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Partyheld11 Feb 2020 11:16Hello everyone,
We currently have several options regarding real estate. We are in the process of finding the most suitable one for us, but it’s proving quite difficult. That’s why I wanted to present all the options here for discussion and get some external opinions.
First, our current situation:
We are a family of four:
Wife, 30 years old; myself, 34 years old; two children (2 and 4 years old).
About 4.5 years ago, we bought a fixer-upper two-family house on roughly 1600 sqm (17200 sq ft) of land at a good price.
We have renovated it a lot ourselves and then moved into one unit. The other unit is rented out inexpensively to family.
Each unit is only 95 sqm (1020 sq ft). This is a bit tight for us as a family of four, especially since my wife is self-employed and has a home office. Currently, the two boys share a room. This works at their age but won’t be feasible long term.
The house got new windows, but the masonry isn’t very thick. Therefore, we have to ventilate very carefully and monitor humidity to avoid mold—so a lot of airing out!
Current debt: 240,000 (Currency not specified).
Now, we are considering how to proceed.
Currently, we see the following options:
Option 1:
Stay in the house. Remove the old oil tank from the basement and convert that space into a home office for my wife. That way, each child would have their own room.
Advantages:
We would likely have everything paid off within 7 years and be debt-free.
We would still have the really large garden.
After paying off the mortgage, we would continue to receive rent from the second unit.
Disadvantages:
The home office would be in the basement, which would need additional heating and probably a dehumidifier, since the basement is old and not climatically ideal. Nearly no natural light.
We would continue living in an old house with humidity issues in our unit. Either expensive insulation or installing a decentralized ventilation system would be necessary. A ventilation system is not ideal either; due to the layout, we would probably need six individual units, which would require breaking channels into the walls. Noise from the busy street in front of the house would likely increase.
We partly use wood heating to save on gas costs. This creates a lot of work and mess.
Insulation problems: The balcony would have to be removed. The driveway next to the house is already very narrow and would become almost too tight. The basement stairwell behind the house would need to be relocated, as it would otherwise be very cramped. All of this would also be expensive.
Option 2:
Build a new house at the back of the garden for ourselves and rent out the current house completely.
Advantages:
We would live alone in our own house and practically have the garden to ourselves.
We could build the house exactly as we want, from the energy standard to the comfort of the ventilation system and layout.
We would receive rent from two apartments plus garages (potentially a good retirement plan).
Disadvantages:
The garden would be somewhat smaller.
We would have to insulate and/or equip the current house with a ventilation system because we cannot expect tenants to ventilate carefully.
We would still own the old house, which will almost certainly require renovation costs in the next 30 years.
We would likely only be debt-free in about 15 years.
I would have to manage both the house and the tenants.
Insulation problems: The balcony would have to be removed. The driveway next to the house is already very narrow and would become almost too tight. The basement stairwell behind the house would need to be relocated because access would otherwise be too cramped. This would all be expensive again.
Option 3:
Build at the back of the garden and sell the front house with approximately 600 sqm (6460 sq ft) of land.
Advantages:
We would live alone in our own house and have the entire garden for ourselves.
We could build the house exactly as we want, from the energy standard to the comfort of the ventilation system and layout.
We would likely get enough from selling the current house to cover the current debt plus the new build. This means we would be debt-free immediately.
We would no longer have to deal with the “old place” and have no stress with tenants.
Disadvantages:
The garden would be a bit smaller (though about 900 sqm (9700 sq ft) of land would still remain).
We would no longer have passive income from renting.
Our current tenants (my wife’s uncle and his family) probably wouldn’t like this since they currently live very cheaply here. They could only stay here at that rate for five more years after the sale (they also made upgrades like a new kitchen and wood stove). They wouldn’t find another apartment of this size that cheap.
Additional information:
I roughly calculated that if we didn’t sell the house, it would take about 34 years to recover the purchase price we could get now through rental income. During that time, of course, renovation costs would also come up. We would also have to pay interest on the current mortgage and possibly the new one. So I think only after about 40 years renting would be more economical than selling now.
I look forward to your opinions and suggestions.
Regards,
Partyheld
We currently have several options regarding real estate. We are in the process of finding the most suitable one for us, but it’s proving quite difficult. That’s why I wanted to present all the options here for discussion and get some external opinions.
First, our current situation:
We are a family of four:
Wife, 30 years old; myself, 34 years old; two children (2 and 4 years old).
About 4.5 years ago, we bought a fixer-upper two-family house on roughly 1600 sqm (17200 sq ft) of land at a good price.
We have renovated it a lot ourselves and then moved into one unit. The other unit is rented out inexpensively to family.
Each unit is only 95 sqm (1020 sq ft). This is a bit tight for us as a family of four, especially since my wife is self-employed and has a home office. Currently, the two boys share a room. This works at their age but won’t be feasible long term.
The house got new windows, but the masonry isn’t very thick. Therefore, we have to ventilate very carefully and monitor humidity to avoid mold—so a lot of airing out!
Current debt: 240,000 (Currency not specified).
Now, we are considering how to proceed.
Currently, we see the following options:
Option 1:
Stay in the house. Remove the old oil tank from the basement and convert that space into a home office for my wife. That way, each child would have their own room.
Advantages:
We would likely have everything paid off within 7 years and be debt-free.
We would still have the really large garden.
After paying off the mortgage, we would continue to receive rent from the second unit.
Disadvantages:
The home office would be in the basement, which would need additional heating and probably a dehumidifier, since the basement is old and not climatically ideal. Nearly no natural light.
We would continue living in an old house with humidity issues in our unit. Either expensive insulation or installing a decentralized ventilation system would be necessary. A ventilation system is not ideal either; due to the layout, we would probably need six individual units, which would require breaking channels into the walls. Noise from the busy street in front of the house would likely increase.
We partly use wood heating to save on gas costs. This creates a lot of work and mess.
Insulation problems: The balcony would have to be removed. The driveway next to the house is already very narrow and would become almost too tight. The basement stairwell behind the house would need to be relocated, as it would otherwise be very cramped. All of this would also be expensive.
Option 2:
Build a new house at the back of the garden for ourselves and rent out the current house completely.
Advantages:
We would live alone in our own house and practically have the garden to ourselves.
We could build the house exactly as we want, from the energy standard to the comfort of the ventilation system and layout.
We would receive rent from two apartments plus garages (potentially a good retirement plan).
Disadvantages:
The garden would be somewhat smaller.
We would have to insulate and/or equip the current house with a ventilation system because we cannot expect tenants to ventilate carefully.
We would still own the old house, which will almost certainly require renovation costs in the next 30 years.
We would likely only be debt-free in about 15 years.
I would have to manage both the house and the tenants.
Insulation problems: The balcony would have to be removed. The driveway next to the house is already very narrow and would become almost too tight. The basement stairwell behind the house would need to be relocated because access would otherwise be too cramped. This would all be expensive again.
Option 3:
Build at the back of the garden and sell the front house with approximately 600 sqm (6460 sq ft) of land.
Advantages:
We would live alone in our own house and have the entire garden for ourselves.
We could build the house exactly as we want, from the energy standard to the comfort of the ventilation system and layout.
We would likely get enough from selling the current house to cover the current debt plus the new build. This means we would be debt-free immediately.
We would no longer have to deal with the “old place” and have no stress with tenants.
Disadvantages:
The garden would be a bit smaller (though about 900 sqm (9700 sq ft) of land would still remain).
We would no longer have passive income from renting.
Our current tenants (my wife’s uncle and his family) probably wouldn’t like this since they currently live very cheaply here. They could only stay here at that rate for five more years after the sale (they also made upgrades like a new kitchen and wood stove). They wouldn’t find another apartment of this size that cheap.
Additional information:
I roughly calculated that if we didn’t sell the house, it would take about 34 years to recover the purchase price we could get now through rental income. During that time, of course, renovation costs would also come up. We would also have to pay interest on the current mortgage and possibly the new one. So I think only after about 40 years renting would be more economical than selling now.
I look forward to your opinions and suggestions.
Regards,
Partyheld
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borderpuschl11 Feb 2020 11:34Hi, in my opinion,
if you can actually make enough from the sale to pay off your debts and also build the new house without any loans, this would clearly be my favorite option.
However, based on your description, I find it hard to imagine that the house on the 600m² (6,458 sq ft) plot would bring in that much. But it strongly depends on the location.
if you can actually make enough from the sale to pay off your debts and also build the new house without any loans, this would clearly be my favorite option.
However, based on your description, I find it hard to imagine that the house on the 600m² (6,458 sq ft) plot would bring in that much. But it strongly depends on the location.
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Partyheld11 Feb 2020 11:44The location is within about a 50 km (31 miles) radius of Munich, with excellent train connections.
Great highway access. All doctors and schools are available locally. So, it’s a very sought-after area.
Many people who work in Munich move here.
I checked on ImmobilienScout.
If I calculate with €350 per square meter (sq m) of land and €2,500 per sq m of living space, I am usually about €50,000 - €80,000 below the other listings.
Using these numbers, I arrive at €650,000.
After deducting €240,000 in debt, that leaves €410,000.
That should be sufficient for a small new build of about 145 sq m (1,560 sq ft), as a lot of own labor is planned.
The plot is completely level, so not much earthwork will be needed. No basement.
Great highway access. All doctors and schools are available locally. So, it’s a very sought-after area.
Many people who work in Munich move here.
I checked on ImmobilienScout.
If I calculate with €350 per square meter (sq m) of land and €2,500 per sq m of living space, I am usually about €50,000 - €80,000 below the other listings.
Using these numbers, I arrive at €650,000.
After deducting €240,000 in debt, that leaves €410,000.
That should be sufficient for a small new build of about 145 sq m (1,560 sq ft), as a lot of own labor is planned.
The plot is completely level, so not much earthwork will be needed. No basement.
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borderpuschl11 Feb 2020 11:57Then I might do it differently and not aim for complete debt freedom, instead investing more into the house itself.
€410,000 (about $450,000) is not much, depending on how much work you do yourself.
Have you already checked whether you are even allowed to build on the rear part if you split the plot?
€410,000 (about $450,000) is not much, depending on how much work you do yourself.
Have you already checked whether you are even allowed to build on the rear part if you split the plot?
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Partyheld11 Feb 2020 11:58Yes, there is a zoning plan for this. Construction is allowed, that has been confirmed.
There are already two separate plots, but I might want to slightly adjust the property boundary to retain more space.
There are already two separate plots, but I might want to slightly adjust the property boundary to retain more space.
We also have a very large plot of land and love it, but if I could have chosen, 900 sqm (approximately 9700 sq ft) would have been ideal. That’s more than enough space, and you don’t have as much work with such a huge garden. Plus, you get rid of the old place and are debt-free or almost, depending on how much you spend on the new house. That would definitely be my favorite choice.
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