Apr 292013
 

I have good news and bad news! The good news is I bought another farm yay ๐Ÿ˜€ The bad news is I have to find a way to raise another $25,000 by the end of July for the down payment or I lose my $17,250 deposit forever (O_O) Would anyone be interested to buy some short term, securitized Liquid Independence bonds with farmland being collateral? Lol, just kidding ๐Ÿ˜›

The property I bought earlier this month at an auction was for 150 acres of grain farmland for $172,500. I had to make a 10% (or $17,250) non refundable deposit. But I didn’t have $17K sitting around. So I used my TD bank’s line of credit at 5% interest rate to basically borrow the entire deposit amount and then transferred the money into the agent’s trust account.

13_04_farm2purchase

Unfortunately I bought this farm before I had time to get my financing in order. All lenders these days require a minimum of 25% down payment. My 10% deposit will of course be part of the down payment, but I need to come up with the remaining 15% of the purchase price, or $25,875. I currently don’t have a lot of cash on hand. Perhaps just enough to cover the closing legal costs plus a little extra. This farm deal is scheduled for completion at the end of July. That gives me 3 months to come up with about $25,000.ย  I can’t even save that much in an entire year, haha. But where there’s a will, there’s a way, and I have to find a way because my $17,250 depends on it เฒ _เฒ .

Unfortunately that 10% deposit really did a number on my line of credit account. I’m now using $33K of my $40K credit limit. So there’s not much room to borrow anymore. And they won’t raise my limit, I’ve asked. I could sell some stocks to raise cash or use my credit cards which has a combined limit of over $10K ๐Ÿ™‚ Wait, a personal finance blogger is advocating the use of credit card debt? Yup ๐Ÿ˜€ I don’t believe in good debt or bad debt. Only the cost of capital matters. I would gladly pay the 19% annual interest rate on a $10K credit card balance if it means saving my deposit ๐Ÿ™‚ It’s not clear to me yet how I’ll raise the entire $25K, but it will likely be a combination of what’s already been mentioned.

Was it a bad idea to buy a property without getting pre-approved for a loan first? Maybe. ๐Ÿ™‚ Was it risky to wire someone $17K knowing that I would lose all of it if I can’t come up with an additional $25K? Okay, yes it is! ๐Ÿ˜€ But we only live once, and sometimes I like to add a little excitement in my life to spice things up a bit. I am so ready for this challenge \(^_^)/. I bought my first farm last year with $20,000 of my own cash and borrowed the rest to make up the total purchase price of $150,000. Average farmland prices around that area grew by nearly 20% in the last year so today that same farm that I bought is probably worth well over $170,000. I’ve just made over 100% return on that investment and became $20,000 richer. So I just couldn’t pass up another opportunity like that. I’ll keep everyone posted on how this second farm purchase turns out. ๐Ÿ™‚

[Update Jun 2013] The seller has kindly changed the closing date of our purchase agreement to sometime in October instead of July. I’ll keep everyone posted ๐Ÿ™‚

[Update Sept 2013] Looks like I have successfully accumulated my $25,000 and then some. ๐Ÿ™‚ This farm deal can go ahead as planned.

[Update Sept 2014]ย It’s been a year since I’ve owned this farm now. Looks like it was the right decision to purchase it because the value has gone up by more than 10% so far. ๐Ÿ™‚ This farmland is held inside my small business account so I can write off expenses for it. Who knows? Maybe one day I’ll incorporate my company too. In B.C.ย one can do that withย onestop.gov.bc.ca.ย Further eastย Ca4it is a company that can help with incorporating in Ontario.ย There are many choices. I will leave my options open for now.

 

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Not Working
Not Working
04/29/2013 1:52 pm

1000$ Here ๐Ÿ˜› haha sad it doesn’t work like poker stacking

plantingourpennies
04/29/2013 2:02 pm

Good luck. Do you have any equity in the other one that you could tap relatively cheaply? When we needed money to buy our canal lot we used a HELOC on our duplex to fund half of the purchase. We had the rest in cash.

CF
04/29/2013 2:03 pm

Need business partners? ๐Ÿ˜‰

Brian
05/01/2013 5:15 am

Sounds good! I would advocate for seeking some stocks to come up with the capital. You’re just shifting investment classes, so I think You should do that before using a credit card.

Pauline
04/29/2013 2:31 pm

totally my kind of money moves lol. the bank of mum is my favorite for easy credit.

Cassie
Cassie
04/29/2013 2:33 pm

I don’t know how you feel about this idea, but could you borrow the money from your parents and pay them back with the rental income off the property for the first few years?

Debt Roundup
04/29/2013 4:29 pm

Ballsy move, but I love it. Jumping on it without full funding, but I think you will make it work. I just hope you don’t lose the deposit. Why don’t you put a donate button the site and see if people will be willing to help you out?

Anonymous
Anonymous
04/29/2013 4:32 pm

Did you put only “YOUR NAME” on the offer?

You ever think about joint venture? Basically, since you found the property, another investor puts up all or most of the down payment and but you still get 50% equity.

RetireInNiagara
RetireInNiagara
04/29/2013 4:33 pm

Hey, you got friends out here that will lend you money at 3% (ummmmmmm per month lol lol)
Good luck I’m sure it will all work out, you got time to work on it.

Phil
04/29/2013 4:44 pm

As someone else above has said, ballsy… but I’d consider loaning you some cash if you come up short, noyt that i think you will come up short as you are quite creative… My terms would be 7% ROI, but it needs to be paid by 30-Dec-13. So that means keep it for a day, month or until the end date, but you return to me 107% of whatever you borrow… think I’m bluffing (O-o) – you’ve got my e-mail – Cheers.

Phil
04/30/2013 2:02 pm

Like I said, you are creative, and I have no doubt you will attain your goal, but on the off chance you come up short, pop me an e-mail, and I’m pretty sure we can work something out. Out of curiosity, do you do your own taxes? I’m curious becasue they must be rather complicated with your diversified portfolio of assets and array of income sources. – Cheers.

Girl Meets Debt (@girlmeetsdebt)
Girl Meets Debt (@girlmeetsdebt)
04/29/2013 5:28 pm

I like how you’re a badass PF blogger because you “donโ€™t believe in good debt or bad debt. Only the cost of capital matters” Favorite quote of the day! ๐Ÿ™‚

studentdebtsurvivor
04/29/2013 5:36 pm

Congrats. Sometimes you have to take risks to get ahead.

Dividend Growth Investor
04/30/2013 5:19 am

You can withdraw funds from your stock account without selling anything, if you are approved to use margin in your brokerage accounts. There are risks involved however, so you need to not take out too much. So if your stock portfolio is valued at $100K, you can easily take out $25K. Even if markets crashed by 50%, you are still ok. And the dividends you receive will be paying off the loan for you too ๐Ÿ˜‰

Canadianbudgetbinder
04/30/2013 5:49 am

That’s tough, seems like you had to jump on it fast otherwise risk loosing the deal. I think you’ll pull through, that’s a pretty nifty deal for what you picked it up for.

KC @ genxfinance
04/30/2013 6:36 am

That’s really awesome. Good job for taking the risk and see how it pays off. More power.

Brian
Brian
04/30/2013 6:45 am

I guess there are always loan sharks if you were really desperate? I also hear kidneys can sell for a lot!

All kidding aside… good luck raising that 25K! Do you have any family members who might want to own shares in you?

writing2reality
04/30/2013 7:43 am

Splendid! I was just wondering how the second farm purchase was going! People above have mentioned the big three available in my opinion, Joint Venture/Partnership, possibly margin from an equity account, and the bank of Mom and Dad. Good luck with whatever option you end up finding!

If you were in the states I’d recommend peer-to-peer lending.

Fee A
Fee A
04/30/2013 8:40 am

Hi there! I have been following your blog from the early days. Sometimes when I see your latest risky moves (sorry ‘leveraging’ lol), I have to read it while peeping through my hands over my eyes, just like when I used to watch ‘Dr Who’ as a scaredy cat kid. Thrilling to watch but I wouldn’t have the guts to do it myself!

Cat Alford (@BudgetBlonde)
Cat Alford (@BudgetBlonde)
04/30/2013 9:20 am

LOL – nothing like a little bit of pressure to get the fire under your ass. ๐Ÿ˜‰ I have no doubts that you will figure this out. I’m looking forward to reading about it!

JC @ Passive-Income-Pursuit
04/30/2013 1:59 pm

If you really believe in the no risk/no reward then I guess you could go the bank robbery route. ๐Ÿ˜‰

I have been looking at trying to get some real estate exposure so I would be interested in a joint venture/partnership. I think that or liquidating the stock portfolio is probably the best way to go.

brickbybrickinvesting2012
brickbybrickinvesting2012
04/30/2013 4:29 pm

I’m sure you will be scrambling over the next month but a year or two from now you will look back on this and laugh I’m sure.

Alex Yang (@yyangalex)
04/30/2013 7:01 pm

oh boy haha. quite the predicament. im surprised theres even people willing to loan you money off the web. sounds exactly like how those “i loaned money to person X and then they disappeared” stores in the globe & mail or tor star get started LOL. the funny thing is, the terms that some of these ppl are offering, i cant tell if they’re actually trying to help, or trying to rip you off

the fact you have equities though, you can always sell those, esp with markets at whats likely a short term high. paying credit card interest instead of liquidating securites seems like insanity to me… hmm

Phil
05/01/2013 3:01 am

You cannot have everything overnight. Alex is bang on. Your best option is to sell a few of the poorer performing or arguably those dividend stocks which have had lless growth over time. Pick the weeds to water the flowers they say. You certainly have all the resources at your own fingertips to cover your endeavours from what I have seen. The real purpose of my offer is to get you past the point of possible panic, since bad decisions are usually made during moments of panic. I think you would be short changing yourself if you used any of the above mentioned suggestions, including mine, other than those that involved “rebalancing” your own portfolio to cover the costs. If you can teach yourself this now, you can learn to be truely financially independent – Cheers.

Phil
05/01/2013 3:41 pm
Reply to  Phil

Use your 20+K in your TFSA… That is what the account is meant for… That way it keeps most of everything you have intact, and in 2014, when you are rolling in the dough once again you will be able to add the amount you took out back in…

Greg@ClubThrifty
05/02/2013 3:51 am

Wow! Congratulations…and i think it is awesome that you have so many people helping!!!

The Dividend Engineer
05/02/2013 4:57 am

HI Liquid. I’m adding my two cents to an already rich conversations full of interesting ideas.

You could:

– Ask for love money from people in your family and/or from your friends. If 10 persons each give $2500, you could easily fund your purchase. As a commenter mentioned, you could payback these people with the rental income.

– Put a second mortgage on your other farmland.

– Incorporate a company, sell non-voting shares to people in your family and/or to your friends. Obviously, the company would be co-owner of the land.

– Propose a possible tennant a deal to help you finance the purchase. For instance, you could allow the tennant a “free use” for the value of $25000.

– Ask your lawyer to front you the money.

Keep us informed of the deal!

The Dividend Engineer
05/03/2013 4:27 am

The incorporation process is not long. Two or three days. And it’s not that expensive, about $1500 for a simple company.

addvodka
05/02/2013 5:33 am

Wow, you are ambitious! I love it! Good luck, I know you’ll be able to do it.

agentfang
agentfang
05/02/2013 3:14 pm

Looks like someone is spending way too much money these days!! Tsk tsk tsk, you should know better haha.

Mo' Money Mo' Houses (@momoneymohouses)

Your a displaying YOLO to the max! Hope all goes well with farm #2!

GazD
GazD
05/07/2013 4:38 am

Sorry can’t give you advice but I really like the way you’ve put yourself out there and let the “how” to take care of itself. I think we limit ourselves all to often saying “I can’t…” instead of “how can i…”. Thanks for sharing.

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