Hello
I am 28, single, and finally want to move out of my rental apartment into my own home. I currently have a nice option in sight, but there are many issues. The main problem is that I want to live in a small town where there is rarely anything available and everything is relatively expensive. At the moment, a two-family house is for sale that I quite like.
Basic information:
Fixed income: 2000 net/month + Christmas/vacation bonus (permanent employment with a stable company, everything is fine). However, no significant increases are expected.
Variable income (side job): about 500€/month (approximately $500/month) — this income is quite uncertain, can drop quickly but also increase, sometimes even reaching four figures. It’s hard for me to rely on this.
I have two home savings contracts (not yet ready for allocation) with a total balance of 25,000€ (approximately $25,000), plus savings of around 6000€ (approximately $6,000) that are readily available but I do not want to use for the purchase; I want to keep them as a reserve (these are roughly the recommended three net monthly incomes).
The house is listed for 400,000€ (approximately $400,000) (plus realtor fees, etc. are extra). It consists of two completely separate apartments, each with 3.5 rooms, fully basemented. A new oil heating system was installed a few years ago, etc. It sounds good, and the plot looks very well maintained. An interior inspection is still pending.
The area has high rents, so the second apartment could probably be rented out well (I estimate about 800€ cold rent easily, depending on condition). Maybe an acquaintance or my sister would take the apartment; currently, I’m quite unsure what to do with it.
I will receive help from my parents; we haven’t discussed amounts yet, but we have a good relationship, and there are reasons they would help (which I do not want to explain further here).
My problems:
- I am a customer of a large Bank X, but the house is being sold through a realtor from large Bank Y. How do I handle this correctly? So far, I have asked for the address, looked at the house from the outside, and plan to have a non-binding interior viewing soon. Since this has only been going on for about a week, I have not yet spoken with my bank.
- The house was built around 1970 and is a solid structure. What should I pay attention to during the viewing? Is a building survey advisable?
- Is financing even possible in this situation? I have no real idea about this.
- How is such financing usually approached? Before I speak to my bank advisor completely blind, I would like to have some prior knowledge. For example, what do you do with home savings contracts? Do you pay them off relatively quickly and then use them to repay parts of the loan? As mentioned, I really have little knowledge, and I think a little background information won’t hurt before talking to my bank.
What else should I watch out for that I might have completely forgotten? I am searching a lot online, but somehow it’s not really helping me.
Greetings from Bavaria
I am 28, single, and finally want to move out of my rental apartment into my own home. I currently have a nice option in sight, but there are many issues. The main problem is that I want to live in a small town where there is rarely anything available and everything is relatively expensive. At the moment, a two-family house is for sale that I quite like.
Basic information:
Fixed income: 2000 net/month + Christmas/vacation bonus (permanent employment with a stable company, everything is fine). However, no significant increases are expected.
Variable income (side job): about 500€/month (approximately $500/month) — this income is quite uncertain, can drop quickly but also increase, sometimes even reaching four figures. It’s hard for me to rely on this.
I have two home savings contracts (not yet ready for allocation) with a total balance of 25,000€ (approximately $25,000), plus savings of around 6000€ (approximately $6,000) that are readily available but I do not want to use for the purchase; I want to keep them as a reserve (these are roughly the recommended three net monthly incomes).
The house is listed for 400,000€ (approximately $400,000) (plus realtor fees, etc. are extra). It consists of two completely separate apartments, each with 3.5 rooms, fully basemented. A new oil heating system was installed a few years ago, etc. It sounds good, and the plot looks very well maintained. An interior inspection is still pending.
The area has high rents, so the second apartment could probably be rented out well (I estimate about 800€ cold rent easily, depending on condition). Maybe an acquaintance or my sister would take the apartment; currently, I’m quite unsure what to do with it.
I will receive help from my parents; we haven’t discussed amounts yet, but we have a good relationship, and there are reasons they would help (which I do not want to explain further here).
My problems:
- I am a customer of a large Bank X, but the house is being sold through a realtor from large Bank Y. How do I handle this correctly? So far, I have asked for the address, looked at the house from the outside, and plan to have a non-binding interior viewing soon. Since this has only been going on for about a week, I have not yet spoken with my bank.
- The house was built around 1970 and is a solid structure. What should I pay attention to during the viewing? Is a building survey advisable?
- Is financing even possible in this situation? I have no real idea about this.
- How is such financing usually approached? Before I speak to my bank advisor completely blind, I would like to have some prior knowledge. For example, what do you do with home savings contracts? Do you pay them off relatively quickly and then use them to repay parts of the loan? As mentioned, I really have little knowledge, and I think a little background information won’t hurt before talking to my bank.
What else should I watch out for that I might have completely forgotten? I am searching a lot online, but somehow it’s not really helping me.
Greetings from Bavaria
It all sounded quite reasonable until I reached the part about the 400,000 Euro purchase price. 😎
With the available income, you won’t be able to handle this volume.
On top of the negotiable purchase price, you still have the real estate agent’s fee and the property transfer tax; in Bavaria, this is 3.5%, so with 400,000 Euro, that’s an additional 14,000 Euro (and you’ll have the tax assessment notice in your mailbox faster than you can blink).
You want to rent out one of the two apartments in the future... somehow... to someone... 🤨
What happens if you don’t have or find a tenant for 6 months? You have to be able to cover such periods.
In addition to the pure financing costs, there are several additional expenses when owning a house, such as waste disposal, electricity, water and sewage, etc. The attractive bargain offers on the internet and in print media, where buying a house looks insanely cheap, have brought many back down to reality later on.
I would recommend starting at least two steps smaller, for example with a condominium.
With the available income, you won’t be able to handle this volume.
On top of the negotiable purchase price, you still have the real estate agent’s fee and the property transfer tax; in Bavaria, this is 3.5%, so with 400,000 Euro, that’s an additional 14,000 Euro (and you’ll have the tax assessment notice in your mailbox faster than you can blink).
You want to rent out one of the two apartments in the future... somehow... to someone... 🤨
What happens if you don’t have or find a tenant for 6 months? You have to be able to cover such periods.
In addition to the pure financing costs, there are several additional expenses when owning a house, such as waste disposal, electricity, water and sewage, etc. The attractive bargain offers on the internet and in print media, where buying a house looks insanely cheap, have brought many back down to reality later on.
I would recommend starting at least two steps smaller, for example with a condominium.
Hello
thank you for your response. I am aware that 400,000 is not manageable for me. I simply calculated it this way because it is two apartments, so the amount is divided by two. That leaves me with 200,000 (+ realtor fees, property transfer tax, of course a percentage of the 400,000, etc.).
If you just calculate 200,000€ + 14,000€ tax + 14,000€ realtor fees, would that be manageable? Assuming the rest comes for the second apartment from parents, which will later go to my sister (just a simple assumption), how would that work? The house is not intended for me alone, but to be shared.
Or, to put it differently, what can I afford based on my income?
I already pay for electricity now. Waste collection, water, and similar costs are included in my additional expenses. With a more efficient heating system in the house (oil central heating), it would even be cheaper than my current rental (rent: hot water via electric boiler, oil stove in the living room, etc.). I understand that at some point, renovation will need to be considered.
I would not mind a condominium or similar, but unfortunately, there is almost nothing available in this town. I have been watching the market for a year now; there was one terraced house for sale that I didn’t like, and now this two-family house, which looks really great from the outside. I think it is simply cheaper to share a two-family house than for each person to buy or build a separate house.
Greetings from Bavaria
thank you for your response. I am aware that 400,000 is not manageable for me. I simply calculated it this way because it is two apartments, so the amount is divided by two. That leaves me with 200,000 (+ realtor fees, property transfer tax, of course a percentage of the 400,000, etc.).
If you just calculate 200,000€ + 14,000€ tax + 14,000€ realtor fees, would that be manageable? Assuming the rest comes for the second apartment from parents, which will later go to my sister (just a simple assumption), how would that work? The house is not intended for me alone, but to be shared.
Or, to put it differently, what can I afford based on my income?
I already pay for electricity now. Waste collection, water, and similar costs are included in my additional expenses. With a more efficient heating system in the house (oil central heating), it would even be cheaper than my current rental (rent: hot water via electric boiler, oil stove in the living room, etc.). I understand that at some point, renovation will need to be considered.
I would not mind a condominium or similar, but unfortunately, there is almost nothing available in this town. I have been watching the market for a year now; there was one terraced house for sale that I didn’t like, and now this two-family house, which looks really great from the outside. I think it is simply cheaper to share a two-family house than for each person to buy or build a separate house.
Greetings from Bavaria
E
elVincent8 May 2015 13:19Do you currently feel confident that you can afford an apartment with a basic rent of 800€ (about $870)? If that works for you and your parents are willing to provide the missing capital for the second unit or act as additional borrowers, then it could be feasible. In this case, your parents essentially provide the security for the rent of the second unit, which is needed to repay the loan.
Put differently: You take out a loan of around 400,000€ (about $435,000), can afford a monthly payment of 800€ (about $870) yourself, and your parents (or later your sister or a tenant) also contribute 800€ (about $870) per month (your parents cover periods when the unit is vacant). Without extra repayments, the loan would be paid off in about 28 to 30 years, which is a relatively tight schedule.
I think this will be challenging given your income situation because the estimated total rent would take up more than half of your net income. Many banks would likely consider this too risky.
Could your parents buy the house and you repay half of the loan directly to them?
Put differently: You take out a loan of around 400,000€ (about $435,000), can afford a monthly payment of 800€ (about $870) yourself, and your parents (or later your sister or a tenant) also contribute 800€ (about $870) per month (your parents cover periods when the unit is vacant). Without extra repayments, the loan would be paid off in about 28 to 30 years, which is a relatively tight schedule.
I think this will be challenging given your income situation because the estimated total rent would take up more than half of your net income. Many banks would likely consider this too risky.
Could your parents buy the house and you repay half of the loan directly to them?
A different question: What are your plans for the next 10 years? Looking for a partner? Possibly starting a family? Maybe changing jobs? Or even moving to another city? You also need to consider that initially about 10% additional acquisition costs will apply (property transfer tax, real estate agent fees, notary, and likely some renovations), which is the equivalent of around 3 years of rent excluding utilities. Property prices might increase by 10% in a year, but they might not (interest rates are rising again).
Another issue is that the property is probably not part of a homeowners' association (HOA). It is likely that the individual apartments cannot be sold separately, which complicates matters further.
I would suggest looking only for a small individual condominium unit (apartment) and, if none are available, waiting until you have a clear life plan. It’s also important to note that the market in a small town can be challenging when trying to sell the property. It might take months to find a buyer willing to pay the market value.
Another issue is that the property is probably not part of a homeowners' association (HOA). It is likely that the individual apartments cannot be sold separately, which complicates matters further.
I would suggest looking only for a small individual condominium unit (apartment) and, if none are available, waiting until you have a clear life plan. It’s also important to note that the market in a small town can be challenging when trying to sell the property. It might take months to find a buyer willing to pay the market value.
hi
The "problem" just resolved itself, I just received an email confirming a binding purchase commitment 🙁
The future is uncertain, but I’m not planning to move; I want to live exactly there and stay (forever) 😉 If partner & family, then exactly there.
€800 rent would be manageable if the €300 I currently pay into the home savings plan were eliminated, but as I said, it’s unfortunately no longer an issue and I’ll keep looking.
Greetings from Bavaria
The "problem" just resolved itself, I just received an email confirming a binding purchase commitment 🙁
The future is uncertain, but I’m not planning to move; I want to live exactly there and stay (forever) 😉 If partner & family, then exactly there.
€800 rent would be manageable if the €300 I currently pay into the home savings plan were eliminated, but as I said, it’s unfortunately no longer an issue and I’ll keep looking.
Greetings from Bavaria