Hello everyone,
I have been an active reader here for a long time. I have already discovered many useful tips and learned a lot from you. Thank you for that.
Now to the actual "problem."
We live in a nice 4-room condominium, which we have almost paid off – the value of the apartment is about 380,000 euros (approx. $410,000), with current debt of around 115,000 euros (approx. $124,000). There is about 90,000 euros (approx. $97,000) in our bank account. After the fixed interest period ends (beginning of 2022), we could make use of the special repayment option and pay off the remaining amount in full. That is the background.
Our municipality will sell about 50 plots of land in a new development area this spring (the infrastructure work is in full progress). Since we have two children, our chances of getting a building plot are good.
Price: about 300 euros per square meter (approx. $325 per square meter).
We would like to build. Since I am a teacher, I need a dedicated home office. I am tired of constantly working at the kitchen table. School materials are scattered all over the living room.
I estimate that the dream of owning a home would cost us about 600,000 euros (approx. $650,000).
About our income:
Monthly net income: he earns 2,600 euros (approx. $2,800), I earn 2,500 euros (approx. $2,700) working 75%, private health insurance already deducted, plus child benefits of 400 euros (approx. $430), totaling 5,500 euros (approx. $6,000).
How should we best proceed now?
a) Pay off the apartment completely, sell it, and finance only the difference?
b) Keep the apartment, rent it out (rent about 900 euros (approx. $975)), do not pay it off, but take on additional debt to finance part of the house?
c) Use the equity as a down payment for the land (+ a small variable loan), sell the apartment after the fixed interest period ends, pay off the remaining debt with the proceeds, and put the remaining "profit" into the new house...
d) ???????
I know that was a lot. I hope you can help me a little...
I have been an active reader here for a long time. I have already discovered many useful tips and learned a lot from you. Thank you for that.
Now to the actual "problem."
We live in a nice 4-room condominium, which we have almost paid off – the value of the apartment is about 380,000 euros (approx. $410,000), with current debt of around 115,000 euros (approx. $124,000). There is about 90,000 euros (approx. $97,000) in our bank account. After the fixed interest period ends (beginning of 2022), we could make use of the special repayment option and pay off the remaining amount in full. That is the background.
Our municipality will sell about 50 plots of land in a new development area this spring (the infrastructure work is in full progress). Since we have two children, our chances of getting a building plot are good.
Price: about 300 euros per square meter (approx. $325 per square meter).
We would like to build. Since I am a teacher, I need a dedicated home office. I am tired of constantly working at the kitchen table. School materials are scattered all over the living room.
I estimate that the dream of owning a home would cost us about 600,000 euros (approx. $650,000).
About our income:
Monthly net income: he earns 2,600 euros (approx. $2,800), I earn 2,500 euros (approx. $2,700) working 75%, private health insurance already deducted, plus child benefits of 400 euros (approx. $430), totaling 5,500 euros (approx. $6,000).
How should we best proceed now?
a) Pay off the apartment completely, sell it, and finance only the difference?
b) Keep the apartment, rent it out (rent about 900 euros (approx. $975)), do not pay it off, but take on additional debt to finance part of the house?
c) Use the equity as a down payment for the land (+ a small variable loan), sell the apartment after the fixed interest period ends, pay off the remaining debt with the proceeds, and put the remaining "profit" into the new house...
d) ???????
I know that was a lot. I hope you can help me a little...
N
nordanney27 Oct 2020 21:27Kati.com schrieb:
Are there other options where the rate is max 1800€?Sell the apartment or build a much smaller one.Kati, you also have some savings, right? You should deduct those first. And since the apartment no longer has a high mortgage, there should actually be something left over. You have to work a bit with the numbers here. I consider the claim that "many high earners alone have a net income of 5,500 per month" complete nonsense, as that corresponds to a gross income of over 10,000 per month.
There are two options (with completely made-up figures!!):
- Sell and have a monthly payment of €1500 (about $1600) with a family income of €5500 (about $5900)
- Keep and have a monthly payment of €2500 (about $2700) with a family income of €6500 (about $7000) including rental income.
I was a bit too lazy to apply your actual numbers meaningfully, but you can see the general direction. With specific figures and exact interest rates for all loans, taxes, reserves, etc., it naturally gets more complicated.
Of course, if you’re not in the mood to calculate everything down to the last detail, the simple solution is: sell.
- Sell and have a monthly payment of €1500 (about $1600) with a family income of €5500 (about $5900)
- Keep and have a monthly payment of €2500 (about $2700) with a family income of €6500 (about $7000) including rental income.
I was a bit too lazy to apply your actual numbers meaningfully, but you can see the general direction. With specific figures and exact interest rates for all loans, taxes, reserves, etc., it naturally gets more complicated.
Of course, if you’re not in the mood to calculate everything down to the last detail, the simple solution is: sell.
B
BackSteinGotik27 Oct 2020 23:32Schelli schrieb:
You have to play around with the numbers a bit here. I consider the claim that "many high earners have a net income of 5,500 per month" to be complete nonsense, as that corresponds to a gross income of over 10,000 per month.Well, there will certainly be people like that. But they probably don’t make up the majority, and it’s unlikely that these individuals plan to spend a fortune building on a small plot of land in a remote village. They are likely households in the top 3% to 5% of the income distribution.
Still, the provocative original post is correct—beyond a certain price level, without significant external financial inflows like gifts or inheritances, even genuinely high earners are priced out. And when, in an urban area, dual-income civil servants such as teachers can no longer afford to buy a house in rural areas, it definitely becomes an interesting situation.
B
BackSteinGotik27 Oct 2020 23:47Tassimat schrieb:
There are two options (with made-up numbers!!):
- Sell and have a monthly payment of €1500 at a household income of €5500
- Keep and have a monthly payment of €2500 at a household income of €6500 including rental income.
...
Of course, if you don’t feel like calculating all the details right now, the simple solution is to sell. The real question is whether you want to cash in on your apartment during a high-price phase to indulge in currently expensive consumption – that is, building a house – or whether you want to become a landlord as a side business and use that to help finance your own home at the same time?
Since purchase prices and rents have become decoupled, selling is likely more advantageous than renting out. You state the net rent as €900, so it would take 35 years’ worth of rent to cover the purchase price mentioned at €380,000. The apartment would be nearly half a century old by then.
At the same time, you need capital to carry out your house project. Both options involve considerably higher risk.
Since you don’t plan to work full-time within the next 10 years and therefore prioritize time over money, the rental option seems less suitable to me. It requires more effort and entails greater risk.
Is a monthly rent of €900 (approximately $980) reasonable for an apartment valued at €380,000 (approximately $414,000)?
As mentioned, if you support this with actual figures, this ratio should lead to a clear conclusion. However, it is worth questioning whether the property value of €380,000 (approximately $414,000) is realistically achievable on the market, or if the monthly rent without utilities has been set too low. Or perhaps both, since simple matters have become complex.
As mentioned, if you support this with actual figures, this ratio should lead to a clear conclusion. However, it is worth questioning whether the property value of €380,000 (approximately $414,000) is realistically achievable on the market, or if the monthly rent without utilities has been set too low. Or perhaps both, since simple matters have become complex.
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