Image by Rod Long

Return on Equity

Many investors want to know that their money is working as hard for them as possible.

 

In other words, how much do they gain for every dollar of equity in their property?

 

This is called Return on Equity, and as their equity increases through principle reduction and market appreciation, their ROE is likely decreasing.

Here's how to calculate your ROE:

Annual Return/Equity Balance

Image by Rod Long
Image by Chandni Dan

Declining ROE

Calculating your ROE can help answer the question of "when is it time to sell?"

A declining ROE prompts some investors to make a change - whether by refinancing, or selling the property to move that equity into a new (bigger) property, or by diversifying into multiple new properties.

 

This acquisition puts their equity in a place where it can have higher returns again - and each dollar will work harder for the investor.

Contact me for assistance with the "hold vs. trade" decision.