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8 Nov 2014

THREE MORTGAGES IN ONE YEAR

When I was quiet, its been crazy in this household. We actually applied and got three mortgages in one year after paying off all our homeloans. This scares many people but I guess its just our life. We go through some sort of preparation before we apply for a loan because we just can't stomach rejection. We are cowards like that! We also use our rental income in a spreadsheet with bank statements as proof of extra income. Now on to the story of us accessing three big mortgages in one year. A truck below being testament to our latest move from house to house.
Three Mortgages in One Year - Moving House
Every once in a while I itch to go through a renovation project. It seems to be a very strange feeling to many, but I on the other hand have accepted the fact that I am not normal. I definitely don't want to be normal, thank you very much. As this "renovation itch" time approaches, I started searching for a good fixer upper in the area of my dreams. I saw a gorgeous traditional style 1960s Victorian property listed online, with all 5 bedrooms, 3.5 bathrooms, a study, 2 kitchens and outside rooms. It was everything I ever wanted to work on beautifying. The only problem was that we were away as a family and would go back home in a week's time. I lost the listing and never bumped into it ever again in that week. 

The Viewing
Back home we started calling real estate agents to show us the properties in that same area. We love gated communities for obvious reasons. One agent took us out to a 3 bedroom house with a lot of ground to extend the house. As we were driving to the show house right behind our agent's car, we drove past the Victorian property I saw online. I froze inside the car but I didn't want to disrespect the agent by asking her to stop. This was such a painful discovery. I knew that I want that old house but without an idea how I will make that happen.

We viewed the 3 bedroom property and asked the agent to email us an "offer to purchase" form as we take the decision. We were too excited by the possibility of extending the current structure or rezoning the place into a two duet property. We could sell or rent out the one house and live in the new house. The house wa nicely placed in the front portion of the stand with massive land behind it. The stand measured about 1300+ square metres (14,000+ square feet). The agent lead us the other direction, to get out through the other gate of the estate. Meaning that, I couldn't see the Victorian house as we drive out.

The Search Re-Launched
We waved goodbye to the agent as we were trying to get back into the estate to see the house we wanted one more time. The Mr had not seen it as we drove fast past it the first time. Unfortunately, going back in there was impossible. Back home in my laptop, the search began. The house reappeared on my screen. I wanted to jump up and down. It was listed by only two agents (dual mandate). We called the first one but she seemed not interested to take us to see the place. We called the agent in the second advert. She was available immediately. The house was absolutely crazy dim and ugly inside. Just think OUTDATED everything.

We made our mind there and then. We'll sign in the dotted line. Almost 1600 square metres (17,000 square feet) of land and a lot of space to play around with remodel ideas. Solid structure without a single crack in sight. I looked at it and thought to myself, "I am absolutely home". Finally, a house with a veranda (porch) as large as a playground. We were pleased and arranged to go view it in a few days just to be sure. The house was on the market for only a week plus at the time.

After the second viewing we went to sign the offer to purchase. One couple had beaten us to it. We signed the offer anyway and offered the lowest we think the sellers would accept. A saving of more than R200,000. We were convinced that the place was listed below the market rate to start with. In just a few hours our agent called and told us that our offer was accepted. We were beyond thrilled. We were told that the lady from the other bidding couple cried. I understood her as I probably would have cried in her position too.

Mortgage 1 and 2
We financed this property with two mortgages. I will never have enough space to unpack that process in this article. But to cut the long story short, the interest rates we were charged were too high on a new mortgage. We decided to get a re-advance on two of our fully paid mortgages. Those were two super cheap homeloans.

We moved into the new home. It has been a hectic year trying to clean the place up. Removing carpets, splashing paint, etc. Our home was now light and getting there quick when we spotted another house for sale within the walking distance of our new home. We called our agent to investigate the owner and negotiate an offer. The price was non negotiable.

Mortgage 3
We were back at the bank door asking for a homeloan with our 20 percent deposit (down payment) in hand. This one house was in an office street. We wanted to rezone it into a commercial property. We go crazy when we see an opportunity to try something we have never done before. We immediately searched for town planners, architects and quantity surveyors. Finally, we have a commercial property. The process has been a money drain but we are still happy we dived right into the deep end. Our residential rental properties are hard at work financing this project. This is a life changer.

That my friend, is how we moved from having no homeloan to having three mortgages in one year. We are still working on this commercial project. Our calculation shows a return on investment of 17%. That is more than we can ask for.

Our Plan
Renovations on our current home are very slow. This is an asset that is underutilised. We are planning to complete the renovations on it and the commercial project and rent both out. Meaning that in a few years we will definitely be homeless again. We live in a construction site all the time. Super crazy, I know. We have a few ideas to try with existing investment properties, in order to raise their productivity and rental rates.

We had a hectic year. What a ride! Building wealth has never been this exciting. Its tough at times but overall exciting. Just remember this: It is POSSIBLE to do this for anyone. I may come back on the process of applying for a re-advance and a reasoning behind taking that path to finance our property.

To ask any questions from me click here...

Many blessings,
SISA

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