👇WATCH EPISODE 👇
Are You Already Financially Free and Don’t Know It? How Return on Equity Reveals the Truth
If you’ve followed me for a while, you know I’m obsessed with cash flow and results not theory. In my conversation with CPA and fractional CFO Marcus Crigler, we unpacked a simple but often ignored truth: a lot of investors are far closer to financial freedom with real estate than they think. The problem? They’re measuring the wrong things and letting fear drive their decisions.
The KPI Most Investors Miss: Return on Equity in Real Estate
Here’s the no-BS version. You didn’t buy rentals to brag about door count you bought them for freedom. The cleanest way to see if a property still deserves a seat at your table is your Return on Equity in Real Estate (ROE): annual true profit divided by your current equity in that property.
If a rental has $100,000 in equity and produces $5,000/year net, that’s 5% ROE. Sounds okay until you realize you could redeploy that same $100,000 into assets yielding 8–12% and potentially double your income without working harder. I routinely see portfolios sitting on $500k–$1M of lazy equity earning 0–3% less than a decent CD. That’s not “buy and hold.” That’s “buy and hope.”
When to Recapitalize Your Portfolio (and Why Bigger Can Be Better)
Assets go stale. Markets shift. Expenses creep. At some point, it’s time to recapitalize your portfolio sell, 1031, refinance, or reallocate until your equity is back to work. This is what the pros do relentlessly. They either improve the asset to hit target returns or they recycle the capital into a better opportunity.
And here’s the kicker: scaling into a larger, better-performing asset can increase more than income; it accelerates net worth growth because appreciation and amortization compound on a larger base. A $10M asset appreciating 3% adds ~$300k on paper; a similar $15M asset adds ~$450k. Same market, smarter capital placement, bigger wealth effect.
Quick self-audit (do this this week):
- List each property with current value, loan balance, true net cash flow (after all expenses), and equity.
- Calculate ROE: Net annual cash flow ÷ equity.
- Decide: Keep, fix, or exit. If ROE is under your target (I like 6–8%+ depending on risk), either improve it or move it.
Liquidity: The Unsexy Superpower That Wins Cycles
Hot take: real estate liquidity (accessible cash) is the #1 predictor of longevity and opportunity capture. Cash flow matters, but cash keeps you calm and dangerous especially when others are retreating.
Liquidity lets you:
- Survive dips without panic selling.
- Strike fast on discounted deals and auctions.
- Fund value-add improvements that boost ROE.
I tell clients: if you want consistent seven-figure income, build seven-figure liquidity over time. I consistently see high earners with reserves that match (or exceed) their annual take-home. Liquidity isn’t “lazy” it’s lethal.
Mindset: Why Many Stay in the Rat Race Even When the Math Says “You’re Free”
Most people don’t stay in the rat race because they’re broke; they stay because they’re afraid of being broke again. So they cling to underperforming properties and vanity metrics. Freedom happens when you detach identity from door count and make clean, math-driven decisions. If ROE is weak and liquidity is thin, fix the system not your ego.
My Three-Step Money Ripples Playbook
You’ve heard me say it: Get Lean, Get Liquid, Get Out.
- Get Lean: Track every dollar income and outflow. Tight books create confident decisions.
- Get Liquid: Build reserves that make you bold, not nervous.
- Get Out (Deploy): Recapitalize low-ROE assets and place capital into higher-yield opportunities that buy back your time faster.
Your Next Move
Run the ROE check on every door in your portfolio, set a real liquidity target, and map a recap plan. If you want a CFO-level set of eyes to help you implement bookkeeping, tax strategy, and ROE-driven portfolio decisions, reach out. Freedom isn’t about collecting properties it’s about collecting options. And options come from high ROE and deep liquidity.
Ready to build financial freedom with real estate the smart way? Let’s put your equity and your cash to work on your terms.