ᐅ Residential construction on an existing building – parents’ property

Dear Forum,

My plan for this year is to gather preliminary information to carry out the following project. I would like to build two apartments on an existing building (approximately 300m³ (10,600 ft³) of floor space) on my parents’ property. These apartments are intended to be rented out upon completion, with the rental income contributing to or largely covering the repayment of the loan.

The location is between Düsseldorf and Cologne in an attractive residential area with stable or increasing demand. I am 31 years old and have a permanent employment contract, but I do not have significant savings that could be used. If there are considerable advantages, a joint family project might make sense.

The property belongs to my parents, and the building offers the possibility that the land and foundation are already serviced. I assume this significantly reduces costs compared to building a new house. Regarding the loan, it is likely beneficial to already have the land as collateral. However, the question arises of how best to proceed with using land owned by my parents. What options or concepts exist in this regard?

I still have significant gaps in knowledge related to residential construction, financing plans, inheritance planning, and similar topics. I have planned this year for solid preparation, including consultations, planning, and networking.

Perhaps someone can already offer an assessment or keywords that could be helpful for my research. As I have not yet conducted extensive research, I do not expect lengthy responses, but I would greatly appreciate a friendly, critical, or inquisitive reply.

Thank you very much,
Fabian

Advanced88 schrieb:

Regarding the loan, it is certainly advantageous to already own the land. However, the question arises as to how to best manage this with parents’ property and what options exist.

It’s actually quite simple. You take out the loan; the land plus existing building and any extension belong to your parents. They secure your loan with their property. You don’t directly benefit from this other than building equity for your parents. If you fail to repay the loan, your parents risk losing their house. Rental income, by the way, goes to the parents, who must also pay taxes on it.

I am not a fan of building a first home for others who will just live in the property.

I would first clarify whether the additional floor is even eligible for a building permit / planning permission.

hanse987 schrieb:

I would first clarify whether the extension is even eligible for a building permit / planning permission.

And whether residential use for two families is permitted.

HilfeHilfe schrieb:

I’m not a fan of building someone else’s first home that they will just occupy.

I might live there myself later, or for example, my parents if they want to downsize. Or my brother. So, it’s a family project.
Why aren’t you a fan of it?

hanse987 schrieb:

I would first clarify whether the additional floors are even allowed by building permit / planning permission.

Two more stories are permitted to be added to the building; it was rezoned as building land a few years ago.

kaho674 schrieb:

And whether residential use for 2 families is allowed.

That should not be a problem. Next door, there are four-story townhouses spread over 10,000 m² (2.5 acres), and the building is already approved for several floors. I will check it, though.