Cloudy windows, moldy corners and a tiny bathroom: Many houses are so old that comfortable living is no longer an option. On real estate portals you can find such shacks in abundance and often at such low prices that prospective buyers ask themselves: Can’t you tear down the old walls and build new ones on the property? Can you even get a bargain that way?
“Demolition and new construction are currently more and more an issue for us,” confirms Björn Pätzold, specialist in construction financing at the financial services provider Dr. Small. New building land is particularly popular in the suburbs of large metropolises. But Pätzold also warns: Home buyers should carefully calculate whether a demolition plan is financially worthwhile.
In many places, scrap real estate can be bought for as little as 120,000 euros. For the demolition alone, however, depending on the location and size, between 20,000 and 30,000 euros are added – and then the dream house is far from being built. House builders can empty the property as much as possible themselves and thus save a little money. However, Dr. Klein expert Pätzold believes that carrying out the demolition entirely on his own is a mistake. “Demolition companies have the necessary experience, all works and vehicles and the corresponding insurance cover,” he explains. Laypeople should not do without this.
Is demolition even allowed?
Nor is it advisable to try to reuse as much of the old property as possible when building a new one. “In order to be able to build a house according to the current state, a new foundation is required. And after a demolition, all lines must always be re-laid in accordance with the prescribed DIN standards, ”says the real estate expert.
Builders should also check whether the city or municipality even allows the demolition. In principle, homeowners are free to decide what to do with their property within their property boundaries. The authorities can still prohibit demolition – for example, if a house is in an urban conservation area or is a listed building.
There are also pitfalls in financing. This is “more complex than if you leave the house,” says Pätzold. The good news: banks generally consider demolition costs to be part of ancillary construction costs. So builders can finance the demolition with a real estate loan. The conditions are usually much better than with a normal installment loan. Many banks already offer building loans with a fixed interest rate of ten years for less than one percent interest.
However, if you want to make new out of old, you should plan enough buffer. Pätzold advises having 40,000 to 50,000 euros on hand for unexpected expenses. “If the sum is not needed, it can be brought in later as a special repayment,” he says. It is also important to look at the commitment interest. Unlike real estate buyers, builders usually do not call up the loan in one fell swoop, but gradually. For the part that they have not yet used, they pay commitment interest to the borrower. The following applies: It pays to compare, because the range is enormous. Some houses take three percent interest, others only 0.25 percent. Many banks also grant a so-called provision-free period in which home builders do not have to pay interest. Depending on the bank, this is three to twelve months.
Real estate compass
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