Understanding Return on Equity and when to Cash Out Refi?
Hi All,
My goal is to grow my portfolio to generate cashflow to live off of passive income. Mainly interested in BRRRR deals.
I have a couple SFH rental properties here in the midwest that are fully paid off. Having this equity sit around feels wasted and I could be using it more effectively to reach my goal.
Both properties' market value is about $220,000 and both cashflow $14,000/annually. ROE=6%
What is considered a good ROE? Can having too much equity be considered a bad thing? In this case I should do a cash out refi to invest in other properties, right?
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#1 Personal Finance Contributor
- Rental Property Investor
- East Wenatchee, WA
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#1 Personal Finance Contributor
- Rental Property Investor
- East Wenatchee, WA
I'm happy with an ROE of 7%, but I am in the preservation stage.
If still in accumulation stage, I would want a higher return and would be willing to make a higher effort.
Yes, I would think putting equity lines (nothing to refi) on these if you have opportunities to invest at a higher rate makes sense.
My min return for the pain and costs of obtaining financing is my ROE + inflation + fees + indigestion factor + time comp for sourcing another deal.