On the Internet, the addiction to "the fast euro" has always been rampant. That calls again and again unseriose offerers for consulting services on the plan – also within the range of the construction financing. They give dubious tips, how one can save allegedly terrific sums and how real estates can finance themselves practically. These bait offers for your construction financing should always (really always) be questioned. We clarify and reveal in particular those tricks that sound plausible, but can lead to a financing disaster.
Like so many other industries, in which it concerns much money, also the range of the building financings is not safe from dubious, so-called consulting services, which promise the golden from the sky – speak: a particularly favorably financed real estate – to an unsuspecting customer, in the long run however only the risk of large difficulties partly drastically increases.In the following you read about five examples of bait offers for your construction financing, which sound tempting and plausible at first glance, but in the worst case can bring the borrower into serious financial distress and should therefore be treated with caution:
1. Loans in foreign currencies
Is exactly what it sounds like: you can as a German loans in other countries or. Borrowing currencies. Comparatively stable currencies such as the Swiss franc or the Japanese yen are popular, for example. Every now and then you will find credit offers abroad that may be more favorable in terms of interest rates than those that are available in Germany at the given time. In principle it concerns however a gambling with exchange rates, because finally the foreign exchange must be converted nevertheless again into euro.
For smaller, uncritical amounts, such speculative transactions can certainly be made – but large-volume borrowings such as construction financing, for which many home builders often have to plan decades of their lives, loans in foreign currencies are simply too uncertain – especially in view of the still not really over crisis of the euro and the unstable situation in the Middle East, each of which can cause turbulent stock markets and exchange rates.
2. Financing without equity capital
Who wants to build a house, but cannot or does not want to bring in own capital funds, can let themselves be submitted appropriate offers to the full financing by the banks. On the one hand, this is more expensive than financing a house with equity, because more interest has to be paid. On the other hand, one exposes oneself to an increased risk of getting stuck in deep debt – for example, if illness, job loss or other, personal strokes of fate occur.
A high basic income, a secure job and good health are important, so the chances of losing earnings are low. Generally one should meet the model of the full financing however with skepticism and bring in own capital funds of at least 10 – better 20 – per cent or save besides. And remember: land transfer tax, notary and broker costs do NOT cover a construction financing loan.
3. A property can finance itself
Can it (i.e. the real estate) quite, but there the basic conditions must be then already very tidy. A goal is that the renting incomes cover quasi the rates, which one as a real estate owner (in spe) for a financing must berappen.
However, there are many stumbling blocks: A bad location of the property can reduce the value or even the rental income in the long run instead of increasing it. Likewise, how much money you have to put into refurbishment, maintenance, operation and other things also plays a role.
Also not to be neglected is that there is an increasing demand for housing for single households, which do not have too large a square footage requirement at all (ca. 50 to 70). Who invests here wrongly, will pay in the doubt nevertheless also draufzahlen.
Last but not least, there is of course the question of whether the tenants will pay their money, whether tenants will be found at all in a timely manner, for example as replacements after the previous occupants have moved out. Especially with reliably paying tenants the concept of "self-financing real estate" stands and falls. One should definitely not rely on a success and have equity capital in the backhand for emergencies.
4. Real estate yield from the vacation paradise
Demanded, well-booked vacation apartments or vacation homes, for example in climatically attractive countries in Southern Europe, promise handsome returns all year round. And if necessary, you can even take a few weeks vacation yourself. Sounds tempting, but can quickly turn into a financial disaster. Because you don't live locally, don't know or can't uncover the circumstances and legal pitfalls well enough, and furthermore are all too quick to rely on promises from people whose mouths are as loose as their consciences are bite sized.
Always a problem: freedom from encumbrances. If you purchase an existing property or land, you may come across a prior encumbrance from a previous owner that was not even mentioned, planned, or contractually agreed upon. And in countries other than your own, the mills of the law sometimes grind much more slowly and less insistently. The 2008 real estate bubble in Spain, for example, came about in part because favorable lending rates and government subsidies led to a construction boom whose results were beyond demand, and suddenly rising lending rates finally finished off the value of the already overvalued properties. Foreign investors must also reckon with such dangers – that is why the following applies here in particular: Anyone who cannot cope with financial setbacks should refrain from such real estate ventures.
5. Adventurous financing with equity funds
Especially from the end of the 1980s, when there were dream returns for equity fund investments (at least compared to today) – at times even eight to ten percent were possible with halfway manageable risk – some contemporaries thought it was a good idea to repay real estate loans by investing in equity funds. Often with the ideal idea of making an additional tidy profit, because the return is still significantly higher than the cost of financing.
What may have seemed feasible at the time is, in view of the development of the stock markets over the past 15 years, only bearable for people who have nerves of steel and emergency capital up their sleeve. Under no circumstances should one rely completely on unstable value investments such as shares, if it concerns a financing of the financing.
If you take these 5 tips to heart, you will be able to identify lure offers well and get to the bottom of them by asking the right questions. On the other hand: Who spreads such enticing offers, does not appear respectable. And do you want to talk to dubious providers at all?
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