Work out your “true” budget

From your set budget, you need to work out your true, realistic budget. You need to take into account all the things that traditional agents assume you know – but you usually don’t (at least the first time around). Such as:

• Stamp duty: purchase fees and taxes are an important item: budget 8% of the price paid to the seller – excluding any agents’ fees or the cost of furniture you could be buying form the seller;

• A bit of work: Even in the perfect house, you will want to make a few adjustments: redo the kitchen, get a paint job in the living room or modernize the upstairs bathroom. Depending on the size of the house, you should set aside 20,000€ to 50,000€;

• Swimming pool or garden: If the house you like doesn’t have a swimming pool, you should set aside 30,000€ to allow you to put one in – or just 5,000€ to modernize the one that might be there;

• Agents: If you choose to use a property finder, their fee will come on top of the price paid at the notaire. Try and negotiate a flat fee so you know exactly what you should budget (without having to get a calculator every time). The seller’s agent fee is including in the price paid at the notaire.

So, if your budget is 500,000€, here is how you should allocate it:

• House improvements: 30,000€

• Exteriors: 10,000€

• Property finder: 17,000€

Which leaves: 500,000€ – (30,000€ + 10,000€ + 17,000€) = 443,000€. Divide by 1.08 to account for the stamp duty (8%), and calculate your “true purchase maximum” (TPM): 443,000€/1,08 = 410,000€.

Obviously, you will need to adjust this computation with your own “search & comfort“ factors.

For example, you may decide that you are happy to buy a property in need of renovation (see below). In this case you will need to increase the home improvement budget drastically. If you are ready tackle a (serious) 1-year project without structural work, you might budget 180,000€ for 180 sq.m (1,000€/sq.m). Under this scenario, your true purchase maximum becomes: [500,000€ – (180,000€ + 10,000€ + 17,000€)] / 1.08 = 271,000€.

© 2017 by Uzège Transactions et Développement

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