Help! What should I do?

Question

Hello BiggerPockets! I’m in somewhat of a situation and I would really love some help with my decision-making. I currently own 2 two family homes. One of them is on a 10 year mortgage at 2.8 the amount of rent I am getting is just covering the mortgage taxes and insurance. I also have another that is on a 15 year at 2.2 which I am cash flow flowing about 1000 per month. I’ve owned these properties for about eight years and three years respectfully.

Between the two of them, I have a little over 800,000 in equity, pretty good for only putting down around 35,000 between the two of them!!

I’m 36 years old and make a pretty decent amount of money around 550 K my question is simple. Do I cash out refi on both properties leaving only 25% equity on each? this would allow me to take out around 450 K and use it to buy another substantially sized property maybe a six or a seven unit in New Jersey. I’ve done the math many times over and my two original properties at 30 year mortgages at today’s rates would be the exact same payment as they are today so my cash flow or lack thereof would remain the same. The next property being around a 1.6 to 1.8 purchase price would probably cash flow something around 1500 to 2000 per month.

I feel as though My Equity is kind of dead money. Sure I can wait 10 years and receive all of the rents or I can capitalize on my age and spread my money around to more properties. I think we are all under the impression that Real Estate will go up significantly over the next 10 years so I thought capturing that increase on another 1.8 million would be pretty significant to my net worth.

Of course it’s easy to analyze deals all day but when it comes to your entire net worth and all the money that you have, it’s very scary so I guess my question is simple. What do you guys think at 36 years old should I be making all of my equity work for me at this age to increase my net worth as much as possible for my retirement or should I stick it out with the two that I have and just ride them for the next 10 years and then capture all of the rental income? any responses will be greatly appreciated. Thank you guys so much.

Caleb Brown · Answer

I think doing a cash out refi would be a great idea. Another option can be doing a 1031 to exchange those. I would be more willing to 1031 the one breaking even and then keep the other. If you do cash out refi do the numbers as you've done, double check your math that it accounts for repairs, maintenance, etc.

Jorge Vazquez · Answer

What I’ve learned after 20 years of investing is equity isn’t good or bad on its own. It’s just money sitting somewhere. That’s it. The real question is what is that money actually doing for you. Every dollar has either a cost or a return tied to it, whether you realize it or not. If your equity could be earning 6 percent somewhere else, then leaving it stuck costs you that 6 percent. Same thing with cash. If your money is sitting in a savings or money market making 3 percent and inflation is about 3 percent, you’re not winning. You’re just standing still, like a hamster running on a wheel and going nowhere. So I always look at three things together. First, how much equity or liquidity you actually have. Second, what is the cost or return on that money right now. And third, and this is the big one, how much experience and knowledge you really have. That last part is the multiplier. Someone with real experience can use leverage and grow responsibly. Someone without it can take the same leverage and turn it into stress, bad decisions, and sleepless nights. If you dumb it way down, the formula is simple. Equity or liquidity, plus or minus the cost or return, multiplied by your knowledge. That’s it. That’s how I decide whether money stays put or goes back to work. It’s not about feelings or comfort. It’s about math, experience, and being honest with yourself about what you’re actually good at executing. That’s how I’ve answered this question every time it’s come up for me, and it’s why there’s no one-size-fits-all answer. Everyone’s numbers and experience are different.

Earl White · Answer

Nicholas:

Your interest rates are 2.2 and 2.8 percent respectively for the two properties? That seems like practically free money if correct.

My thought is to sell the one that is 2.8 since it is not cash flowing with a 1031 exchange, and see if your new mortgage can get approved for the larger property. This keeps the cash flowing one at 2.2 in place.

I suggest asking your loan officer. The quesiton may be not what is the best economic strategy for your two properties, but what potential options do you have for the next one.

V.G Jason · Answer

Save money to buy a third property instead, let these great debt acquisitions run. Should take you 2-3 years to get a healthy set up for property #3.

Only sell these properties if the fundamentals have changed.

Joseph Guzzardi Jr · Answer

DO NOT SELL either of these. At least, I wouldn't! You are in very strong locations in Monmouth Co. There are loan programs such as a 2nd position DSCR that you can tap equity as long as your ratios for these loans are solid. You should look into this or possibly consider a HELOC

JooYung Choi · Answer

Hey Nicholas,

First off, congrats on your investments. 2 duplexes on sub 3% interest rates, that's a huge win. Sure you may not be cashflowing now, but you will be tremendously in a couple years since you are probably close to paying it off. Since you also had good appreciation on your properties without much renovation, that tells me your properties are in good locations, will continue to appreciate and are great holds to keep in your portfolio.

If I were in your shoes, I would open HELOCs just to have access to that equity if needed, but I wouldn't refinance out of that rate. Yes I agree opportunity costs, but I would only deploy that equity if I had an absolute winner of a deal. I would also renovate the current 2 duplexes and increase rents (personally I would MTR or STR if applicable).

This shouldn't stop you from acquiring more assets with your current income! Maybe explore BRRRR or flip opportunities so you can keep recycling your HELOC while keeping your current mortgage rates.

Best of luck!

James Jones · Answer

You’re asking the right question, and you’re right to pause before pulling the trigger. This isn’t a math problem only, it’s a risk management and lifestyle decision.

A few key points to think through:

1. Equity isn’t dead money, but leveraged equity amplifies mistakes.

Yes, idle equity has opportunity cost. But stripping both properties down to 25 percent equity each concentrates risk. One vacancy, one major repair, or a market slowdown hits your entire portfolio at once. You’re trading safety margin for speed.

2. Your low-rate debt is an asset.

You’re sitting on historically excellent financing. Resetting both properties to 30-year notes at today’s rates, even if the payment pencils today, increases long-term interest drag and reduces flexibility later. You can’t get those rates back.

3. Cash flow stability matters more than projected upside.

Right now, one property is neutral and one is strong. That’s a solid base. If the new six to seven unit truly cash flows $1,500 to $2,000 after real reserves, management, and capex, that’s compelling. But many deals look good until reality shows up.

4. A middle-ground option is often overlooked.

Instead of cash-out refinancing both, consider:

Refinancing only the higher equity or lower-performing property

Pulling a smaller amount of equity and keeping 35–40 percent LTV

Or waiting until one property is paid off and then using that cash flow to support new debt

This keeps optionality while still putting capital to work.

5. At 36, longevity beats acceleration.

You don’t need to max leverage to win. You need survivability across multiple cycles. Investors who last are the ones who can sleep at night when markets stall.

If it were me, I’d only move forward if:

The new deal cash flows strongly even under conservative assumptions

You keep at least one property conservatively leveraged

You maintain liquidity after closing

Growth is good. Control is better.

There’s no wrong answer here, but there is a difference between aggressive and fragile. Make sure you’re choosing the former, not the latter.

John Morgan · Answer

At your young age, I’d harvest that equity. Sounds like you’ve done the numbers, and with new mortgages you’ll cash flow a little and can scale up which will exponentially increase your cashflow and net worth over time.

I’ve done 6 cash out refis on properties that had built up good equity to buy 14 good cashflowing properties with the cash. So I basically got these 14 properties for free with zero out of pocket money to buy them. My cash flow probably doubled when it was all said and done. And now I’ve got more properties appreciating over time which will ramp up my net worth MUCH more over the next 10-20 years vs having less properties just sitting there with all that equity doing nothing for me. So I say, scale up and put some of that equity to use. Especially since you have a good W2. Let your equity work harder for you. And once you’ve hit your monthly cashflow goal whatever that is (like I did about two years ago), then let things build up with equity and get paid off. But definitely put that equity to work now while you’re young, even though you’re trading a low interest rate for a higher one.

Help! What should I do?

Most Popular Reply