Cut t-shirt into loose/slouchy tank top?

I love loose/slouchy tanks cut out from big t-shirts, but I always end up with the arm holes looking awkward around the chest area. How can I cut a shirt to look like this a href="http://www.youreyeslie.com/digital-galaxy-vest.html" rel="nofollow"http://www.youreyeslie.com/digital-galax…/a ? A link to a video or step-by-step tutorial would be great!