The appropriate level of equity

[Justin B.]

I'd like to get the forum's opinion of what everyone thinks is a happy medium for equity in an investment property. I don't want too much. A good source of capital is refinancing current properties.

I'm always looking for new properties (I am currently sub-$100k properties and own 5 currently) so I always need capital. When searching for it, beyond what we have in cash, I look for any properties I own that I can refinance, and refinance back to 20% equity (this is typically the best the bank will do for me). My strategy is also buy and hold (rent). I do not currently flip nor do I look for those opportunities.

To lay it out simply, I do this:
equity < 25% - Never Refinance
25% < equity < 40% - Refinance if capital is needed
equity > 40% - Always refinance even if capital not needed (assuming property will positively cash flow afterwards).

My thought is I never want more than 40% equity in any property I own. I can't come up with a good argument for it. I'd rather own more properties than tie up my capital in a property.

So, I'm curious as to other's thoughts on the topic.