Good morning HF,
We have been considering for some time how to manage a family-owned property currently developed in a suburb of a large city in a long-term and sustainable way. Unfortunately, we have no experience in this area, so we hope to gain some helpful ideas from this post. Many thanks in advance for any advice.
Background: The property covers an area of 700 sqm (7,535 sq ft) and is partly occupied by an almost square building with 8 m (26 ft) side length, 3 floors (including raised ground floor) plus a basement. The basement is only partially underground (approx. 1.4 m (4.5 ft)). The attic with a gable roof was added in the 1990s to the existing building, which dates back to the post-war period. On the property, there is also a former utility building now used as an apartment, as well as a single garage. Due to financial and personal reasons, the modernization including the attic conversion was only partially completed, so some interior work (e.g., in the stairwell) is still unfinished. The property is encumbered with a mortgage, with an outstanding balance of around 240,000 euros at the end of 2019. The building is currently occupied by my mother-in-law (retired), and some rooms are rented out. Some rooms are empty or used by the family as guest rooms. It is likely that some renovation work is needed, as only the essentials have been addressed due to financial constraints.
From our point of view, there are basically three options for the future:
We have considered renovation. This would mean that my wife and I could live on one floor, one floor would be rented out, and my mother-in-law would remain on the ground floor. The conversion would, of course, have to be barrier-free. Against this option is the fact that the family does not really want to rent anymore (one floor would remain unused since all my wife’s other siblings already own their homes). Also, the house does not really meet our expectations, and the barrier-free conversion (external elevator?) would certainly be expensive.
Therefore, we are currently thinking about option 1—that is, tearing down everything on the property and starting from scratch. The idea is to build two bungalows of about 60 sqm (645 sq ft) each for own use on the plot. Since we do not want a basement, we would like to build a small utility building with laundry facilities, storage space, and a bike cellar. Additionally, there is a dream to build one of them in the style of Mies van der Rohe (or also Neutra, Ruf, etc.).
The question, of course, is what we can realistically afford. We are the only ones in the family still renting. Everyone else already owns property and is actively repaying loans. In about five years, we could provide an equity share of 80,000 euros and a monthly payment of around 1,000–1,200 euros, plus 300 euros for reserves and additional costs. My mother-in-law could contribute around 500 euros from her pension. By then, we would have reduced the existing loan to about 100,000–120,000 euros (a bank change by payoff would only be possible after 8 years). Since we will be in our mid-40s then, we want to have the new loan paid off within 15 to a maximum of 20 years.
Assuming an interest rate of 1% in five years and a monthly payment of 1,700 euros, we could plan for a full repayment loan with a term of 15 years and a loan amount of around 285,000 euros. Plus the equity share and minus the existing loan, this leads to a maximum investment sum of 265,000 euros. It is probably easy to dismiss any illusions with this figure. By extending the term to 20 years, we could increase the amount to 350,000 euros.
So, our current question is whether option 1 is feasible with a budget range of 250,000 to 350,000 euros and, if so, how. Prefabricated house, architect-designed house, perhaps even the mentioned dream house? And how should we best prepare financially during this time—building savings contracts, extra repayments, etc.?
We have been considering for some time how to manage a family-owned property currently developed in a suburb of a large city in a long-term and sustainable way. Unfortunately, we have no experience in this area, so we hope to gain some helpful ideas from this post. Many thanks in advance for any advice.
Background: The property covers an area of 700 sqm (7,535 sq ft) and is partly occupied by an almost square building with 8 m (26 ft) side length, 3 floors (including raised ground floor) plus a basement. The basement is only partially underground (approx. 1.4 m (4.5 ft)). The attic with a gable roof was added in the 1990s to the existing building, which dates back to the post-war period. On the property, there is also a former utility building now used as an apartment, as well as a single garage. Due to financial and personal reasons, the modernization including the attic conversion was only partially completed, so some interior work (e.g., in the stairwell) is still unfinished. The property is encumbered with a mortgage, with an outstanding balance of around 240,000 euros at the end of 2019. The building is currently occupied by my mother-in-law (retired), and some rooms are rented out. Some rooms are empty or used by the family as guest rooms. It is likely that some renovation work is needed, as only the essentials have been addressed due to financial constraints.
From our point of view, there are basically three options for the future:
- Demolition and new construction
- Renovation
- Sale
We have considered renovation. This would mean that my wife and I could live on one floor, one floor would be rented out, and my mother-in-law would remain on the ground floor. The conversion would, of course, have to be barrier-free. Against this option is the fact that the family does not really want to rent anymore (one floor would remain unused since all my wife’s other siblings already own their homes). Also, the house does not really meet our expectations, and the barrier-free conversion (external elevator?) would certainly be expensive.
Therefore, we are currently thinking about option 1—that is, tearing down everything on the property and starting from scratch. The idea is to build two bungalows of about 60 sqm (645 sq ft) each for own use on the plot. Since we do not want a basement, we would like to build a small utility building with laundry facilities, storage space, and a bike cellar. Additionally, there is a dream to build one of them in the style of Mies van der Rohe (or also Neutra, Ruf, etc.).
The question, of course, is what we can realistically afford. We are the only ones in the family still renting. Everyone else already owns property and is actively repaying loans. In about five years, we could provide an equity share of 80,000 euros and a monthly payment of around 1,000–1,200 euros, plus 300 euros for reserves and additional costs. My mother-in-law could contribute around 500 euros from her pension. By then, we would have reduced the existing loan to about 100,000–120,000 euros (a bank change by payoff would only be possible after 8 years). Since we will be in our mid-40s then, we want to have the new loan paid off within 15 to a maximum of 20 years.
Assuming an interest rate of 1% in five years and a monthly payment of 1,700 euros, we could plan for a full repayment loan with a term of 15 years and a loan amount of around 285,000 euros. Plus the equity share and minus the existing loan, this leads to a maximum investment sum of 265,000 euros. It is probably easy to dismiss any illusions with this figure. By extending the term to 20 years, we could increase the amount to 350,000 euros.
So, our current question is whether option 1 is feasible with a budget range of 250,000 to 350,000 euros and, if so, how. Prefabricated house, architect-designed house, perhaps even the mentioned dream house? And how should we best prepare financially during this time—building savings contracts, extra repayments, etc.?
For me, such a situation involving care is not an option. Either I do it voluntarily or not at all.
Besides that, you would need to clarify to what extent you would be financially responsible if care in a nursing home becomes unavoidable. Don’t forget that care can also mean changing diapers 10 times a day, for example after a stroke, or having to stay at home constantly due to dementia with a tendency to wander.
In addition, a waiver of inheritance would need to be arranged with all other heirs.
Edit: where I unfortunately have no idea at all is to what extent the mother can be legally bound not to change the will later, if you don’t receive the property in advance.
Besides that, you would need to clarify to what extent you would be financially responsible if care in a nursing home becomes unavoidable. Don’t forget that care can also mean changing diapers 10 times a day, for example after a stroke, or having to stay at home constantly due to dementia with a tendency to wander.
In addition, a waiver of inheritance would need to be arranged with all other heirs.
Edit: where I unfortunately have no idea at all is to what extent the mother can be legally bound not to change the will later, if you don’t receive the property in advance.
R
Ruferianer13 Oct 2019 19:14Our original plan was to first get a sense of how realistic the project is in terms of construction and financing. If the idea fails at this stage, we wouldn’t need to involve the larger family discussion.
However, since inheritance has been mentioned several times here, we will now bring these conversations forward and first look at the general expectations of everyone involved.
However, since inheritance has been mentioned several times here, we will now bring these conversations forward and first look at the general expectations of everyone involved.