ᐅ Is our lifelong project of building a duplex realistic?

Hello everyone,

I would like to share my idea here and ask for honest feedback.

My wife and I are considering building a house in 3-4 years. Since we want to save costs (who wouldn’t?), and also think of it as retirement security, we came up with the idea of building a semi-detached house and renting out one half.

Here is our plan:

1. Plot of land up to 150,000€ including site development
2. Semi-detached house shell construction up to 180,000€ by a German construction company
3. Complete interior finishing up to 120,000€ as follows:
- 4 craftsmen from abroad (Poland, partly family, with construction experience) for around 1,500€ gross per month (I am planning 2-3 months for finishing)
- Expensive materials (such as tiles, windows, doors, etc.) I would also like to buy in Poland, but of high quality
- Sanitary equipment will be supplied by a good friend who works for a German sanitary wholesale company, at purchase price – I would aim for higher-quality products here as well
- I am currently considering a micro combined heat and power system (micro CHP)
4. Additional construction costs plus expert inspections around 50,000€

All in all, we expect total costs of about 500,000€ for the finished semi-detached house. Equity about 80,000–100,000€. The rest would be financed through KfW loans plus bank financing. Our current net income is around 5,000€ without child benefits (3 children). We would build in Rösrath (near Cologne) with good infrastructure.

I believe one half of the semi-detached house could be rented out for 1,200–1,400€ net cold rent.

Does this plan make sense? Of course, these are just rough considerations so far. I would plan and list everything in detail to convince the bank.

Looking forward to your comments...

Best regards,
Robert

With a semi-detached house, you only save on one wall that doesn’t need plastering or insulation. And, of course, on the land if you were to build only one half.

The bank will be critical of any DIY work.

I don’t think it will be worthwhile, depending on how the financing looks.

I believe the cheapest way to build your house is as a detached single-family home, on a relatively small plot of land, using your full equity for it.

Hello,

if you can really rent out one half for at least 1,200 euros and already have 100,000 euros available, I think the idea isn’t that bad. However, I would consider whether

a) it needs to be a duplex or if a granny flat (also known as an accessory dwelling unit) might be more practical (lower rent but also lower costs), and
b) this kind of self-construction work is really sensible/feasible, or if you should invest a bit more money and have a general contractor deliver a turnkey property

I mean, if the project ends up costing 600,000 euros minus 100,000 euros of equity and you receive 800 euros in rent, then you’re probably looking at a repayment rate of about 2,000 euros per month minus rent = 1,200 euros (rough estimate)—depending on the loan term, of course! That’s dreamlike with a net income of 5,000 euros and a secure job, leaving 3,800 euros plus child benefits and potential salary increases. But I would call the kind of self-construction work you mentioned “bold” and agree with backbone23, who says the bank will probably see it the same way.

Just some thoughts...

This won’t work out. Even though I have four tradespeople in the family, I wanted to do a lot myself—no chance. The requirements from energy-saving regulations and all the other stuff make a construction project so complex these days that you need professionals who know what they’re doing and do it every day. In your situation, the build could easily take three years, and even then it might still be only "well" done.

Expensive things like the heating system shouldn’t be underestimated; you will definitely need a heating engineer for that. The same goes for many other trades.

Then you might end up with “bad” neighbors next door and have to renovate extensively again a few years later. Why own a house only to have “strangers” right next door? From my personal point of view, a semi-detached house is a necessary compromise if you absolutely need a house but your budget is very tight. With a good income like yours, you could easily buy a detached house somewhere and enjoy your peace and privacy.

If you’re looking for an investment property, I’d prefer an apartment in a highly desirable area of a city, with a property management company handling everything and no hassle for you.

Hello and thanks to everyone involved,

I should mention that I run a business. My wife has a permanent and secure job. However, since I am more highly qualified (in the IT sector), I don’t expect any problems finding employment even if I give up my business. My wife and I are now in our mid-30s.

We are also considering a house with a granny flat, and I already have tenants lined up—my parents. But renting out the granny flat to strangers later on (may my parents live a long life) seems much more complicated to me than a semi-detached house, don’t you think?

As long as I have a business, I have many tax opportunities. So far, I haven’t made private provisions for my retirement, and it’s about time I start thinking about it. That’s why I’m considering the idea of a duplex instead of a private pension plan. Well, I would still take out a private pension, but on a smaller scale...

Of course, my plan also carries many risks—but NO RISK, NO FUN! The risk of problem tenants can never be completely ruled out, but it can be largely minimized. For example, a friend of mine rents to an army officer, so the risk should be very low in that case.

With an investment of €500,000 and equity of about €100,000 (approximately $500,000 and $100,000), the loan payment would be around €2,000 ($2,000) per month at 3.5% interest and 2% annual principal repayment—I’m not in favor of anything less than 2% principal repayment. Early repayment options are a must for me! Of course, several KfW loans and additional subsidies (e.g., for a micro combined heat and power system) are also possible.

These are just initial considerations, and I’m still refining the plan...

Thank you and best regards
Robert

Hello Robert,

Hampek schrieb:

However, since I am highly qualified (IT sector) ....

In my opinion, your line of work is also the root of your misconception ... building a house, with its trades, is not comparable to the “normalities” of IT; while you find many similar software programs, in construction you pay dearly if standards are not met—for example, requirements of the Energy Saving Ordinance or the Renewable Energies Heat Act (EEWärmG).

I will not comment on your cost estimates;

but:

Hampek schrieb:

- 4 craftsmen from abroad (Poland, partly family, experienced in construction) for about 1500€ gross per month (2-3 months planned for the finishing work)

I do not want to deny that these people know their trade, but you need two certified local master craftsmen for electrical and sanitary installations who will sign off on these trades. Who do you think will be willing to put their name on a warranty for work they neither performed nor supervised?

What about compliance with the Energy Saving Ordinance—KfW 70 or better, which also includes insulation? After completion of the construction project, the structural engineer (proof of compliance with the Energy Saving Ordinance) will recalculate to verify whether the materials used are sufficient.

Hampek schrieb:

We would build in Rösrath (near Cologne) with good infrastructure.

Where people are annoyed to have to carry a GL instead of a K on their license plate. Beautiful and expensive area; one of our nicest houses is located there.

Hampek schrieb:

I could rent out a semi-detached house for a net cold rent of 1200–1400.

That strongly depends on the exact location within Rösrath where you plan to build.

Best regards, Bauexperte