All Forum Posts by: Lorenz Cornelis

@Jai Reddy They absolutely are and it is also strongly solidified within the Swiss culture (also an entire subcategory of hunting for lesser known but high-quality brands). I can really recommend a visit if you love watches! 

@Scott M. Hi Scott! 

I am working as a financial consultant in Zurich. Crunching numbers, building up models,... are part of the job. But unfortunately no technical background! 

Hi Joe,

Thank you for your reply. To be honest, I do not fully agree that % do not tell you anything. It is a direct indicator of performance and creates a relationship within the portfolio in order for the investor to better grasp the relative impact of a decision. 

Regarding your second point, I want to mention that the scenario is ofcourse based on a "rental-model/buy-and-hold". So the question is more how the different ratios (or $$$$) react to each other to properly estimate a return. The cash/loan balance then is determined as a direct result of it! Maybe as a sidenote the minimum debt/equity ratio also varies widely from country to country. The European banks are traditionally a bit more "conservative" so we do have build up a solid investment case to maximize leverage.

Hi All!

I am currently setting up my investment dashboard to track my portfolio's performance (buy-and-hold) but am also looking into better understanding the underlying dynamics between the various return metrics. My question has two components:

Part One: Which metrics to include in the executive output:

The current shortlist/ratio's that will make it on my "executive output" are:

1. Capitalization ratio
2. Cash-on-Cash ratio
3. Return on equity (incl. loan paydown, cashflow and appreciation)
4. Debt servicing ratio

Is there any metric I am forgetting here to get a first good impression of the property? Any suggestions?

Part Two: Underlying dynamics:

I am trying to better understand the various effects between our "selection". For example: a high cash-on-cash ratio is usually good news. However, it could also be that the property is "underlevered" and therefore has a lower overall return on equity (+ the opportunity cost of only being able to acquire one property). Another example could be a high debt servicing ratio (e.g. close to 100%) which could mean that your rental income is too low OR you have a short-term loan (which then again affects your return on equity from loan paydown and risk profile).

Do you have any further points or ideas? I would love to hear about it!

Warm regards from Switzerland,

Lorenz

Hi there,

I have a hypothetical question when it comes to investing with private money (i.e. investors, friends, family,...) without any of your private funds (or a small amount).

Would it be possible/viable to buy property, finance the downpayment with private investors, superficial rehab works and then refinance the loan after 2-5 years, pulling out the equity and return it to the private lender?

e.g. The investor funds $40.000 and receives after 2-5 years $50000 (+25% Return) after refinancing. The property is in my name and I live of the cash-flow + equity that is building up.

Feel free to share your thoughts! 

Hi Harjeet!

It was one of the "requirements" when negotiating with the bank back when I was tied to a set of "stricter" rules. Now that I will start working in a fixed position I obviously get more freedom in my decisions when lending with the bank. I will do the calculations and see what my options are. Thanks!

Hi Soh!

Thank you for your reply! At the time I did not have a fixed income and could only convince my bank by buying "safe" properties. The properties itself have stable tenants and were constructed 2 years ago. So the relatively low cash-flow goes hand in hand with low risk.

For me there are two scenarios: 1) Sell one/two properties and invest in more cash-flowing properties ; 2) refinance the loans, make use of the low-risk since the construction lord is still liable for any structural damages and leverage the funds for a new property.

Hi,

I bought my first two rental properties when I was 21 years old. Since I was still studying and did not have a fixed income at the time I had to negotiate a 17 year long loan & 2.85% fixed rate interest. Although it did not make sense for me at the time since a shorter time frame increases the monthly mortgage payment, the bank accepted the deal. 

Fast forward three years and soon leaving university for the real world, I am now considering refinancing the loan (17 --) 30 years) on both properties in order to buy a third and/or fourth property.  Both of my current properties currently cash-flow zero on the 17 year term so there is room to extract equity. Would it make sense to extract equity until the cash-flow is zero again after refinancing?

Numbers:

Price/property: 165k

Down payment made/property: 70k

Interest rate (fixed): 2,85%

Term: 17 years

Cash-flow/property: $0/month

I am looking for opinions & experiences of more experienced investors and potential risks i.e. overleveraging. Feel free to shoot me a message!

Thank you!