After all the feedback that a standard house with 120 sqm (1300 sq ft) and two floors plus land will likely not be available for less than 300,000 euros, and that I should rather focus on buying a condominium, I have looked at a few condos in the past weeks, but none of them were even remotely suitable. I am single and imagine living in about 80 to 90 sqm (860 to 970 sq ft) with three rooms. Prices in the Augsburg surrounding area:
Prices for new condos in rural areas: 3000 euros per sqm (279 sq ft)
Prices for new condos in (small) towns: 3500 to 4500 euros per sqm (325 to 418 sq ft)
Prices for older condos in rural areas: 2500 euros per sqm (232 sq ft)
Prices for older condos in (small) towns: 3000 to 3500 euros per sqm (279 to 325 sq ft)
So, in the best case, I would pay 200,000 euros plus additional purchase costs for an older condo with 80 sqm (860 sq ft), but I would likely need to budget for new flooring, possibly some windows, and potential upcoming repairs to the building’s facilities (underground parking, stairwell). This means the total cost in the best case would be around 220,000 euros for a used apartment with 80 sqm (860 sq ft) and three rooms.
Many sellers of new condos now want 270,000 euros for apartments that will only be finished at the earliest in 1.5 years.
And I keep thinking, this can’t be right??? So I reviewed my budget again and cut some expenses (streaming services, clothing subscriptions, expensive phone contract...). I can afford 1000 euros per month and I have a permanent civil service job.
New plan: a “single house”
a) Buy a plot of land with 300 to 400 sqm (3200 to 4300 sq ft) for 80,000 to 100,000 euros
b) Buy a simple prefab house without luxury, about 90 sqm (970 sq ft) without a basement, turnkey (including additional building costs, painting, and tiling) for 180,000 euros.
My questions to the community here:
1. Do you think this plan is realistic?
2. How would you proceed?
Would you meet with the well-known prefab house manufacturers?
Or local construction companies first? Or an architect?
[Feel free to send recommendations or warnings via PM]
3. Is there an aspect I seem to have completely overlooked or forgotten?
Thank you very much in advance.
Prices for new condos in rural areas: 3000 euros per sqm (279 sq ft)
Prices for new condos in (small) towns: 3500 to 4500 euros per sqm (325 to 418 sq ft)
Prices for older condos in rural areas: 2500 euros per sqm (232 sq ft)
Prices for older condos in (small) towns: 3000 to 3500 euros per sqm (279 to 325 sq ft)
So, in the best case, I would pay 200,000 euros plus additional purchase costs for an older condo with 80 sqm (860 sq ft), but I would likely need to budget for new flooring, possibly some windows, and potential upcoming repairs to the building’s facilities (underground parking, stairwell). This means the total cost in the best case would be around 220,000 euros for a used apartment with 80 sqm (860 sq ft) and three rooms.
Many sellers of new condos now want 270,000 euros for apartments that will only be finished at the earliest in 1.5 years.
And I keep thinking, this can’t be right??? So I reviewed my budget again and cut some expenses (streaming services, clothing subscriptions, expensive phone contract...). I can afford 1000 euros per month and I have a permanent civil service job.
New plan: a “single house”
a) Buy a plot of land with 300 to 400 sqm (3200 to 4300 sq ft) for 80,000 to 100,000 euros
b) Buy a simple prefab house without luxury, about 90 sqm (970 sq ft) without a basement, turnkey (including additional building costs, painting, and tiling) for 180,000 euros.
My questions to the community here:
1. Do you think this plan is realistic?
2. How would you proceed?
Would you meet with the well-known prefab house manufacturers?
Or local construction companies first? Or an architect?
[Feel free to send recommendations or warnings via PM]
3. Is there an aspect I seem to have completely overlooked or forgotten?
Thank you very much in advance.
Try searching for "tiny-houses.de" or something similar. It is possible to build houses very cheaply in Germany, though of course you have to like that approach. The lowest price I’ve encountered from a client was just under €73,000 plus interior finishing. However, that client spent years pestering every supplier and visiting trade fairs until they got their price.
On the other hand, given your life situation, I would do something completely different: only buy or build when you retire or it becomes foreseeable. A house you build today as small as you plan is a risk. It will be built cheaply (if not cheaply) but is supposed to last 60 years and possibly serve as part of your retirement provision. It could be that in 40 years you hit the jackpot because small houses become highly sought after, but I rather doubt it. So you will then lack capital while your income decreases, making it difficult to build new capital.
Therefore, I would try to rent cheaply near your workplace in your area and comfortably build equity for another 10-15 years. This also has the advantage that banks will see you in a different light. Your "well over €2,000" quickly becomes an amount insufficient for a regular house with 100% financing, and above all, you would quickly reach loan payments equaling 50% or more of your household net income—if the mortgage lending value of the house even covers that. That is definitely at the limit (normally the maximum is 40-45%), and every bank will charge a premium for that risk.
With 1.5 incomes, a larger house, and two children, I/we are far from such a situation. Really far. Our risk is therefore much lower and additionally secured by two earners. This gives me/us enough flexibility that on Tuesdays I can easily go to my favorite pub and “pay” my Sky subscription there with freshly tapped beer.
That won’t be possible with your financing plans, unless you are extremely frugal – in other words, stingy from morning till night.
Of course, that approach is possible, but it would not be for me. In my opinion, you need to rethink and, above all, visit the bank to get reliable figures.
Best regards
Dirk Grafe
On the other hand, given your life situation, I would do something completely different: only buy or build when you retire or it becomes foreseeable. A house you build today as small as you plan is a risk. It will be built cheaply (if not cheaply) but is supposed to last 60 years and possibly serve as part of your retirement provision. It could be that in 40 years you hit the jackpot because small houses become highly sought after, but I rather doubt it. So you will then lack capital while your income decreases, making it difficult to build new capital.
Therefore, I would try to rent cheaply near your workplace in your area and comfortably build equity for another 10-15 years. This also has the advantage that banks will see you in a different light. Your "well over €2,000" quickly becomes an amount insufficient for a regular house with 100% financing, and above all, you would quickly reach loan payments equaling 50% or more of your household net income—if the mortgage lending value of the house even covers that. That is definitely at the limit (normally the maximum is 40-45%), and every bank will charge a premium for that risk.
With 1.5 incomes, a larger house, and two children, I/we are far from such a situation. Really far. Our risk is therefore much lower and additionally secured by two earners. This gives me/us enough flexibility that on Tuesdays I can easily go to my favorite pub and “pay” my Sky subscription there with freshly tapped beer.
That won’t be possible with your financing plans, unless you are extremely frugal – in other words, stingy from morning till night.
Of course, that approach is possible, but it would not be for me. In my opinion, you need to rethink and, above all, visit the bank to get reliable figures.
Best regards
Dirk Grafe
B
Bauanfänger3613 Feb 2017 18:49Thanks for the various suggestions. I think I shouldn’t try to build too cheaply or be too stingy, so the house doesn’t end up with high repair costs prematurely.
But if I continue renting and pay the landlord the base rent for the next 10 years, without any rent increase, I will have effectively “given away” €72,000.
During the same period, my desired property is expected to increase by about 2% per year if we take the price growth from 1990 to 2016 as a reference. Theoretically, my property will become more expensive than the amount I save, even if the equity grows proportionally.
I have a bank appointment scheduled for Friday, so let’s see what they say.
In any case, I’m looking forward to more ideas and suggestions.
But if I continue renting and pay the landlord the base rent for the next 10 years, without any rent increase, I will have effectively “given away” €72,000.
During the same period, my desired property is expected to increase by about 2% per year if we take the price growth from 1990 to 2016 as a reference. Theoretically, my property will become more expensive than the amount I save, even if the equity grows proportionally.
I have a bank appointment scheduled for Friday, so let’s see what they say.
In any case, I’m looking forward to more ideas and suggestions.
Bauanfänger36 schrieb:
But if I keep renting and pay the landlord the net rent for the next 10 years, I’m basically giving away 72,000 euros.This is a common misconception. You are actually only “giving away” the net yield to the landlord, which is definitely less than 5%, and can even be zero or negative – meaning you are living cheaper than if you were buying/financing a comparable property.
According to your calculation, that would be 3,600 euros over 10 years, or 360 euros per year, which breaks down to 30 euros per month. Even if you assume a net yield of 10% (which is highly unrealistic), it would only be about 60 euros per month.
The only counterargument is that the value of living in your own home is higher because, for example, you can renovate or modify it according to your own preferences.
On the other hand, in exchange for the rent you pay, you receive housing value. If you calculate rent as completely “given away,” then you’d have to start sleeping under a bridge tomorrow – where rent, or housing value, is actually zero. So roughly speaking, the difference in comfort between a bridge and your apartment is your housing value.
Best regards,
Dirk Grafe
Bauanfänger36 schrieb:
3. Is there an aspect I might have completely overlooked or forgotten? As a civil servant, to my knowledge, you can be relocated by your employer at any time, and according to general criteria (single, no children), you would likely be among the first to be transferred.
This leaves you with a property that is practically unsellable (a 90 sq m (970 sq ft) single-family house – roughly as marketable today as Nokia cell phones) and a large loan.
You pay €7,200 (USD equivalent) in annual rent without utilities, but want to buy/build for €270,000 (USD equivalent)?
That results in an extreme factor of 37.5.
A factor between 15 and 20 can still be economically justifiable, while anything higher tends to be a break-even or even a losing proposition.