ᐅ Our Home Construction Planning – Realistic or Just a Dream?
Created on: 1 Jul 2013 13:57
T
trueillusion
Hello everyone,
we’ve finally registered here, even though we have only just started planning...
A little about us:
We’re a young couple, 28 and 30 years old, unmarried, without children.
Our dream has always been to someday own our own house. By chance, we recently came across our dream home and haven’t been able to think about much else for weeks. We even visit "it" regularly :-) Every day we’re searching online to gather as much information as possible, and now we’re planning to schedule an appointment at a bank just to get some info.
We found a stone-built house with 350 sqm (plus garages, an old barn with about 70 sqm possibly for conversion, and a basement) on a 1400 sqm plot. One 70 sqm apartment is currently rented out, and we plan to build another one of about 110 sqm to rent to my parents. Deducting common areas (hallways, staircases, etc.), about 150 sqm would remain for us to live in. For now, it’s just the two of us, but we plan to have two children in the coming years. The space fits well for that :-)
We’ve estimated the total costs for all renovation work and upgrades at around 350,000 €, of which about 200,000 € relate to the purchase price.
So far, I’ve only been able to calculate the loan amount online since we haven’t had a bank appointment yet, so I don’t really know if the calculation is realistic.
What do you think, based on your experience?
We currently earn a gross monthly income of 5,400 € (paid 13 times per year), which results in about 3,500 € net. Our current base rent is 700 €, plus 200 € for utilities, and we could “comfortably” afford to add another 300 €.
For the calculation, we would also factor in the rental income from the two apartments:
The 70 sqm apartment should bring in about 300 € base rent. Since you should set aside one-third, that leaves about 200 €.
The larger apartment for my parents could bring in approximately 400 € base rent, so I include about 260 € of that in the loan calculation. I’m not sure about the utility costs yet.
For the house, including our utilities, we therefore have roughly 1,660 € available.
Of course, I don’t know how high the utility costs for this house will actually be. Part of them (the tenants’ share) can naturally be passed on, while our own share and any costs that can’t be charged to tenants would be added on top.
From your experience, what should utility costs realistically be for a house like this? And roughly what portion of those costs can be passed on to tenants? Can one say something like: “Estimate X amount per sqm for utilities,” and “You can pass on about 90% of the utility costs for rented space to tenants”?
I’m quite worried that I might have to work with very different numbers from what we’re currently calculating.
At the moment, I estimate utility costs of about 400 € for us, with the tenant costs added on top accordingly.
That would leave about 1,260 € for the loan, roughly speaking.
There’s a great calculator on Immobilienscout, and it says:
Are such figures and especially the calculator’s results even reliable?
What are realistic, current interest rates?
I’m a bit afraid these are just optimistic figures that look different in reality. What experiences do you have with banks and effective annual interest rates? What do beginners often overlook?
Since we plan to renovate with accessibility and energy efficiency in mind, we might qualify for favorable loans from the KfW bank and possibly even grants. Has anyone had experience with this, and do banks count these as equity or include them as loans?
What collateral do you have to or should you provide to the bank to get the best possible loan terms? We have a fully paid savings contract worth 10,000 € (listed here as equity) that can be cashed out immediately, two others that are still running, and life, accident, and death insurance policies that currently have relatively low values (a few thousand euros) due to our young age. When paid out at retirement age, these would amount to nearly 100,000 €. We also have a guarantor with equity and a fully paid home, but that is only a last option.
What do you think of our plans in general? Is this feasible or just wishful thinking we should set aside?
One downside: fixed-term employment contracts. Although I’ve read that this is less important nowadays and might be better left unmentioned. Both of us are currently in our second fixed-term contracts, meaning each has been extended once. After 24 months of fixed-term contracts, the contract automatically becomes permanent. I would have a permanent contract in 12 months, and he in 8 months.
Should we just not mention this until asked, or does it even matter since we earn enough?
Any other tips you can give?
Oh dear, so many questions.
THANK YOU ALL FOR YOUR REPLIES!!! :-)
Best regards,
Betty
we’ve finally registered here, even though we have only just started planning...
A little about us:
We’re a young couple, 28 and 30 years old, unmarried, without children.
Our dream has always been to someday own our own house. By chance, we recently came across our dream home and haven’t been able to think about much else for weeks. We even visit "it" regularly :-) Every day we’re searching online to gather as much information as possible, and now we’re planning to schedule an appointment at a bank just to get some info.
We found a stone-built house with 350 sqm (plus garages, an old barn with about 70 sqm possibly for conversion, and a basement) on a 1400 sqm plot. One 70 sqm apartment is currently rented out, and we plan to build another one of about 110 sqm to rent to my parents. Deducting common areas (hallways, staircases, etc.), about 150 sqm would remain for us to live in. For now, it’s just the two of us, but we plan to have two children in the coming years. The space fits well for that :-)
We’ve estimated the total costs for all renovation work and upgrades at around 350,000 €, of which about 200,000 € relate to the purchase price.
So far, I’ve only been able to calculate the loan amount online since we haven’t had a bank appointment yet, so I don’t really know if the calculation is realistic.
What do you think, based on your experience?
We currently earn a gross monthly income of 5,400 € (paid 13 times per year), which results in about 3,500 € net. Our current base rent is 700 €, plus 200 € for utilities, and we could “comfortably” afford to add another 300 €.
For the calculation, we would also factor in the rental income from the two apartments:
The 70 sqm apartment should bring in about 300 € base rent. Since you should set aside one-third, that leaves about 200 €.
The larger apartment for my parents could bring in approximately 400 € base rent, so I include about 260 € of that in the loan calculation. I’m not sure about the utility costs yet.
For the house, including our utilities, we therefore have roughly 1,660 € available.
Of course, I don’t know how high the utility costs for this house will actually be. Part of them (the tenants’ share) can naturally be passed on, while our own share and any costs that can’t be charged to tenants would be added on top.
From your experience, what should utility costs realistically be for a house like this? And roughly what portion of those costs can be passed on to tenants? Can one say something like: “Estimate X amount per sqm for utilities,” and “You can pass on about 90% of the utility costs for rented space to tenants”?
I’m quite worried that I might have to work with very different numbers from what we’re currently calculating.
At the moment, I estimate utility costs of about 400 € for us, with the tenant costs added on top accordingly.
That would leave about 1,260 € for the loan, roughly speaking.
There’s a great calculator on Immobilienscout, and it says:
Are such figures and especially the calculator’s results even reliable?
What are realistic, current interest rates?
I’m a bit afraid these are just optimistic figures that look different in reality. What experiences do you have with banks and effective annual interest rates? What do beginners often overlook?
Since we plan to renovate with accessibility and energy efficiency in mind, we might qualify for favorable loans from the KfW bank and possibly even grants. Has anyone had experience with this, and do banks count these as equity or include them as loans?
What collateral do you have to or should you provide to the bank to get the best possible loan terms? We have a fully paid savings contract worth 10,000 € (listed here as equity) that can be cashed out immediately, two others that are still running, and life, accident, and death insurance policies that currently have relatively low values (a few thousand euros) due to our young age. When paid out at retirement age, these would amount to nearly 100,000 €. We also have a guarantor with equity and a fully paid home, but that is only a last option.
What do you think of our plans in general? Is this feasible or just wishful thinking we should set aside?
One downside: fixed-term employment contracts. Although I’ve read that this is less important nowadays and might be better left unmentioned. Both of us are currently in our second fixed-term contracts, meaning each has been extended once. After 24 months of fixed-term contracts, the contract automatically becomes permanent. I would have a permanent contract in 12 months, and he in 8 months.
Should we just not mention this until asked, or does it even matter since we earn enough?
Any other tips you can give?
Oh dear, so many questions.
THANK YOU ALL FOR YOUR REPLIES!!! :-)
Best regards,
Betty
K
Königsbiene2 Jul 2013 10:15I agree with:
- Building inspector (we often fell in love with existing properties that always seemed promising at first, or appeared to need about €100,000 (approx. $110,000) in extra costs... but after a friend who is a construction expert casually went through the house with us, the dream usually faded very quickly...)
- Where has the money gone so far, why wasn’t any equity saved?
- Don’t be too naive about taking time off for your children! You typically receive parental leave benefits for one year, which is manageable financially. But what happens after that year? Will you both go back to full-time work? Or will one of you work part-time or not at all? And childcare is expensive! We pay almost €800 (about $880) per month for our two toddlers! So, even if you both return to full-time jobs, you should plan for significant costs related to your two planned children (and the expenses don’t stop at childcare; there are many other associated costs).
- You are planning to never have peace and to always have work to do on the house. Without children, that might not seem too bad today. But just wait until the kids are there. We both work full or nearly full time until 3 p.m. Time with the children is limited. On top of that, we still have to clean the house, do laundry, maintain the garden, meet friends, meet other children, renovate something at the daycare, and so on. Suddenly, we are completely occupied because of the children. And I can tell you, if my husband had to do housework every evening or weekend, or if I had to handle the administration for the rental apartments, there would quickly be tension between us.
- Tenants can also be a source of stress...
- Calculate the additional costs carefully. They will not be insignificant. Some of these you will initially pay on behalf of your tenants and only settle with them later. If additional payments are due, many tenants cannot simply cover those costs at short notice...
But if you are sure, then do what your heart tells you! Just keep in mind: some dreams simply cost too much money (our conclusion).
- Building inspector (we often fell in love with existing properties that always seemed promising at first, or appeared to need about €100,000 (approx. $110,000) in extra costs... but after a friend who is a construction expert casually went through the house with us, the dream usually faded very quickly...)
- Where has the money gone so far, why wasn’t any equity saved?
- Don’t be too naive about taking time off for your children! You typically receive parental leave benefits for one year, which is manageable financially. But what happens after that year? Will you both go back to full-time work? Or will one of you work part-time or not at all? And childcare is expensive! We pay almost €800 (about $880) per month for our two toddlers! So, even if you both return to full-time jobs, you should plan for significant costs related to your two planned children (and the expenses don’t stop at childcare; there are many other associated costs).
- You are planning to never have peace and to always have work to do on the house. Without children, that might not seem too bad today. But just wait until the kids are there. We both work full or nearly full time until 3 p.m. Time with the children is limited. On top of that, we still have to clean the house, do laundry, maintain the garden, meet friends, meet other children, renovate something at the daycare, and so on. Suddenly, we are completely occupied because of the children. And I can tell you, if my husband had to do housework every evening or weekend, or if I had to handle the administration for the rental apartments, there would quickly be tension between us.
- Tenants can also be a source of stress...
- Calculate the additional costs carefully. They will not be insignificant. Some of these you will initially pay on behalf of your tenants and only settle with them later. If additional payments are due, many tenants cannot simply cover those costs at short notice...
But if you are sure, then do what your heart tells you! Just keep in mind: some dreams simply cost too much money (our conclusion).
Due to recent experiences, here’s some advice from a young father:
If you want children and a house, you as the father must be able to cover all costs on your own. If you can’t, don’t even bother.
Parental allowance is nice, but it has several drawbacks. It is limited in time and subject to the progression tax rule. This means you can expect a significant tax back payment, possibly in the four-figure range, if your partner contributed about half of your combined income.
Then your partner will want or need to return to work after a year... which means tax class 5 and a part-time job... net income of about 1000€ (approximately 1100 USD). But now you must pay for the second commute, buy work clothes again, and pay for lunches with colleagues in the canteen or elsewhere. These are all small expenses, but by the end of the month might add up to around 200€ (about 220 USD). Then your child needs to be cared for somewhere. If grandparents can help, that’s great; if not, good luck. In Karlsruhe we couldn’t get a daycare spot because we earned too much. Only private daycare would have accepted our child, costing about 800€ (around 880 USD) per month for 30 hours per week including meals. Suddenly your partner’s salary is gone.
You alone must now cover everything. Add at least 300€ (about 330 USD) monthly operating costs for the house itself—heating, electricity, water, insurance, waste disposal, property tax—and if you’re really unlucky, a new road or sewer works outside your home might come up, and then the municipality charges you. So make sure to leave room for reserves.
Now here comes the really tough part: the second child arrives (hard to say without smiling 😀): Your partner’s parental allowance will then be a maximum of 650€ (about 715 USD) for one year. You might decide to pull the first child out of daycare. But after a year it gets really difficult. Either one child goes to kindergarten and the other to daycare, or worse, both must go to daycare.
These are costs that can be really tough to handle.
We were very lucky here because in the Germersheim district, the youth welfare office covers almost all daycare costs, regardless of income. My salary alone could cover everything, and in an emergency, I can always work as an IT consultant. Annual salaries of around 100,000€ (approximately 110,000 USD) are not uncommon, but you’re on the road five days a week... and that’s not what a young family father wants.
Enough scaring you. Look ahead and consider the points mentioned. Only when you know all the facts can you make informed decisions.
If you want children and a house, you as the father must be able to cover all costs on your own. If you can’t, don’t even bother.
Parental allowance is nice, but it has several drawbacks. It is limited in time and subject to the progression tax rule. This means you can expect a significant tax back payment, possibly in the four-figure range, if your partner contributed about half of your combined income.
Then your partner will want or need to return to work after a year... which means tax class 5 and a part-time job... net income of about 1000€ (approximately 1100 USD). But now you must pay for the second commute, buy work clothes again, and pay for lunches with colleagues in the canteen or elsewhere. These are all small expenses, but by the end of the month might add up to around 200€ (about 220 USD). Then your child needs to be cared for somewhere. If grandparents can help, that’s great; if not, good luck. In Karlsruhe we couldn’t get a daycare spot because we earned too much. Only private daycare would have accepted our child, costing about 800€ (around 880 USD) per month for 30 hours per week including meals. Suddenly your partner’s salary is gone.
You alone must now cover everything. Add at least 300€ (about 330 USD) monthly operating costs for the house itself—heating, electricity, water, insurance, waste disposal, property tax—and if you’re really unlucky, a new road or sewer works outside your home might come up, and then the municipality charges you. So make sure to leave room for reserves.
Now here comes the really tough part: the second child arrives (hard to say without smiling 😀): Your partner’s parental allowance will then be a maximum of 650€ (about 715 USD) for one year. You might decide to pull the first child out of daycare. But after a year it gets really difficult. Either one child goes to kindergarten and the other to daycare, or worse, both must go to daycare.
These are costs that can be really tough to handle.
We were very lucky here because in the Germersheim district, the youth welfare office covers almost all daycare costs, regardless of income. My salary alone could cover everything, and in an emergency, I can always work as an IT consultant. Annual salaries of around 100,000€ (approximately 110,000 USD) are not uncommon, but you’re on the road five days a week... and that’s not what a young family father wants.
Enough scaring you. Look ahead and consider the points mentioned. Only when you know all the facts can you make informed decisions.
B
Bauexperte2 Jul 2013 11:31Hello,
Like most first-time builders, you are taking the wrong steps. I am quite sure your dreams will soon have to adjust to reality :-)
Before you start dealing with figures for purchase and renovation, your budget should be clarified first. Find an independent mortgage broker you trust – if you have trouble finding one, I can help you in NRW – and discuss your current financial situation with them. This meeting will take about two hours, and afterward, you will not only know for sure how much money you can realistically invest and under what conditions, but you will also be able to roughly estimate, based on the necessary discussions, whether you can realize your dream project.
I will spare you and myself commenting on your calculations, as they are irrelevant unless you have a professional report clearly showing which work must be done immediately, later, or over the years. By the way, you also need a structural engineer who, with their signature, guarantees which walls you can alter, remove, or build new and at what thickness. An architect is also necessary to have the renovation approved by the local building authority or planning permission office—and so on and so forth.
I am already quite certain that your estimated €150,000 (about $161,000) budget for renovations will not be enough. These old houses are usually completely uninsulated... and we haven’t even talked about the “surprises” yet!
Best regards,
Bauexperte
Like most first-time builders, you are taking the wrong steps. I am quite sure your dreams will soon have to adjust to reality :-)
Before you start dealing with figures for purchase and renovation, your budget should be clarified first. Find an independent mortgage broker you trust – if you have trouble finding one, I can help you in NRW – and discuss your current financial situation with them. This meeting will take about two hours, and afterward, you will not only know for sure how much money you can realistically invest and under what conditions, but you will also be able to roughly estimate, based on the necessary discussions, whether you can realize your dream project.
trueillusion schrieb:You must have a lot of free time; the house and land are clearly too large for me – after all, I would like to live as well :-) And—maintenance of the outdoor areas is the landlord’s responsibility; don’t get your hopes up incorrectly here.
We are a young couple, 28 and 30 years old, unmarried, without children... By chance, we have now come across our dream home... We found a rubble stone house with 350 sqm (square meters) (about 3767 sq ft) of living space (plus garages, an old barn with about 70 sqm (about 753 sq ft), possibly for expansion, and a cellar) and 1400 sqm (about 0.35 acres) of land. One apartment of 70 sqm (about 753 sq ft) is currently rented out; another will be built at about 110 sqm (about 1184 sq ft) and rented to my parents. Deducting the shared areas (hallway, stairwell, etc.) leaves about 150 sqm (about 1615 sq ft) for us to live in ourselves. Currently, just the two of us, but two children are planned in the coming years. The area fits quite well accordingly :-)
trueillusion schrieb:You can calculate many things because paper is patient. Once your budget is clarified, you should commission an expert – not a casual acquaintance or hobby inspector – to assess the property, if no formal appraisal is available. With such old “gems,” water damage is often a major problem; that should be clarified beforehand – don’t you think?
Recently, we calculated a sum of 350,000 € (about $375,000) with all sorts of renovation measures and updates, of which about 200,000 € (about $215,000) is the purchase price of the house.
trueillusion schrieb:I doubt you really know what you are getting into. I manage new construction projects, and sometimes there are homeowners who want to handle just the interior finishing themselves. These homeowners are often busy with the interior work for a full year in a new build! What you are imagining will certainly take three years or more. It’s a thing with “good” acquaintances and friends—they often don’t keep up their initial promises. Relationships usually suffer as a result!
A lot needs to be done, but that’s exactly what we were looking for. We don’t want a cookie-cutter house. We are aware that we will have to put every free minute into the house over the next few years and that we will curse it many times, but it would be worth it to us.
I will spare you and myself commenting on your calculations, as they are irrelevant unless you have a professional report clearly showing which work must be done immediately, later, or over the years. By the way, you also need a structural engineer who, with their signature, guarantees which walls you can alter, remove, or build new and at what thickness. An architect is also necessary to have the renovation approved by the local building authority or planning permission office—and so on and so forth.
I am already quite certain that your estimated €150,000 (about $161,000) budget for renovations will not be enough. These old houses are usually completely uninsulated... and we haven’t even talked about the “surprises” yet!
Best regards,
Bauexperte
trueillusion schrieb:
This is something whose full scale I’m not really aware of yet. Basically, the person who stays at home receives 65% of their income. For us, it’s clear that we only want to have children when, despite the 65%, we still have the same amount as we do now—that means earning at least 35% more than we currently do. Still, this plan could go wrong, and then we would really have to consider whether it would still be financially feasible, possibly with a side job or something similar... This is definitely an important topic that we will explore in more detail.
The point about the local authority is really interesting and something we completely overlooked. A friend of ours had to come up with 20,000 € (about $22,000) just for exactly this kind of case a year ago. Is that really possible? It’s outrageous that such costs have to be factored in... It seems almost impossible!? But also something that we should look into more thoroughly :-) That’s a bit naive. You want 150 square meters (1,615 square feet) for yourself and your family, but only want children if you can afford it. If you can’t afford children, then the 150 square meters (1,615 square feet) are pointless too, right?
You receive 65% of your net salary (net, not gross) as parental benefit for one year. That means you have to go back to work after one year—so you will need childcare for your one-year-old (grandparents, daycare, or something else). In our area, a daycare spot costs about 600 € (about $660) per month. You receive child benefit of 185 € (about $205) per month... Kids are very expensive!
The second point: The local authority NEVER charges initial development fees just like that; these fees only apply if the street, sewage system, or similar infrastructure is newly developed (according to the country’s laws—so only if it is officially declared, not just because there is already a street). If this infrastructure is already in place, to my knowledge no further development charges can be imposed. The responsible building authority can give you precise information about this. By asking the right questions to the authorities, many of your concerns can probably be clarified.
Wastl schrieb:
The second point: The municipality NEVER simply demands initial development fees without reason, but only when the street, sewer, or similar infrastructure is developed (according to the country’s laws – meaning when it is officially designated as such, not just because a street exists, etc.). If this has already been done, to my knowledge no additional development charges can be applied. The responsible building authority can provide information on this. By asking many questions at the authorities, you can likely clear up some of your concerns.Maybe I’m misunderstanding you here: But surely a municipality can charge residents money years later for modernizing a street or sewer system. And they will do so. Where I live, this is managed through a clever system where each household pays a small annual contribution for construction work in the village. This depends on the number of residents and the property size in square meters (sqm).
That way, a different street is renewed every year. Or, like here next year, the sewer separation system will be installed.
Development fees are often only invoiced once the last building plot on a street is developed. This is currently the case with a coworker of mine. He was the last, and now the invoice has been sent to everyone on the street. Fifteen years after the street was built.
Maybe we are talking past each other? I was actually referring to the development charges that can only be billed once – but even then, after, for example, 15 years or, as in our case, after almost 30 years. The key point is when the street is first developed (road, sewer, etc.). After that, the renovation and maintenance of streets and sewers are included in the water/sewer fees or the general municipal budget. This way, all residents of the community pay for it, not just the neighbors of the affected street. I just wanted to emphasize that a large amount should only be expected if this initial development has officially not yet taken place. Otherwise, you naturally have to contribute to renovations through the regular fees, but not a lump sum of 20,000.