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...
Kati.com schrieb:
We are waiting for the allocation of building plots, then we will plan the house, calculate all expenses and income, see what remains at the end, and make a decision... That sounds like a solid plan.
I believe both options are manageable. In the end, you have to choose between: a stress-free and easy approach by selling, or a slightly more stressful option where you might need to tighten your belt a bit, but build more capital through the rented apartment.
A bit more about the return on investment. A 3% rental yield is completely normal in southern Germany and other booming cities. From that, you can deduct 2% of the original purchase price minus the proportional land costs. Whether you can increase the loan on the apartment again and by how much should be estimated by a tax advisor. However, it might be difficult to have the entire rental income tax-free. What is definitely tax-free, though, is the increase in value, which in recent years has been partly over 5% per year. You can also choose to have the rental property completely interest-only and repay very little on a new house. It is not necessary to have everything fully paid off within 10-15 years.
I’m not sure if anyone has mentioned this before, but are you 100% certain that you’re allowed to purchase a plot of land if you already own property?
In our case, it was explicitly prohibited if you already owned property—even if it was just 62cm (24 inches) in Hamburg—and now I live in Bavaria: whoever already owns something usually cannot get land. These are often the conditions here. Sometimes it is allowed to own something small, but with a large condominium like yours, you would already be disqualified.
In our case, it was explicitly prohibited if you already owned property—even if it was just 62cm (24 inches) in Hamburg—and now I live in Bavaria: whoever already owns something usually cannot get land. These are often the conditions here. Sometimes it is allowed to own something small, but with a large condominium like yours, you would already be disqualified.
Snowy36 schrieb:
I’m not sure if someone has already pointed this out before me, but are you 100% certain that you’re allowed to purchase a plot of land if you already own property? I’m aware of this requirement. In our area, the rules are a bit more flexible: you cannot own a house or a buildable plot of land. Additionally, you must have had a permanent residence in the municipality for at least 5 years. Extra points are awarded for having children, volunteering, or working within the municipality...
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Piotr19812 Nov 2020 21:49I don’t understand this discussion at all.
I understand that the condominium is almost paid off?! Depending on the location, I would rent it out. Taxes or not, it doesn’t really make a big difference, especially not in these income brackets. Besides, many expenses can be deducted as income-related costs.
You can always sell later.
Don’t forget, fate never sleeps. And maybe there will come a time when you’ll say: “Thank God we didn’t sell back then.”
P.S. Having comes from holding on!!! 😉
I understand that the condominium is almost paid off?! Depending on the location, I would rent it out. Taxes or not, it doesn’t really make a big difference, especially not in these income brackets. Besides, many expenses can be deducted as income-related costs.
You can always sell later.
Don’t forget, fate never sleeps. And maybe there will come a time when you’ll say: “Thank God we didn’t sell back then.”
P.S. Having comes from holding on!!! 😉
Piotr1981 schrieb:
I don’t understand this discussion at all.
As far as I understood, the condominium is almost fully paid off?! Depending on the location, I would rent out the condo. Taxes or not, it won’t make much difference, especially at these income levels. Besides, many expenses can be deducted as advertising or rental expenses.
You can always sell it later.
Don’t forget, fate never sleeps. And maybe the moment will come when you’ll say: “Thank goodness we didn’t sell back then.”
PS: To have means to hold onto something!!! 😉 And where will the 600,000 (600K) for the new house come from then?
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