I have good news and bad news! The good news is I bought another farm yay 😀 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 😛
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.
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. 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 ಠ_ಠ.
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 🙂 Wait, a personal finance blogger is advocating the use of credit card debt? Yup 😀 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 🙂 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. 🙂 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! 😀 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. 🙂
[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 🙂
[Update Sept 2013] Looks like I have successfully accumulated my $25,000 and then some. 🙂 This farm deal can go ahead as planned.
[Update Sept 2014] 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. 🙂 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. one can do that with onestop.gov.bc.ca. Further east Ca4it is a company that can help with incorporating in Ontario. There are many choices. I will leave my options open for now.