Why I sold my Washington state rentals: Return of Equity
There are many metrics that Investors use to quantify the quality of their investments. NOI, ROI, IRR, are to name a few. After purchasing a couple rentals in the Seattle market and being the beneficiary of some nice appreciation I evaluated the performance with a ROE or Return of Equity indicator. On of my rentals had appreciated all the way to $450k and my mortgage that I owned was $200k. Therefore I had about 250K of equity which is the demonimator of the calculation. The numerator is the annual cash flow which was about $4K a year. Therefore my return on equity was less than 2%=4k/250k. Frankly, 2% is very poor compared to stocks (~8-10%) or properly leveraged Real Estate (~20-40%).
Long story short I decided to sell these rentals to unleash this "lazy money" and get it working again with prudent leverage.