Sell, Hold, Renovate?

Question 1

What is the equity build-up paradox?

Answer 1

As the twin effect of loan balance decreases, and property appreciates the equity begins to build-up. The income builds up at a substantially slower rate, thus as the equity builds up the ROE decreases.

Question 2

Marginal IRR

Answer 2

=Gain from Year 2 (One more year)/(Forgone) Cash from Sale at the end of Year 1