The real estate boom, with skyrocketing sales and prices, is giving rise to speculative phenomena that are moving to the limits of legality. One of the trends that is emerging among small investors is that of purchasing multiple homes practically at the same time, a few hours or a few days apart from each other, in order to have a mortgage for each of them and be able to purchase multiple homes with as little money as possible out of pocket. By applying for loans from different banks and signing purchases and sales with different notaries, financial institutions do not realize that the customer is getting into debt, because the Bank of Spain’s database, the CIRBE, takes about a month to update.
There are numerous videos on YouTube in which investors explain how they completed this operation. As are the broker mortgage companies offering their services to fit together the pieces of the convoluted real estate puzzle that involves obtaining mortgages and signing on the deeds of two, three, four or even more apartments in the near future.
Bringing the theory back to earth, this modus operandi It allows a small investor who obtains three mortgages for 80% of the value of three 100,000 euro properties – the most profitable are usually the smaller ones – to have to pay just 60,000 euros, to which another almost 30,000 euros in taxes should be added. Thus, for around 90,000 euros in total, they could accumulate three properties in one go. This leverage on the bank’s resources allows them to scale their assets much more quickly and, in a context of high rental demand, to quickly cover the costs of mortgage payments with the monthly installments paid by their tenants.
Antonio Domenech, a mortgage consultant, is one of those who tries to attract customers for this type of operation through his YouTube channel. In a video titled How to take out two mortgages at the same timewith 2,400 views, he admits to having experienced it firsthand. “Many of you say to me: ‘Hey Antonio, can you sign two mortgages at the same time?’ The answer is a resounding yes. I have done it and many clients turn to me to be able to do it, sometimes even obtaining 100% mortgages”.
Then he explains step by step how the trick works, which involves loan approval times, appraisals and finally, above all, signature. “You have to make a date and an appointment at a notary’s office to sign the mortgage, and then another different date for the other one. It’s about coordination. I specialize a lot in this. (…) If, for example, you sign a mortgage on January 15th, it won’t appear on the CIRBE until February 21st, we have a month or a month and a half to play”, he concludes.
Domenech’s is just one of the numerous testimonies on the subject that can be found online. When all goes well, the buyer is able to hoard the houses, exceeding the solvency limits of the banks, which usually require that mortgage payments do not exceed 40% of the buyer or buyers’ income. But the risks are no less.
Risks
Unforeseen events such as delay in processing one of the mortgages or the seller requesting more time can ruin the entire plan. And they make those who try lose a lot of money, given that if they do not obtain sufficient funds they can lose the deposit paid for the purchase of one or more houses, which usually varies between 5 and 10% of the value of the apartment. Some broker Mortgage companies try to take advantage of the enormous stress resulting from managing the paperwork for several parallel loans and the uncertainty of whether everything will go well, to delegate clients to them in exchange for a commission that can exceed 4,000 euros.
There are other dangers, both for the bank and for those who deceive it. It may happen that one of the institutions ends up finding out and denies the loan. Or that the excessive debt load prevents the buyer from meeting payments if a tenant stops paying or significant losses occur.
Another less complicated way to pass the solvency criteria without attracting the attention of the bank that some investors use is to apply for a personal loan at the same time as the mortgage. The mechanics are the same: they have to be closed almost simultaneously so that it is not reflected in the CIRBE, but it has its own particularities. Although it is easier to grant, the interest paid is much higher, making it a less profitable option.
