in town” and “the financial risk is too high in the current situation.”
We would be grateful for your thoughts on our plan and the expected construction costs.
Best regards,
Julia
M
Myrna_Loy24 Jun 2022 16:21I would prioritize the project of having children. They only really need their own space once they are 5 years old or older. We became parents in our mid to late 30s, and I envy everyone who started a few years earlier. I also found managing a second baby alongside a toddler and work at 38 years old much more exhausting than at 34.
J
Julchen739324 Jun 2022 16:29ypg schrieb:
That definitely makes floor installation more relaxed…
…but with senior_external_help_ you don’t build a basement.
You can accept help, but you shouldn’t overuse it. My husband himself is just over 60, very fit, but I wouldn’t send him to a house construction site, if you know what I mean. You should rather be able to offer support to your husband. If you know what I mean 😉
That’s good. But even they have to pay their contractors and issue invoices.
You should still realistically calculate this, so you don’t suddenly have to deal with a €10,000 expense instead of a zero-cost item.
I agree, which is why #4 Yes, I definitely feel responsible there as well. We have already made quite a few changes to our current house, and I like to help out – even if I mostly do the “helper” tasks like handing over materials and hauling away debris 😉
Regarding surplus during parental leave: That is actually the main reason why €2,500 is our maximum monthly payment. It’s affordable for us even during parental leave, especially since, as you mentioned, retirement savings can at least temporarily be reduced or paused.
With the current (unfortunately probably too conservative) calculation, it’s barely manageable, and with significantly higher costs or interest rates, it would probably not be feasible.
W
WilderSueden24 Jun 2022 16:31Myrna_Loy schrieb:
I would prioritize the project of having children. They really need their own space only once they are around 5 years old or older. We became parents in our mid to late 30s, and I envy anyone who started a few years earlier. I also found managing a second baby alongside a toddler and a job at 38 much more exhausting than at 34. On the other hand, doing your own work and having small children simply isn’t the ideal combination. And even if you do only a little yourself... building a house takes up a lot of mental capacity that is then missing for the child.
J
Julchen739324 Jun 2022 16:36Myrna_Loy schrieb:
I would prioritize the children project. They really need their own space only from around age 5 and older. We became parents in our mid and late 30s, and I envy everyone who started a few years earlier. I also found managing a second baby alongside a toddler and a job at 38 much more exhausting than at 34. WilderSueden schrieb:
On the other hand, doing your own work and having small children is simply not the ideal combination. And even if you do little yourself... building a house consumes a lot of mental capacity that then is missing for the child. Yes, we have been thinking a lot about what the right order is here – if you can even speak of a "right" way. If we start the building project now, we would definitely delay planning for children, otherwise it wouldn’t be compatible with the required own work.
W
WilderSueden24 Jun 2022 16:58With children, many things simply become more complicated. It’s not just a matter of “getting up, having a quick breakfast, and leaving,” but it all takes much longer. Even daily life without a construction site now requires significantly more planning and time. The trip to the daycare before work takes time, which is then missing in the evening. And this is all without the construction site yet.
Small children need constant care, unless they are sleeping. If both parents want to work, childcare must be secured—not just from 9 a.m. to 1 p.m. Children usually go to bed a bit earlier, so if you want to spend time with them in the evening, there’s not much time left for personal tasks after work. Even just checking on the construction site becomes more demanding because small children have a knack for finding leftover nails and putting them in their mouths. The inspection with the electrician was also a bit challenging because someone at 14 months old already wanted to climb the ladder to the upper floor (and actually could!).
If I had the choice, I would definitely start the housebuilding process before having children.
Small children need constant care, unless they are sleeping. If both parents want to work, childcare must be secured—not just from 9 a.m. to 1 p.m. Children usually go to bed a bit earlier, so if you want to spend time with them in the evening, there’s not much time left for personal tasks after work. Even just checking on the construction site becomes more demanding because small children have a knack for finding leftover nails and putting them in their mouths. The inspection with the electrician was also a bit challenging because someone at 14 months old already wanted to climb the ladder to the upper floor (and actually could!).
If I had the choice, I would definitely start the housebuilding process before having children.
P
Pinkiponk24 Jun 2022 17:04Myrna_Loy schrieb:
I would prioritize the children for the project. They really need their own space only from around age 5 and older. We became parents in our mid to late 30s, and I envy those who started a few years earlier. I also found managing a second baby alongside a toddler and a job at age 38 much more exhausting than at 34.But then, on top of the job and small children, house building comes as well. That could be more challenging to manage. Maybe it’s better to focus on the job and the house first, and once the home is ready and both partners are professionally established, then have children. 🙂 Starting to look for a plot and build or buy a house once the small children are already there can bring some unrest into family life. The plot is now available.