ᐅ How to Best Approach a Project Involving an Existing House When Using Own Equity
Created on: 9 Oct 2022 10:33
A
AJAM_2022
Hello everyone,
I need some fundamental advice on how to approach our planned project, as we are currently a bit overwhelmed with where to start.
Starting point:
Existing house owned by my parents-in-law.
Valued at €680,000 (approximately $730,000) four years ago.
Major renovation completed in 2018.
Debt-free.
The plan is to build a single-family house plus an extension for my parents-in-law.
My wife and I have a monthly net income of about €9,000 (approximately $9,700).
We are debt-free and have saved around €100,000 (approximately $108,000).
One question:
What is the best way to determine the budget for the new build?
The existing house will be used as “equity.”
Ideally, we would sell it beforehand to know exactly how much we will get.
However, that may be difficult timing-wise, as the buyer probably won’t want to wait until our new house is completed.
If we arrange bridge financing and sell the existing house later, it is uncertain how much we will actually get for it.
Especially in the current market, no one knows where real estate prices are headed.
We look forward to an engaging discussion.
Sunny Sunday greetings
I need some fundamental advice on how to approach our planned project, as we are currently a bit overwhelmed with where to start.
Starting point:
Existing house owned by my parents-in-law.
Valued at €680,000 (approximately $730,000) four years ago.
Major renovation completed in 2018.
Debt-free.
The plan is to build a single-family house plus an extension for my parents-in-law.
My wife and I have a monthly net income of about €9,000 (approximately $9,700).
We are debt-free and have saved around €100,000 (approximately $108,000).
One question:
What is the best way to determine the budget for the new build?
The existing house will be used as “equity.”
Ideally, we would sell it beforehand to know exactly how much we will get.
However, that may be difficult timing-wise, as the buyer probably won’t want to wait until our new house is completed.
If we arrange bridge financing and sell the existing house later, it is uncertain how much we will actually get for it.
Especially in the current market, no one knows where real estate prices are headed.
We look forward to an engaging discussion.
Sunny Sunday greetings
AJAM_2022 schrieb:
probably does not want to wait until our new house is finished. Generally, the notary contract is made with a fixed handover date set for the future (for example, about one year plus or minus). Most buyers also have a notice period to observe or still need to sell their current property.
During the time gap, it is possible to rent a holiday home for several months.
AJAM_2022 schrieb:
The existing house is intended to be used as "equity". The problem I see is that parents-in-law may not want or be able to transfer their retirement savings/assets to their children so easily, at least from what it sounds like. The "we" here does not really apply, since this concerns you as the builders. Or you may already have other arrangements in mind… but this would have financial (tax) implications.
AJAM_2022 schrieb:
How is it best to determine the budget for the new build? Calculate, calculate, calculate. For that, gather information, read up, and consult a professional, etc.
S
SaniererNRW1239 Oct 2022 19:56k-man2021 schrieb:
Is that really your experience, or was that meant ironically? Do buyers usually wait until move-in after paying the purchase price?I have done this myself three times in the last 15 years. Timeframes ranged from six to 24 months. It was absolutely no issue. So, not meant ironically.
SaniererNRW123 schrieb:
Done it myself three times in the last 15 years. Periods ranged between six and 24 months. Absolutely no problem. And I’m not being ironic.I have read this so many times on the forum.
When we sold our house, we only had a few months. We sold in spring and wanted the handover around mid-July.
The notary told us this was very unusual and that the buyers needed to be informed they were effectively paying in advance, since the title deed wouldn’t be transferred in the land registry until a certain date.
How does it usually work over 24 months? Was the land registry updated first and then you regulated the handover date separately in the notary contract? Our notary couldn’t offer any wording for this.
kati1337 schrieb:
How does it work over 24 months? Was the land register then updated, and did you arrange the handover date differently in the notarial contract? That’s exactly what the notarial contract is for—to specify a handover date. Until then, your name remains on the land register because the property still belongs to you.
S
SaniererNRW1239 Oct 2022 22:27kati1337 schrieb:
How does something like this work with a 24-month period? Was the land register updated, and did you arrange a different handover date in the notary contract? Our notary couldn’t provide any wording for that. The notary contract normally sets a due date for the purchase price (e.g., 30.10.2022). The purchase price is then paid, and the contract includes a clause for “use compensation.” This works similarly to rent (although it should not be called rent, to avoid applying tenant law). Of course, the contract also specifies a date by which the “user” must vacate the property (e.g., 30.10.2023).
The buyer becomes the legal owner immediately—contrary to what @ypg wrote. No buyer agrees to wait until payment before becoming the owner or, even worse, to pay now but only become owner after many months or years. This does not align with a reasonable financing arrangement.
SaniererNRW123 schrieb:
The buyer then becomes the owner directly – contrary to what @ypg wrote. Where you wrote that: I was mistaken! Sorry. Money was transferred, utility costs were borne by the user (us), and the move-out was ultimately much later than the money transfer. … It’s been such a long time 🙄
However, there is also the “everything within the next year/one year” option.