Considering your ROE before refinancing to increase cash flow

[Stuart Grazier]

Colorado Investors - we've been helping quite a few investors do cash-out refinances on their rental properties in Colorado and Texas because there has been such a spike in valuation, but I was talking to an investor the other day and he was telling me he always considers his Return on Equity verse his current (and future) cash flow when deciding to do a refinance or not. In his case it didn't make sense to do another cash-out refinance because he wouldn't get enough cash flow this time around after increasing the debt payment, so he was planning on selling instead to capitalize on the equity and go put it somewhere else where he could make a better return on his capital, but it doesn't always work that way when he evaluates his properties. I'm curious if anyone else uses this methodology and how they evaluate it (if different). I think it is definitely something to consider in Colorado, due to the extremely high property values.