ᐅ Is Buying Land and Building a House Too Risky in the Current Situation?
Created on: 24 Jun 2022 10:14
J
Julchen7393
Hello everyone,
After quietly reading along for a long time, I finally want to reach out to you with my first post to ask for advice.
My partner and I currently live in an end-terrace house (end townhouse) that we rent cheaply from my boyfriend’s parents – who inherited the house themselves. Since the size of the house is not sufficient for our long-term plans and a lot of money would be needed for renovations, we have been looking for a plot of land to build our own home for some time.
Now, a building plot in a new development area of our municipality has been returned, and we are eligible to apply for it. Because the plot is provided by the municipality, it is significantly cheaper (€420 per m² (approx. $440 per sq yd)) than the market price (€600–1000 per m² (approx. $630–1050 per sq yd)). All other plots are already developed or have building permits/planning permission applied for, so it’s unlikely that any more plots will become available.
Although the plot is probably a unique opportunity, we are very uncertain about the feasibility under the current circumstances and would appreciate your assessment.
General information about us:
Female, 29 (Controlling) and Male, 30 (Engineer)
No children yet, but we plan to have two children within the next 4-6 years (which is why we want more living space)
Financial situation:
Net income: €7000 (approx. $7400)
Current expenses: €3400 (approx. $3600)
Surplus: €3600 (approx. $3800)
Equity: €250,000 (approx. $265,000) – of this, we plan to put €200,000 (approx. $212,000) into financing; part of the remaining €50,000 (approx. $53,000) is tied up in retirement savings and should remain there
Construction costs:
Plot: 621 m² (6679 sq ft) at €420 per m² (approx. $440 per sq yd): €260,820 (approx. $277,000)
Additional purchase costs: €18,257 (approx. $19,400)
House construction: 150 m² (1615 sq ft) at €2600 per m² (approx. $270 per sq ft): €400,000 (approx. $425,000)
(We have an appointment with a construction company next week to see if this is feasible with significant DIY work)
Basement: €40,000 (approx. $42,500)
Garage: €25,000 (approx. $26,500)
Kitchen: €25,000 (approx. $26,500)
Outdoor facilities: €30,000 (approx. $32,000)
Total costs: €800,000 (approx. $850,000)
Financing requirement:
€800,000 - €200,000 = €600,000 (approx. $425,000 - $212,000 = $638,000)
The bank would approve a loan with our desired monthly payment of €2,500 (approx. $2650), but depending on interest rate changes, the repayment period without early repayments would be between 30 and 35 years.
We are particularly worried that our estimated construction costs are too low and that significant price increases may follow.
Also, the long loan term concerns us – given the planned children, we find it difficult to consider a higher monthly payment, especially since we both earn roughly the same and will face significant income reductions due to parental leave benefits.
For days now, we have been torn between “taking this once-in-a-lifetime chance to get an affordable building plot in town” and “the financial risk is too high in the current situation.”
We would be grateful for your thoughts on our plan and the expected construction costs.
Best regards,
Julia
After quietly reading along for a long time, I finally want to reach out to you with my first post to ask for advice.
My partner and I currently live in an end-terrace house (end townhouse) that we rent cheaply from my boyfriend’s parents – who inherited the house themselves. Since the size of the house is not sufficient for our long-term plans and a lot of money would be needed for renovations, we have been looking for a plot of land to build our own home for some time.
Now, a building plot in a new development area of our municipality has been returned, and we are eligible to apply for it. Because the plot is provided by the municipality, it is significantly cheaper (€420 per m² (approx. $440 per sq yd)) than the market price (€600–1000 per m² (approx. $630–1050 per sq yd)). All other plots are already developed or have building permits/planning permission applied for, so it’s unlikely that any more plots will become available.
Although the plot is probably a unique opportunity, we are very uncertain about the feasibility under the current circumstances and would appreciate your assessment.
General information about us:
Female, 29 (Controlling) and Male, 30 (Engineer)
No children yet, but we plan to have two children within the next 4-6 years (which is why we want more living space)
Financial situation:
Net income: €7000 (approx. $7400)
- Female: €3400 (approx. $3600) and Male: €3600 (approx. $3800) – both full-time 40 hours per week (with additional variable bonuses not yet factored in)
Current expenses: €3400 (approx. $3600)
- Fixed costs: €2200 (approx. $2350)
- €600 rent, €350 utilities incl. heating, internet, and electricity, €500 car expenses incl. insurance, €400 retirement savings, €350 other fixed costs (insurance, streaming services, etc.)
- Variable costs: €1200 (approx. $1265) – budgeted quite generously; we usually spend significantly less
- Living costs, vacations, leisure activities
Surplus: €3600 (approx. $3800)
Equity: €250,000 (approx. $265,000) – of this, we plan to put €200,000 (approx. $212,000) into financing; part of the remaining €50,000 (approx. $53,000) is tied up in retirement savings and should remain there
Construction costs:
Plot: 621 m² (6679 sq ft) at €420 per m² (approx. $440 per sq yd): €260,820 (approx. $277,000)
Additional purchase costs: €18,257 (approx. $19,400)
House construction: 150 m² (1615 sq ft) at €2600 per m² (approx. $270 per sq ft): €400,000 (approx. $425,000)
(We have an appointment with a construction company next week to see if this is feasible with significant DIY work)
Basement: €40,000 (approx. $42,500)
Garage: €25,000 (approx. $26,500)
Kitchen: €25,000 (approx. $26,500)
Outdoor facilities: €30,000 (approx. $32,000)
Total costs: €800,000 (approx. $850,000)
Financing requirement:
€800,000 - €200,000 = €600,000 (approx. $425,000 - $212,000 = $638,000)
The bank would approve a loan with our desired monthly payment of €2,500 (approx. $2650), but depending on interest rate changes, the repayment period without early repayments would be between 30 and 35 years.
We are particularly worried that our estimated construction costs are too low and that significant price increases may follow.
Also, the long loan term concerns us – given the planned children, we find it difficult to consider a higher monthly payment, especially since we both earn roughly the same and will face significant income reductions due to parental leave benefits.
For days now, we have been torn between “taking this once-in-a-lifetime chance to get an affordable building plot in town” and “the financial risk is too high in the current situation.”
We would be grateful for your thoughts on our plan and the expected construction costs.
Best regards,
Julia
I would do it if the resale market is as tight as the land price suggests. Good equity, young, extremely good income. I would skip the basement, as the costs for it are clearly underestimated. For additional construction costs, just take a flat estimate of 50,000 (about £40,000 / AU$80,000 / CA$65,000). The kitchen could also be cheaper at the end if necessary, in case of a tight budget.
M
Myrna_Loy25 Jun 2022 13:15I just wanted to point out that it's possible to start building even at a "later age," but by the mid-30s, women don’t conceive as easily as snapping their fingers. And if you want more than one child, you shouldn’t start having children at 34. By the time you have number two, you’re suddenly 38. If you already live in a house with a garden where two small children can be happily raised, I would calmly prioritize having children before considering building a house in these times.
Y
Ypsi aus NI25 Jun 2022 13:47I can understand both sides. If you build the house first and then plan to have children, it can put a lot of pressure on you to see the empty kids' rooms. You never know if it will actually work out.
If you build the house when the children are already there, you know you need kids' rooms, but you might not have enough time—or only at the expense of the children—to focus on proper planning and selections.
When we started planning our house (on the second attempt), I became pregnant. The house is exactly as old as our son. We went to the hospital earlier this year on the same day the construction crane for the shell work was delivered. Most appointments (for example, for the kitchen) were still done while I was pregnant, including all the electrical/KNX planning. Still, there is always a lot left to decide on and choose at the final stages. We have a very easygoing child, who we take everywhere. Our little one knows the hardware store inside out from countless tile viewings, construction meetings, etc. The masons even gave him a small gift when the shell was finished because he was there so often. We currently live in a house and are essentially building our new house in the garden. So we live right next to the construction site, which makes many things easier. I often swaddled the little one and took him with me, and I also helped with the electrical work.
In the end, everything is fine as it is—our son, the floor plan, the construction costs, the interest rates, the subsidies. Somehow, the timing was right for everything, even though it can be quite challenging now with both building and parenting.
In a nutshell: the younger the child, the more control you still have. Waiting until your family planning is complete before you build could mean having two children aged 3 and 0 years. In that situation, I wouldn’t be able to keep a clear head for building and planning. Then, you’d end up with only a standard layout without any refinements (in the floor plan, kitchen, lighting design, KNX scenarios, etc.). So: build now, have children afterwards, or get pregnant during the building phase. If you seriously worry that the kids' rooms will remain empty, consider planning an attic conversion as a reserve for children’s rooms.
If you build the house when the children are already there, you know you need kids' rooms, but you might not have enough time—or only at the expense of the children—to focus on proper planning and selections.
When we started planning our house (on the second attempt), I became pregnant. The house is exactly as old as our son. We went to the hospital earlier this year on the same day the construction crane for the shell work was delivered. Most appointments (for example, for the kitchen) were still done while I was pregnant, including all the electrical/KNX planning. Still, there is always a lot left to decide on and choose at the final stages. We have a very easygoing child, who we take everywhere. Our little one knows the hardware store inside out from countless tile viewings, construction meetings, etc. The masons even gave him a small gift when the shell was finished because he was there so often. We currently live in a house and are essentially building our new house in the garden. So we live right next to the construction site, which makes many things easier. I often swaddled the little one and took him with me, and I also helped with the electrical work.
In the end, everything is fine as it is—our son, the floor plan, the construction costs, the interest rates, the subsidies. Somehow, the timing was right for everything, even though it can be quite challenging now with both building and parenting.
In a nutshell: the younger the child, the more control you still have. Waiting until your family planning is complete before you build could mean having two children aged 3 and 0 years. In that situation, I wouldn’t be able to keep a clear head for building and planning. Then, you’d end up with only a standard layout without any refinements (in the floor plan, kitchen, lighting design, KNX scenarios, etc.). So: build now, have children afterwards, or get pregnant during the building phase. If you seriously worry that the kids' rooms will remain empty, consider planning an attic conversion as a reserve for children’s rooms.
askforafriend25 Jun 2022 17:46driver55 schrieb:
Yeah, currently yes, but not if the installment is paid... you probably have an almost million project (40,000€ basement 😳 ), so you won’t be able to make big moves anymore... especially with kids...Joking aside :p if someone can save 250,000, they have control over their finances
K
k-man202125 Jun 2022 18:52guckuck2 schrieb:
New housing developments are great for children because there are usually many other young families moving in as well. Very good point! Unfortunately, we did it differently back then and bought a plot with a teardown property. We had small children, but all the neighbors were retirees… now we are approaching retirement age, building in a new housing development, and hoping that will help us stay young ;-)
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