All Forum Posts by: Kevin Bellavance

@Patrick Philip Bank will get a 1st lien on the asset. Seller will get a 2nd lien on the asset. Therefore, bank has priority over the seller. In a case of non-payments and potential foreclosure, the bank has pretty much 3 choices :

1) They will become the manager of the property and collect the rent to pay themselves. 

2) They will foreclose the property and sell it in court or on the market so they can pay themselves back, in which case the seller doesn't get anything back as all sale proceeds above the mortgage will go directly to the bank. 

3) (Case we most often see) The seller steps in, and ''re-take'' ownership of the property in which case he can then manage the property and take full responsibility on the mortgage of the bank. 

At least, this is how it works in Quebec, Canada. I would advise to consult a lawyer or even a good real estate agent. They are often times really aware of those kind of processes. 

Hope this helps! Cheers!

@Duy Pham Get a good friend (with a salary) of yours to jump in. Aim maybe for a triplex/quadplex. When I was in college, I really wanted to buy a small triplex on the market (it was a great deal) but didn't have enough revenue to get a loan (minimum wage salary, part time) so I spoke with a friend and went back to the bank. We then got a mortgage approved since my friend had a full-time job. However, he backed out couple weeks later and it kinda stopped me right there. I had to wait out of University as my parents wouldn't co-sign either. Your best guess, in my opinion, is either to find a ''money partner'' with borrowing capacity OR if you really can't find anybody, make sure to save as much as you can while you're in college so you can buy something right outta the gate once you graduate. Cheers!

@James Mary Rent are really low in my area. I live in Canada. 

@Alyse Moore I would say, if you find a good deal in the 6-7 units, there's no reason not to go for it :)! I think it's just a fine size to start. Not too small, not too big. Got a friend of mine, he went from 4 doors to almost 200 doors in a couple months (with outside investors money). Now he's kinda stressed out. Start small, get used to it, and eventually you'll manage 100 doors like it's nothing :)! 

@Duy Pham Keep your savings, get a good w-2 job and you should be fine for a loan. I believe the 2 years requirement is for entrepreneur/freelancers with no guaranteed salary. For instance, I was able to secure the mortgage after 3 months of employment. Hope this helps!

@Samir Shahani All and all, negative $1500 a year. But strong cashflow is not my strategy for now. I just want it to pay itself. Here's why : Less cashflow (on purchase day) means lower NOI which means more potential in NOI increase which means more potential for forced appreciation. For instance, I bought this property at 375K and its worth 400K. I could refinance the 25K next year and pull it out to buy more real estate whereas I would have to cash flow 2K a year, for 12 years, before being able to do so (if we look only at the marginal 25K). I'm more value-investing (growth) oriented than cashflow investing (long term stability) oriented. **Obviously, once properties are optimized, I want them to cashflow at least 50$/month/door cause you can't sustain 30 properties not cashflowing. But one at a time, until it gets optimized and all, it's totally doable.

@Account Closed ROI is return on investment. You're computing cash on cash return. These are 2 different things, ROI = Total return (cashflow + capital payment + appreciation )/ Investment

In my case, the breakdown for year 1 is :

Capital payment : 12 payments x $1308 = $15,700 from which I paid $7,800 in interest. Capital paid is $7,900.

Appreciation : My market goes with 1.5% avg a year. 1.5% x 400K (FMV) = $6,000

Cashfow : 17,000 (NOI) - $15,700 (mortgage payment) = $1,300

Total Return : $7,900 + $6,000 + $1,300 = $15,200

Initial investment : $26,000

ROI : 15,200/26,000 = 58.4%

Although you're right, I forgot to include the Seller financing which costs me $2,800 in interest a year. 

Adjusted ROI : (15,200-2,800)/26,000 = 47.6%.

Cash on cash return would be : (1,300-2,800) /26,000 = -5.8%

Thanks everyone for the good words! It's really motivating! I'll make sure to share the rest of my story along the way ! :) 

@Steve Vaughan Hi Steve! Thanks for the positive feedback!! I don't have a commercial loan. It was done via the ''personal'' branch of the bank. Same kind of loan as for a house. My next one will have to be a commercial loan. Currently, rate is locked below 3% for 59 months. I, however, do not plan on paying my mortgage aggressively as I want to maximize use of leverage to acquire more properties. In Canada, we have a pretty stable economy and interest rate environment, fortunately. 

Cheers!

@Linda S. Yes, I hope to!!!

Good story you got there! 

Truly inspiring!

Cheers!

Hi all!

Just want first to thank Biggerpockets. These podcasts (which are so down to earth compared to those self-proclaimed guru's **BS** out there) have played a large role in keeping me motivated for the last two years when I really wanted to get into real estate but couldn't due to student life, lack of stable job, minimum wage, etc.

Anyway, fast forward a couple years, a diploma and a good job later, I just closed on my first apartment building. Here are the details :

-7 units, gross rent for 37K year. Net income of around 17K after operating expenses, maintenance, management and vacancy are accounted for. 

-Paid 375K, appraised at 400K on day 1.

-Seller financing over 5 years for 70K, 4%. Interest only over the 5 year term.

-Bank mortgage for 282K

-Cash needed out of my pocket : 23K + 3K in acquisition fees. Around 26K total. 

Total estimated ROI for year 1 (net income after interest expenses/cashdown) : 60%

I really hope everything goes as planned. I still have a few repairs to do on the building (obviously it's not new), but overall a good building in my opinion (also reassured myself with a good inspection pre-acquisition). 

So, that's it. Just wanted to share my first property story. Nothing compared to some of you who have had much more impressive beginnings but maybe if I can motivate a few beginners out there, then I'm happy with it. 

My advice : 

I've had analysis-paralysis for way too long and it amounted to nothing but stagnation. So, take a deep breath, take calculated risk and go all in. Just don't suck at maths :^) !

Now, on to doubling my asset within the next year!

Cheers!

@Jay Hinrichs thank you for your feedback! But I'm really into real estate and i have already another business running. I'm looking to put my money somewhere to have passive income and real estate is what I believe is the best to do that. Plus. I really love real estate! 

@Account Closed

Welcome to BP and congratulations on making your first steps in the world of Real estate investing!

Best of luck

-Kevin