All Forum Posts by: Kai Van Leuven

@Joe Villeneuve is that a cashflow calculation or something else? Never heard of debt servicing being included in a cashflow Calc. Wasn’t your whole point that putting down too much is a bad thing. I am getting paid to buy houses and it’s also a bad thing. Which side of your mouth should I believe because you are talking out of both of them?

Like I said, you don’t understand the basic principle of cashflows so trying to explain it to someone who does not want to understand is a challenge. 

You have to work 10x harder than I do to make the same return. I would say I feel pretty happy with how to leverage property.

@Joe Villeneuve

I was curious on how my one house compares to your multiples. I plugged it in on excel and did a 5 year IRR. You might have to do some research on what constitutes a cashflow, from a financial perspective. It is pretty funny how my single deal has a higher rate of return than 7.5 of your deals. You have also depleted out your cash in the process.

Assumptions:
700/mo income over 7.5 properties

I plugged in your numbers and this is what we come up with on an IRR

Your 7.5 houses:

My Single House:

@Joe Villeneuve

How did you miss the detail that I took out 250k from a 150k investment. Where did that come into your Calc.? Although it’s all out there another format might help

Series of Cashflows

-150k purchase price and Reno

-1200/month net (taxes and ins. Deducted) for 2 years, 28,800 over that term

-250k refinance (I would consider this a large cashflow)

How does that work into your Calc? Did you miss that the other 2 times?

I guess I will go at it line by line

1 - If you think my comments are "cash flow vs. Down Payment", then you don't understand what I'm saying...at all.

Your whole argument that a large downpayment hurts you is silly at best. Everyone knows that assets are always repositioned. The idea that a downpayment effects a "deal" is very shortsighted. 

2 - When I give examples my numbers are specific to an actual property...not some arbitrary "Little Yellow House"

It is a little yellow house, I own it. I have for 6 or 7 years. I don't really feel like looking up the date and I don't post addresses of deals I have done. 

3 - Again, specific numbers...not "Rent 1475 - 1800"...and the rent isn't what the analysis is based on. It's based on the CF...which you make no mention of at all.

I started at 1475, it rents now for 1800. I make a small amount on the property each month. I don't consider monthly income to be a huge reason why I buy property. You really miss all the other large "cashflows" if you are focused on monthly. The Monthly keeps your head above water.

4 - In your previous criticism, you say I left out a number of things, and yet you mention rent...but no monthly expenses. Why?

I just don't like to put it all out there. I am a private guy.

5 - How many years is "...a couple of years..." payoff?

It has debt on it now. My point was, when I first bought the property in cash, I waited to do a refinance. I collected the rent, 1475 at the time, and waited until the right time to pull out money. You might consider that "dead equity" but I also was not paying interest on it and having the money sit in my bank account.

There's a huge difference between total cost and actual cost...which I don't think you are grasping. 

If on a refinance I get out about 100k more than I put in, who really cares? 

My point is this, down payment does not matter. If you are dealing with a liquid'ish asset (conforming SFR), you buy a great deal, and you plan on growing, you will reposition (sell, refi, ect.) that asset before you pay yourself back off monthly CF. If you limit your down payment, or pay in cash, it really does not matter.

@Joe Villeneuve

My overall thought is that the purchase price is the only thing that matters. Your “cashflow vs down payment model” to me, is a terrible strategy. My example;

Little Yellow House

Purchase: 127k

Fix up: 25k

Down Payment: Cash

Rent 1475-1800

I let this house be paid off in cash for a couple of years until I needed the money for another investment. I could have BRRR'd it after the seasoning period and taken the money (Value around 350k) but I didn't have a need at the time for the money.

My point is that if I would have just been into it for the least amount, or refinanced it when I didn’t need the money, or any other dogma that is pushed. It would have not made as much sense.

Getting a good deal is what matters.

@Joe Villeneuve

Aren’t there a tons “cash flows” (positive and negative) that are missing with the examples you are giving? What about;

Refinances

LOC's

Cap Ex

Repairs

Selling gains

Selling costs

Legal fees

Your examples are really over simplified and I fear are leading new investors to look at deals from a linear lens. Investing in real estate is competitive and strategic. Sometimes I buy in cash, put down the minimum, refinance no matter what the rate, refinance because of rates, or make any other choice based on market conditions.

@Kade Robertson

Why not go the simplest route and buy the house from your parents. You already have 50% of the asking price. Work something out with your dad.

The main reason I bring this up is losing the ability to leverage your primary home makes things really hard from an investment standpoint. You can't do a HELOC, cashout refi, or show it as an asset on a personal financial statement.

50% down is pretty hefty on any investment and the money will become pretty illiquid at that point. You could be into the house around 60k (20% of 300k) and have a lot more options.

@Joe Splitrock

I always say those guys have not been working on a construction site all day. I have never met a construction worker who has perfect hair, skin, and a tool belt without sawdust on it.

Usually when I am working I look borderline homeless. My brother showed up to look at a house I was recently working on and told me “you look like you just got out of jail”, I could not stop laughing.

@Antony Charlier

What to avoid: Overpaying for Property. If you overpay you are always stuck. The costs to sell is around 5-10%.

Monthly Cashflow is nice but not the most important thing in investing. The objective should be to make money, that looks different in a lot of markets.

@Mike B.

Thanks!