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 17:07WilderSueden schrieb:
Having children simply makes many things more complicated. It’s not just “get up, quickly eat breakfast, and go,” but everything takes longer. Even everyday life without a construction site now requires much more planning and time. The trip to the daycare before work takes time that is then missing in the evening. This is all before even considering the construction site.
Young children need constant supervision 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 earlier, so if you want to spend time with the child in the evening, there isn’t much time left for doing work yourself after hours. Even just checking on the construction site is more complicated because small children have a knack for finding leftover nails and putting them in their mouths. Walking through the site with the electrician was also a bit stressful because someone at 14 months old already tried to climb the ladder to the upper floor (and would have made it!).
If I had a choice, I would definitely tackle the house construction before having children. Well, how long does that affect you?
A friend of mine also built a house with room for three children—but then none came.
W
WilderSueden24 Jun 2022 17:21Myrna_Loy schrieb:
Well, how long does that take?Long enough that it’s no fun. A construction period of 10-12 months is more or less standard, usually longer if you do a lot yourself. With a prefab house, it can be a bit shorter. Plus all the appointments and tasks beforehand (finding a builder, architect, bank, etc.).We hardly do anything before moving in, yet building a house is still a lot of work. I think you do better for the child if you don’t constantly have the construction site on your mind or keep going there. Children are only little once.
Myrna_Loy schrieb:
A friend of mine also built with space for three children – then none came.That risk exists, but it’s also possible that after the first one, no more follow.WilderSueden schrieb:
There is a risk, but it’s also possible that after the first one, there won’t be any more. Then you end up with a nice hobby room for yourself.
I would calculate carefully, and with the equity you have, it can work out well (if you reconsider must-haves like 80 square meters (860 square feet) of storage space, meaning a basement 😉 ).
Then you can get a lot done together and move into the house as a couple. Dads can help if they want to.
It was recently mentioned that the priority of the garden for children drops sharply once they start school or can spend time with peers at the playground nearby. In that sense, it makes sense to be finished by then.
J
Julchen739324 Jun 2022 19:17Pinkiponk schrieb:
But on top of work and young children, there’s also house construction to manage. That could be more challenging to handle. Maybe it’s better to focus on work and buying a house first, and once the home is ready and both are professionally established, then have children. 🙂 Starting to look for a plot and building/buying a house while the kids are very young can disrupt family life a bit. The plot is now available.A few years ago, I would definitely have said that this order was our ideal plan! Unfortunately, it was almost impossible to get a building plot from the municipality without children back then, and privately it had been very expensive here for several years or, if affordable, in need of extensive renovation. Now everyone is dropping out of the waiting list, so a building plot would be available even without children, but it’s much harder to finance—which, of course, is why others are backing out 😀
ypg schrieb:
Then you have a nice hobby room for yourself.
I would calculate carefully... and with the equity, it should work well (if you reconsider must-haves like 80sqm (860sqft) of storage space, meaning a cellar 😉 ).
Then you can do a lot yourselves and as a couple take parental leave. Dads can help if they want to..Yes, we really need to discuss the cellar issue again; we currently have one and use it a lot. For the new build, you can also create suitable storage space inside the house and/or the garage.
The task for the weekend is definitely a more detailed calculation and another consultation with the bank after the appointment with the builder.
Pinkiponk schrieb:
Do you really consider the statement "If the costs around the house continue to rise like this, maybe a levy or enormous property tax / council tax will be introduced, energy prices keep exploding, ..." to be completely absurd? At the moment, it seems that building single-family homes is politically and environmentally the least favored form of housing. I don’t rule out the possibility that legislation could bring some negative changes for single-family homeowners. Let’s see how the property tax / council tax reform will develop. Supposedly, there will also be "winners" – I’m curious.I hope you understand that I don’t want to discuss the content here. I think too many threads get derailed by the same political debates 🙂@Julchen, I wish you good luck with your decision-making. 🙂
W
WilderSueden24 Jun 2022 22:46ypg schrieb:
Then you have a nice hobby room for yourself.
I would calculate carefully, and with your own equity, it should work well (if you reconsider must-haves like 80sqm (860 sq ft) of storage space, i.e., a basement 😉).
Then you can do a lot yourselves and move in as a couple. Dads can help if they want.
Recently, it was said that the priority of the garden for children declines rapidly once they start school or can hang out with like-minded kids at the local playground. So it makes sense to be finished by then. What I wanted to express is that it’s not always possible to perfectly tailor the house to your family planning. Most rooms will definitely be used even if you end up with two fewer children. That’s why I wouldn’t wait to build until all the kids are here… especially if there’s an unplanned fourth child later on 😉
As for the garden, I think it strongly depends on the children, the garden itself, and the surroundings. If there’s a place in the garden where the kids like to spend time, they will also invite friends to join them.
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