Return on Equity (ROE) in 2024

[Collin Barker]

Hello,

I am curious what a good ROE would be in the current market conditions for a new acquisition. I just calculated that the ROEs for my 3 rental properties are 6%, 5% and 1.5%. My calculation is based upon cash flow divided by equity. I never imagined I would sell or refinance the 2 best ones because I have 2.65% mortgages on them and they cash flow well, but want to make sure my equity is working up to it's ability for me. 
Appreciate any thoughts or insights! 

[Andrew Syrios]

With real estate, some of the biggest pluses aren't seen in ROE (or ROI for that matter, at least until you sell), namely appreciation, principal paydown and depreciation as a tax write off. So all things considered, the 5% and 6% returns don't sound terrible to me, especially given the costs of selling and where the market is in general (high prices and relatively high interest rates).

The 1.5% on the other hand is pretty tough to swallow. That one, despite its great rate, may be worth selling if you can get a good price for it. 

[Collin Barker]

Thanks for the response, Andrew! Yeah, I often question the 1.5% one. That is a vacation rental that my family and I use for a few weeks out of the year so it is not strictly investment.