All Forum Posts by: Kevin Bellavance

@Kenny Dahill

Congratulations for your first property! Wish you best of luck for what's coming next ! :)

@Ronald Luangsisongkham

That's awesome. I know stock options are a geat way to make big returns. I am reffering to the real time options trading simulation I did last semester where I made 380K out of a 100K investment in 6 weeks. However, the part where it is not risky, I don't agree with it.  It is an extremely risky investment and that's why you can get big returns. Even though I did good in options, I wouldn't bet my own hard earned money on it because you can't control the market. If everything goes south, it ain't going to be fun. But you know, that's just me. I'm glad you were able to make some good numbers with your own money! That is something I wouldn't let myself try. Props to you my friend!

Regards

-Kevin

@Alan Corey

Hi Alan.

Let's say the property is worth 500 000$ at 95% occupancy based on its NOI and the cap rate.

Therefore, the same property with 50% vacancy would cut the NOI by about half since you lose half of its revenus.

Using the same cap rate for half of the NOI would lead you to a value of 250 000$. I don't see what is wrong with the bank. They will loan you 70-80% LTV. IF the property's worth 250 000, then they will loan you up to 80% of 250 000. There's no way they would loan you 80% of 500K if the property is worth half of it because it is half empty.

However, if the owner wants you to pay the price of 500K based on its NOI with 5% vacancy, it would be foolish to go for that deal.

Regards,

Kevin

@Garrett Gable

Sounds great!

And for the record, I didn't mean a college dropout was a bad thing. In fact, most people that inspire me the most are college drop outs. When you think about those Steve Jobs, Gates, Zuckerberg, Dell and all that. I don't believe schooling is in any ways necessary to make a fortune.

Regards,

-Kevin

@Garrett Gable

Great idea for the flips!

However, I hope you know stock market is in most case just luck. In fact, studies showed that a monkey randomly selecting shares of companies can achieve the same yearly return as the average traders in banks. Don't get trapped with all those ''fake overnight millionaires traders'' and all that BS guru stuff. I sincerely hope you know what you are doing if you go on with the stock market and that you trust those you are surrounding yourself with. I doubt you can make that kind of 15k profits in a couple weeks on the stock market with limited capital like you did with real estate. You would have to have silly amount of cash like hundreds of thousands or you would have to do very very risky things like venture capitalism, IPOs, option trading and all that (which is quite impossible for a young college dropout). Most newbies in real estate are getting better returns than the expert CFA (Chartered Financial Analyst which you find on wall street) on a yearly basis.

I am a Finance student and this is what I study all day long. Let me tell you, I believe you would certainly make more money by sticking to the real estate thing than betting on the market.  But you know, that's only my point of view. Who am I to give you advice.

Regardless of the way you'll take, I wish you best of luck ! :)

-Kevin

@Garrett Gable

Congratulations ! Very inspiring.

What's coming next?

@Doug Royce

Then in that case, if it was me, I'd go with option #2 as long as I find a deal within my criterias. I prefer having my money working day and night instead of doing nothing. Of course, it doesn't mean to go and buy anything regardless of the property and its return. This wouldn't make sense. If you stay smart and you find something great soon enough, then why not?

Best regards,

Kevin

@Blake Ziegler

Look, here's what I would talk about with the seller (you are quite lucky that seller financing is ''available'' even though it is not ideal).

Going through college takes about 3-4 years (where I'm from). Therefore, he (the seller) will need cash over the same period of time.

For the following analysis, take note that I didn't look at your spreadsheet. Therefore, it is being considered that your NOI is accurate and that it takes everything it should take in consideration when it comes to property analysis.

I would come to him with this :
I put 10K down.

I finance 75% with a bank since it will probably be considered commercial. This means the bank could finance 206K.

275 - 10 - 206 = around 60K missing. 
You ask him to finance it with something like this : 

Interest only (4-8%) for 36-48 months and a balloon payment of 60K at the end.

This could leave you with something like that:
Debt service =

Mortgage payment of 206K, 25 years, 4% interest = 1085$

Interest to seller (8%) : 0.08/12 x 60 000 = 400$

Debt service = (1085 + 400) x 12 = 17 820$.

NOI - Debt service = 35 000 - 17 820 = around 17 000$ in Cashflow or 1416$/month

Also, in 3 years, your mortgage balance will be at around 190 000. Therefore, without any appreciation, you'll have around 16K in equity that you can pullout by refinancing at 75%.

But, you'll have to pay 60K to the seller... 60K - 16K = 44K. 

44K / 36 months = around 1225$/month that you need to put in reserve.

1416 - 1225 = 191$/month that is left in free cashflow... 

I believe that if the seller is really willing to sell, he should agree with this deal. As for the bank, I can't predict if they are going to agree with that much seller financing. But if you go there well prepared with all the numbers already done, they will be much more inclined to accept the whole thing. Banks want to see professionalism and that you know what you are doing. Show them what they want and you have much better chances.

Please, consider that this is only a general number analysis. Before acting on any of this information, you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.

Best regards,

Kevin

@Blake Ziegler

Hi Blake!

How much cash do you have in hands? I'm thinking of combining the cash you have + seller financing + bank loan.

If you tell me what you have, I can help you figure out the numbers and all that.

Best regards,

Kevin 

@Tim O'Brien

Hi Tim!

Here's one scenario maybe you didn't think of :

First, I don't know your financial situation and I don't know where the cashdown for your next house will come from. However, if you have that cash in your savings account and you do not need the equity from your current house to make the down payment for your next house, you could refinance it.

Let's say you refinance the house, pull out 80K (non-taxable) and make a down payment to buy a multi-units fully rented out PLUS you rent the house you currently live in and move in the next house. This could provide you with nice cashflows AND you wouldn't have to pay capital gains (as long as you hold those properties).

How about that?

Feel free to ask if you have any questions.

Best regards,

Kevin