How I Model Refi/Reinvest Cycles Before I Buy

Most investors track cash flow. Fewer actually model what happens when you pull equity back out and put it to work again -- and that loop is where the real compounding happens.

Here's the mental model I use before I buy anything, and how I check it.

The trigger isn't a feeling, it's a number. I set a hard equity threshold -- for me, 50%. The moment a property's equity ratio (market value minus balance, divided by market value) crosses that line, it's a refi candidate. Not "it feels like it's appreciated a lot" -- an actual ratio I check against every property, every year.

Size the cash-out before you get excited about it. A refi at 50% equity doesn't mean pulling out half the property's value. I keep 20% equity in place after any cash-out (80% LTV), so the number I actually have to deploy is: market value times 0.8, minus whatever's left on the loan. That's usually a lot less than the "wow, I have so much equity" feeling suggests.

Decide before the cash exists, not after. This is the part I see people skip. Once that check-sized cash-out is sitting in an account, it's tempting to chase whatever deal is in front of you that month. I decide the reinvestment percentage (how much goes to a down payment vs. staying liquid) as a standing rule, before any specific property is on the table.

Run the next property's numbers against the same bar, not a lower one. The new property funded by that cash-out has to clear the same underwriting standard as the first one -- same DSCR floor, same vacancy assumption. Otherwise the flywheel just launders a good deal into a mediocre one.

Stress-test the whole thing before committing. Before I pull the trigger on any refi, I run the resulting portfolio through a vacancy/rent-shock scenario -- mild, moderate, severe -- and check DSCR holds up on every property, not just the new one. A refi that only works if nothing goes wrong for the next five years isn't a refi, it's a bet.

I ended up building this whole check into a tool (The Ledger, 9-5-exit.com) mostly because I got tired of re-deriving it in a spreadsheet every time -- it runs the threshold check, the cash-out sizing, and the stress test automatically across a 30-year projection. But the mental model above is the actual thing; the tool just does the arithmetic faster.

Curious how other people size their reinvestment percentage -- I've gone back and forth between a flat 25% down and letting it float based on the deal.