Hi Michael Roe...

I’m using the renters to significantly subsidize our 2nd home.In the two years we’ve own the property, I’m believe it has appreciated about 14% based on recent sales.This summer we had the issue of the short term rental tax which impacted our rentals, but they have been overturned.

My min ROE is 7-8%.

There was also a reminder that the majority of the cards can come in declined (pending verification) or with low limits and that their processors were trained in communicating with underwriters and would work to get the most out of each approval and overturn and denials with an appeals process that could sometimes take up to 5 weeks. 

Thanks I would have to see if my commercial banker will take on customers outside of NC.Deals are ROE/RAROC price adjusted so pricing varies but an example would be 80%, 5/1, 240 am (possibly 300), prime plus a half or one percent, maybe a point to close.Cons: Not as aggressive of terms on the mortgage side.Pros: That commercial lender can accommodate the bigger deals down the road.

I heard that when you buy a property, you look at ROI but when you hold a property, you look at ROE.

ROE over 5 years is too low (I want 15%), you’re creating zero property value and your ROE in this example is being largely impacted by your 3% annual property value growth, that’s a bit high for me at this part of the cycle (2% would make me more comfortable) I would also make the assumption that your rents and expenses are growing in lock step. 

My ROE is about 7% and the loans I paid off for good were at least 6% and higher risk like commercial or seller-financed. 

Another thing to pay attention to would be Return on Equity (ROE).

They would get their down payment back either; 1) as soon as their is enough equity growth (projections 5-7 years) to be able to cash then out 2) when there is enough equity for both of us to do a cash out refinance to both pay them back AND give each of us a ROE 3) or at eventual sale in 10-30 years.