ᐅ City or countryside, new construction or renovation – the challenge of choosing!?

Hello everyone,

I already started a thread in the financing section to estimate a possible loan range. Now we have roughly outlined that and are considering the options available to us.

Here’s a luxury problem:

We currently own two plots of land with rental properties on them. One is in the middle of the city (a 100 sqm (1,076 sq ft) terraced townhouse with a small garden directly on a main road), and the other about 5 km (3 miles) outside the city (a small detached single-family home, on nearly 1,000 sqm (10,764 sq ft) of land, in a quiet location). Additionally, we have €300,000 (including support from relatives) in cash equity plus around €50,000 set aside as a buffer for unexpected expenses in everyday life or on the houses, and a solid income that comfortably supports a loan of about €500,000 (more details in the financing thread).

We are now considering two options for our own home (goal: around 180 sqm (1,938 sq ft) living space for 2 adults, 2 children, home office, and regular visitors):

Option A) We build the house about 5 km (3 miles) outside the city by expanding, renovating, or starting new. There is no longer a formal development plan there, but the neighborhood is quite mixed, and we are pretty sure we could create something we really like without rush. Another plus: With our equity, we’d only need a comparatively small loan (somewhere between €150,000 and at most €300,000) and would either be debt-free within 10-15 years (in our early/mid-40s) or have a long period of relatively low payments compared to our income. The village is quite sought-after, so we would also likely be able to sell the house well, if needed.

The biggest disadvantage is the location. I don’t work in the nearby city but commute around 250 km (155 miles) per office day, 240 km (149 miles) of that by high-speed train. It’s not a big deal as the train time is working time, and I was already able to work 2, sometimes 3 days from home before COVID, with the city station only 1.5 km (1 mile) away. However, if we moved to the village, the one-way distance to the station would be 8 km (5 miles), and the return trip is quite uphill. It’s certainly doable (I am quite fit cycling and would even welcome a somewhat longer bike ride than at present), especially if I can permanently work three days from home. But in everyday life with kids, it might not be so practical—for example, if my wife can’t leave work, I would easily need 1.5 hours at best to commute. Also, we would lose rental income from here (including terminating a tenancy by a tenant who has lived there since 1975—we aren’t in a hurry, but it just feels unpleasant...) and probably have underestimated the investment required. Therefore…

Option B) We buy an existing property in the city and renovate or expand it. The big, big downside here is the typically inflated and still very competitive property market. It will probably take years to find something, and when you do, you basically have to decide at the first viewing—which is quite stressful for us cautious people. Due to the high purchase price (with additional costs around €550,000 minimum, so a new build is off the table), we would likely have to make many compromises during the renovation based on what I have seen in similar projects.

But we could stay in the city, would only need one car, no monthly passes for the kids, etc.—which is a considerable advantage compared to the loan repayment—and overall, we would probably have more free time since we wouldn’t have to constantly drive the children to sports and other activities.

At the same time, one could argue a third option C): if we choose A, we could sell the property with the house there later and use the proceeds for option B. Then we could probably do everything in the city according to our wishes—and the final situation would be the same: instead of owning two rental homes, we would only have one, but in addition, a valuable house in the city. The only remaining problem would be finding a plot without unpleasant surprises…

Of course, I know this is ultimately our decision to make – but how would you approach it? Has anyone been in the same situation? Neither of us has ever lived in the countryside; what hidden costs might come up there that you wouldn’t have in the city?