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...
Hausbau2022 schrieb:
You shouldn’t overlook the future development of the property. Today it’s worth 380k, but in 10 years it could be worth 480k. I might pay taxes, but after tax, I generate a value of €7200*10 years = 72k plus 100k appreciation. Exactly... the bubble will burst eventually. I don’t believe real estate prices (even in well-located metropolitan areas) will keep rising forever...
I don’t want to gamble.
Another option could be to sell the apartment, take out less loan, and... in a few years, if it turns out the house financing has a good buffer, buy an apartment as an investment (2-3 rooms, preferably for renovation, so you can also deduct expenses related to advertising). ...
H
Hausbau20223 Nov 2020 13:49I wouldn’t assume it’s a bubble. If your apartment’s selling price is already a bubble, then your house construction would be one too, and you would have to sell and wait until the bubble bursts to buy a house. Let me tell you, many have been waiting for that burst for years and will continue to wait for a long time. This level will not come back.
Hausbau2022 schrieb:
I wouldn’t assume it’s a bubble. If the selling price of your apartment is already a bubble, then your house construction is too, and you would have to sell and wait until the bubble bursts before buying a house... That’s what I mean. Suppose I sell and build during the bubble – the calculation breaks even.
But if I build the house during the bubble hoping that prices will continue to rise so I can rent it out at a high price and sell it for even more after 10 years, I could face an unpleasant surprise if the bubble does burst...
Or am I being too cautious here?
N
nordanney3 Nov 2020 15:05Kati.com schrieb:
That's what I mean. Suppose I sell and build within the bubble – the balance ends up at zero.
But if I build the house within the bubble and hope that prices keep rising so I can rent it out at high rates and sell it for even more after 10 years, I could be in for a nasty surprise if the bubble bursts...
Or am I just being too cautious here? You’re talking about realized gains and losses. As long as you don’t sell, the price development doesn’t really matter to you.
That’s why I only invest in properties with extremely strong cash flow. Any potential “losses” can be dealt with by my children after I’m gone – either by realizing them or continuing to enjoy a good monthly return in their wallet.
It’s always a matter of philosophy.
B
BackSteinGotik3 Nov 2020 17:49Hausbau2022 schrieb:
I wouldn’t assume there is a bubble. If the selling price of your apartment already is a bubble, then your house construction would be one too, and you would have to sell and wait until the bubble bursts before buying a house... Let me tell you, many have been waiting for this burst for years and will continue to wait for a long time. This level of prices will not come back... Building a house is consumption for personal use. A bubble doesn’t matter if you can realistically finance it until it is fully paid off. This doesn’t necessarily apply to an additional rental property.
No one has a crystal ball; you can only look at the past and consider demographics. You seem to believe prices can only go up. I see the question of who, in about 10 years, will still be able to invest larger amounts if the required rent cannot be achieved on the market? Today, there is already a complete mismatch between purchase prices and rents.