post-acquisition ROE analysis

[Mike Dymski]

I imagine some investors, me included, calculate their purchase cap rates, ROIs, CCR or whatever their metric of choice but then fall victim to parking that property in the portfolio, enjoying the cash flow, moving on to new acquisition and not revisiting those same metrics. Equity builds up through mortgage payments, value-add and/or appreciation and next thing you know, your 25% ROE becomes 18% and your 12% cap becomes 9%, using market value rather than purchase price. You may end up holding properties that do not meet your same thresholds for new acquisition....said another way, you could redeploy that capital elsewhere and get larger returns. It's easy to use purchase metrics rather than current metrics and it's comfortable to have equity, low leverage, to be nimble for when opportunity arises, to think about retirement with low/no debt and just general ease with not having to churn properties to get the best ROE. Just want to throw this out there, see who does and does not look at post-acquisition ROE and generate dialogue (excluding due to mortgage payments...that's been vetted elsewhere).