Return on Equity Calculator
Looking to get some advice on when it is time to pull equity out of a house. Trying to find a formula that I can keep an eye on month to month.
I have some equity in my portfolio but with higher interest rates my payment will increase significantly on some of my rentals. So let's say I can pull out $25k with $2,500 in closing but my payment will go up $500 a month. How do I decide if it is time to do that. Seems like the ROE is to simple for cash out refi because it doesn't take into account the loss of cash flow by increasing the payment.
Is it as simple as the yearly increased cost divided by the amount I took out to get a return divided by the number of years it would have taken me to accumulate that amount without the refi?
Any thoughts or advice would be appreciated.
Hi, Clayton. The way I look at it is simple. If the hypothetical 25k will make me more than 500 a month I go for it. I could use it for a few BRRRs (recycling it of course) that would bring way more than 500 and more importantly will significantly increase the growth of my portfolio. It's not really a formula, but that's how I look at it.
just one more thing. Nowadays I find myself thinking more often just how leveraged I want to be
Quote from @Daniel Toshev:
Hi, Clayton. The way I look at it is simple. If the hypothetical 25k will make me more than 500 a month I go for it. I could use it for a few BRRRs (recycling it of course) that would bring way more than 500 and more importantly will significantly increase the growth of my portfolio. It's not really a formula, but that's how I look at it.
just one more thing. Nowadays I find myself thinking more often just how leveraged I want to be
you are correct but it makes it difficult to decide sometimes. Especially since it never going to be a one for one trade.
I know my current average ROI is in the 20s. Been trying to find a good answer on this for a while and can't seem to come up with one.
Thanks for the post
