ᐅ Living in and Renting Out a Detached House: Request for Opinions and Experiences
Created on: 8 Jul 2021 22:03
M
MatjesImSemmel
Hello,
I’m new here, so first a brief introduction about myself/our family. I’m 36, married, with two small children. So far, we have rented various types of housing across the country. Currently, we live in a semi-detached house as first occupants. We are planning to move to Bavaria next year and finally want to move into our own house. Due to the “interesting” current prices for existing properties, a new build is currently the most likely option for us (even though we would only move in during 2023). We have become accustomed to a modern standard, and I’m (still) not the type to renovate. Also, I cannot estimate the costs for that due to lack of experience and contacts.
Now I have the opportunity to purchase a plot of land. This was offered to me by phone through a timber-frame house provider. I’m still an absolute beginner when it comes to the different cost structures, so at the moment I can only work with rough estimates.
The following framework conditions apply:
Plot: 900m² (possibly extendable), price around 460,000€ (according to the real estate agent)
This leads to several options for me:
1. Single-family house
In prefabricated construction, about 330,000€ according to the provider, I’m simply estimating 400,000€ (exact offer still to be prepared)
+ risk surcharge of another 50,000€
Total investment: 910,000€
2. Semi-detached house
I estimate 2 x 350,000€
+ risk 150,000€
Total investment: 1,300,000€
Now to the financial situation:
Net income: 5,000€ (one income, excluding child benefits), my wife plans to work again after the move, but we do not want to include her salary in the financing.
Equity: 260,000€ (max. 300,000€) in more or less liquid assets. The extra 40,000€ is actually saved for my two boys (for a world trip in 18 years 🙂
Our target monthly payment is about 1,800€. This rules out many offers in the desired region if we want to be done before retirement. Even option 1 with a single-family house will probably push the payment above that.
Now to my thought experiment with the semi-detached house, for which I would like to get your opinions.
I’m trying to finance the remaining 1,050,000€ with a monthly payment of about 3,000€. The local rent index is 8.80€/m² (8.80 €/ft²), so for 120m² that’s roughly 1,000€ cold rent. Because it would be a first occupation, 1,200€ is probably realistic (but I deduct two months’ rent for maintenance and vacancy, so back to an average of 1,000€). The building plot is a 30-minute drive to Munich Airport, the nearest large city is 15 minutes away. However, the location is very rural.
With the rental income, I could almost reach my actual goal: a new house in a reasonable location. The market does not offer that at the moment.
Specifications, offers, etc. will be clarified in the coming weeks. Talks with lenders have gone smoothly up to 800,000€. Next week I’ll ask about a million. To be honest, my interest in the rented semi-detached house is not a minimum return of x%, but rather the potential possibility to move into the desired own house. It would be a great “side effect” if each boy could end up with one half.
Am I a genius or a complete fool?
Do you have any valuable advice for me, perhaps your own experiences, tips, warnings? I am very grateful for any input.
Regards,
MatjesImSemmel
I’m new here, so first a brief introduction about myself/our family. I’m 36, married, with two small children. So far, we have rented various types of housing across the country. Currently, we live in a semi-detached house as first occupants. We are planning to move to Bavaria next year and finally want to move into our own house. Due to the “interesting” current prices for existing properties, a new build is currently the most likely option for us (even though we would only move in during 2023). We have become accustomed to a modern standard, and I’m (still) not the type to renovate. Also, I cannot estimate the costs for that due to lack of experience and contacts.
Now I have the opportunity to purchase a plot of land. This was offered to me by phone through a timber-frame house provider. I’m still an absolute beginner when it comes to the different cost structures, so at the moment I can only work with rough estimates.
The following framework conditions apply:
Plot: 900m² (possibly extendable), price around 460,000€ (according to the real estate agent)
This leads to several options for me:
1. Single-family house
In prefabricated construction, about 330,000€ according to the provider, I’m simply estimating 400,000€ (exact offer still to be prepared)
+ risk surcharge of another 50,000€
Total investment: 910,000€
2. Semi-detached house
I estimate 2 x 350,000€
+ risk 150,000€
Total investment: 1,300,000€
Now to the financial situation:
Net income: 5,000€ (one income, excluding child benefits), my wife plans to work again after the move, but we do not want to include her salary in the financing.
Equity: 260,000€ (max. 300,000€) in more or less liquid assets. The extra 40,000€ is actually saved for my two boys (for a world trip in 18 years 🙂
Our target monthly payment is about 1,800€. This rules out many offers in the desired region if we want to be done before retirement. Even option 1 with a single-family house will probably push the payment above that.
Now to my thought experiment with the semi-detached house, for which I would like to get your opinions.
I’m trying to finance the remaining 1,050,000€ with a monthly payment of about 3,000€. The local rent index is 8.80€/m² (8.80 €/ft²), so for 120m² that’s roughly 1,000€ cold rent. Because it would be a first occupation, 1,200€ is probably realistic (but I deduct two months’ rent for maintenance and vacancy, so back to an average of 1,000€). The building plot is a 30-minute drive to Munich Airport, the nearest large city is 15 minutes away. However, the location is very rural.
With the rental income, I could almost reach my actual goal: a new house in a reasonable location. The market does not offer that at the moment.
Specifications, offers, etc. will be clarified in the coming weeks. Talks with lenders have gone smoothly up to 800,000€. Next week I’ll ask about a million. To be honest, my interest in the rented semi-detached house is not a minimum return of x%, but rather the potential possibility to move into the desired own house. It would be a great “side effect” if each boy could end up with one half.
Am I a genius or a complete fool?
Do you have any valuable advice for me, perhaps your own experiences, tips, warnings? I am very grateful for any input.
Regards,
MatjesImSemmel
MatjesImSemmel schrieb:
On the phone, the lady from Okal Haus mentioned a turnkey single-family home for 330,000 €.I visited the Okal Haus website: the foundation slab is included. But there is no turnkey option, only move-in ready…Then I also agree with:
Myrna_Loy schrieb:
I’m assuming you’re not planning to build just 100 sqm. If we assume 160 sqm, that corresponds to a price of about 2,200 €/sqm – in Bavaria, that definitely isn’t enough. Except maybe in the Hof area.That would result in a 130 sqm house in premium quality 😉, at least that’s how Okal Haus markets it.Plan A doesn’t include a secondary suite or a rental property option given this income level.
MatjesImSemmel schrieb:
I will take a look at the topic of short sales over the weekend. In my opinion, you probably won’t need that here, as it’s a different scheme – as I said, the keyword "real estate agent" makes me think of another model: suppose you fall for the proposal (although there would have to be some clever loan broker around who does a bit of risk manipulation vis-à-vis the bank). Then you buy the plot of land and order the duplex, which unfortunately ends up costing more than expected. You want to get additional financing, the bank reassesses the whole thing more thoroughly and unfortunately has to say no. The dream falls apart, you then have an unfinished house that would bring very little at auction. I’d almost bet the real estate agent knows someone who has a solution to "save" you ;-)
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
MatjesImSemmel schrieb:
The lady from Okal House quoted €330,000 for a single-family home at the turnkey stage over the phone. I somehow expected that to be a bait offer, but an additional €150,000… I’m really curious now. But all of that has already been listed here: additional purchase costs, ancillary construction costs (such as earthworks), garage, landscaping (patio, driveway), kitchen, the step from turnkey to ready-to-move-in (flooring, painting), upgrades for nicer bathroom furniture and tiles… all not included and cost extra. And yes, quite quickly, an additional six-figure sum is added on top of your €330,000 for the house.
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