ᐅ How to Best Approach a Project Involving an Existing House When Using Own Equity
Created on: 9 Oct 2022 10:33
A
AJAM_2022A
AJAM_20229 Oct 2022 10:33Hello everyone,
I need some fundamental advice on how to approach our planned project, as we are currently a bit overwhelmed with where to start.
Starting point:
Existing house owned by my parents-in-law.
Valued at €680,000 (approximately $730,000) four years ago.
Major renovation completed in 2018.
Debt-free.
The plan is to build a single-family house plus an extension for my parents-in-law.
My wife and I have a monthly net income of about €9,000 (approximately $9,700).
We are debt-free and have saved around €100,000 (approximately $108,000).
One question:
What is the best way to determine the budget for the new build?
The existing house will be used as “equity.”
Ideally, we would sell it beforehand to know exactly how much we will get.
However, that may be difficult timing-wise, as the buyer probably won’t want to wait until our new house is completed.
If we arrange bridge financing and sell the existing house later, it is uncertain how much we will actually get for it.
Especially in the current market, no one knows where real estate prices are headed.
We look forward to an engaging discussion.
Sunny Sunday greetings
I need some fundamental advice on how to approach our planned project, as we are currently a bit overwhelmed with where to start.
Starting point:
Existing house owned by my parents-in-law.
Valued at €680,000 (approximately $730,000) four years ago.
Major renovation completed in 2018.
Debt-free.
The plan is to build a single-family house plus an extension for my parents-in-law.
My wife and I have a monthly net income of about €9,000 (approximately $9,700).
We are debt-free and have saved around €100,000 (approximately $108,000).
One question:
What is the best way to determine the budget for the new build?
The existing house will be used as “equity.”
Ideally, we would sell it beforehand to know exactly how much we will get.
However, that may be difficult timing-wise, as the buyer probably won’t want to wait until our new house is completed.
If we arrange bridge financing and sell the existing house later, it is uncertain how much we will actually get for it.
Especially in the current market, no one knows where real estate prices are headed.
We look forward to an engaging discussion.
Sunny Sunday greetings
W
WilderSueden9 Oct 2022 10:45There are a few construction scenarios:
- selling now with the right to live in the property for several months
- building with bridge financing, selling later
- selling, moving into a rental apartment, building, then moving into the house
Given the current market situation, I would avoid relying on any plan that assumes financing the existing house at a later stage or make sure to include a very generous buffer for this.
- selling now with the right to live in the property for several months
- building with bridge financing, selling later
- selling, moving into a rental apartment, building, then moving into the house
Given the current market situation, I would avoid relying on any plan that assumes financing the existing house at a later stage or make sure to include a very generous buffer for this.
I cannot recommend selling the house while retaining the right to live in it for several months. We only did this for a few months, and it felt uncomfortable somehow, living in someone else’s house. It feels different from renting.
There were also some minor disputes afterward. The buyer’s wife complained at some point that we hadn’t maintained their garden properly. I found that quite bold, considering they had previously told us they planned to hire a landscape gardener to redesign everything.
Bridge financing was not an option for us because our house was new and not yet mortgage-free. It would have been much harder to secure new financing. Selling and building would also have been difficult since the locations were almost 600 meters (1,970 feet) apart.
In the end, we solved it by arranging temporary accommodation. So we sold the house, secured new financing, and moved into a rental while our new home was being completed. This also allowed us to be closer to the construction site.
If your house is mortgage-free, I would also consider bridge financing. Moving twice isn’t fun and costs both money and nerves.
There were also some minor disputes afterward. The buyer’s wife complained at some point that we hadn’t maintained their garden properly. I found that quite bold, considering they had previously told us they planned to hire a landscape gardener to redesign everything.
Bridge financing was not an option for us because our house was new and not yet mortgage-free. It would have been much harder to secure new financing. Selling and building would also have been difficult since the locations were almost 600 meters (1,970 feet) apart.
In the end, we solved it by arranging temporary accommodation. So we sold the house, secured new financing, and moved into a rental while our new home was being completed. This also allowed us to be closer to the construction site.
If your house is mortgage-free, I would also consider bridge financing. Moving twice isn’t fun and costs both money and nerves.
AJAM_2022 schrieb:
The plan is for a single-family house plus an extension for the parents-in-law.First, I would check whether the new plot and its zoning regulations allow such a house, and whether everything won’t become too cramped or overbuilt for you.S
SaniererNRW1239 Oct 2022 13:07AJAM_2022 schrieb:
What is the best way to determine the budget for a new build? Ask the architect who is handling the planning. Your wishes will then set the budget.
Only after that should you address all other topics.
AJAM_2022 schrieb:
The existing house is to be used as "equity."
Ideally, we sell it beforehand so we know exactly what funds we will have.
But that will be difficult timing-wise, as the buyer probably won’t want to wait until our new house is finished. No, buyers often wait a year or more. That’s usually not a problem. Alternatively, there are flexible bridge loans that can be repaid later with the proceeds from the sale.
Besides, your financial situation is strong enough that essentially it doesn’t matter what you do. You can flexibly secure half a million against your parents’ house as soon as you know the cost of the new build. Any surplus can be used as an early repayment on the new long-term financing, or for landscaping, new furniture, or as a financial buffer for the future.
K
k-man20219 Oct 2022 17:33SaniererNRW123 schrieb:
No, every buyer is also happy to wait a year or more. That’s not a problem at all. Is that really your experience, or was that meant ironically? Do buyers often wait until after paying the purchase price before moving in? We are currently facing the same considerations as @AJAM_2022 …Similar topics