Advice on Equity in Rental Properties
12 Replies
- Real Estate Broker · Atlanta · Member since 2024 · 1k+ posts · 606 votes6mo
@Neha K. A HELOC is one option but the question, what is the goal? Is it cash flow, growth or debt reduction? If you want to scale, look at a cash-out refi or HELOC to reinvest into more property. If you want stability, paying down your primary mortgage is fine but it won't grow your portfolio. Using rental equity for stocks is usually the riskiest path. Also, with only 20% equity, your options are somewhat limited depending on lender guidelines. You may want to let the properties appreciate more or pay down a bit before tapping into it.
The bottom line is, equity is most powerful when it is used to acquire more income-producing assets and not just sit or shift into non-income uses.
- Member since 2026 · 5 posts · 1 vote6mo
Worth knowing HELOCs on investment properties are way harder to get than HELOCs on a primary. Most big banks won't touch them, and the portfolio lenders that will usually want you to leave 25-30% equity in the property after the line, so at 20% equity you're basically not pulling anything meaningful. Went down this road myself last year and a DSCR cash-out turned out to be the more realistic path, but you'd be trading whatever rate you locked in for mid-7s today and that delta has to clear before it's worth doing.
- 6moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 505 votes
Investment property HELOCs are generally more difficult to obtain and they are debt to income (DTI) loans so that means they will be structured and the loan will be qualified based on your personal income. Investment property HELOCs will generally have a lower LTV compared to primary residency HELOCs.
DSCR loans will qualify based on the property rents so your personal income is not factored in (beyond if a purchase if you can make the down payment, etc). It's difficult to find a cash out refinance product that will lend more than 75% LTV for a DSCR cash out refinance. Also, DSCR loans are not regulated the same way as conventional loans so I have heard more than once from investors that they were told they could get 80% LTV on a cash out refinance and then had the rate and terms changed on them after being deep in the process since legally the loans can be changed all the way up to closing. Because of that it's important to work with mortgage brokers or lenders that are experienced and that you do your research on who you work with. What can be helpful with working with an experienced mortgage broker who specialize in investment property loans is that they often will work with large lenders that don't advertise directly to the public that specialize in investment property products that have terms more favorable to the investor for guidelines and rates such as lower rates, higher LTVs, lower credit scores accepted, etc. Happy to connect to discuss further.
Bright Skyline518 Reviews - 6moNeha K.Member since 2026 · 6 posts · 0 votesOP
Janice, Kevin, and Stacy:
We truly value and appreciate your invaluable advice. Since Janice replied yesterday, me and my husband are thinking about this and there are a lot of things which we are unsure about. I will try to present it below.
1. Our equity in each rentals is actually about 30% and not 20%. My bad. One is built in 1927 and the other one is built in 1984. We have been feeling that we are not making good use of the equity in both these rentals. Please correct us if we are wrong in our thought process. Is it too soon to think on these terms considering our equity is less than 50%?
2. We are unsure if we want to sell one of the properties, or both, or take HELOC. To what Stacy said, our numbers dont seem very substantial for HELOC considering its a rental and equity is less. Is it too soon to tap into equity now?
3. Due to current market conditions and interest rates, we are not been able to decide the right approach.
- 6moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 505 votes
Quote from @Neha K.:
Janice, Kevin, and Stacy:
We truly value and appreciate your invaluable advice. Since Janice replied yesterday, me and my husband are thinking about this and there are a lot of things which we are unsure about. I will try to present it below.
1. Our equity in each rentals is actually about 30% and not 20%. My bad. One is built in 1927 and the other one is built in 1984. We have been feeling that we are not making good use of the equity in both these rentals. Please correct us if we are wrong in our thought process. Is it too soon to think on these terms considering our equity is less than 50%?
2. We are unsure if we want to sell one of the properties, or both, or take HELOC. To what Stacy said, our numbers dont seem very substantial for HELOC considering its a rental and equity is less. Is it too soon to tap into equity now?
3. Due to current market conditions and interest rates, we are not been able to decide the right approach.
From the information provided, it sounds like it might make more sense to have equity accumulate if looking to cash out. Also, depends on the current rate you have on the properties and what you think the properties might appraise for.
Bright Skyline518 Reviews
- Member since 2023 · 79 posts · 27 votes6mo
I'm hearing the real problem is "Somehow, we have been feeling that our equity is stuck and that we have not been able to use that equity." Well, I have ideas on how you can obtain MORE equity.... You can use the rental history from those two rentals to qualify for a DSCR loan. There are non qm options for 85% LTV which you could qualify for as an experienced investor with the rentals. But before you do that, get the HELOC and you could use that for the down payment... there are HELOC options for 89.99% LTV.
Or....move. Lol There's 3.5% down payment options where you dont have to be a first time home buyer right now. You could take advantage of them, as well as seller concessions and other market conditions right now to build equity.
Or...Renovate/upgrade
Job market is weak right now. Construction industry WAS the exception but with the price of oil surging this will and has already had an affect on the construction industry. Labor is more affordable now than it has been since covid. Maybe get some quotes and see whats worthwhile?
As far as those properties equity being "stuck." Well....maybe they are lol. Property values arent appreciating in most markets right now AND its peak purchase season....when they typically go up. That should tell us something. Whats going to happen in the fall when they seasonally decline?
Maybe get that HELOC now and sit on it?
- Member since 2022 · 54 posts · 6 votes6mo
Message me personally to discuss your goals and I'd give you an array of possible scenarios.
- Member since 2026 · 5 posts · 1 vote5mo
30% is better than 20% but still pretty tight for most investment property HELOCs. The lenders I've talked to typically want you to keep 25-30% equity in the property after the draw, so at 30% equity your usable line would be very small if you even qualify. And yeah the 1927 build date could be a factor on appraisal too depending on the condition. On the sell vs hold question, I'd run the numbers on what that equity actually generates for you sitting where it is versus what it could do deployed elsewhere at today's rates. If the rentals are cash flowing and you locked in decent rates, sometimes the best move is just letting equity build a while longer rather than forcing a play when the math is marginal.
- 4moVijay FriedmanBusiness MemberMiami, FL · Member since 2026 · 766 posts · 122 votes
Quote from @Neha K.:
Hi,
Me and my husband have two rental properties. Our first rental is an investment property where we made 20% down payment. Our second rental was first a primary residence and then turned into a rental. There's 20% equity each in both the rentals. Somehow, we have been feeling that our equity is stuck and we are not able to use that equity. We have been thinking of taking HELOC on both the rentals and use that money to either invest in stocks or payoff some of the mortgage in our primary residence. At the same time payoff the loan as early as possible so that we pay less interest. We really dont know which direction to go with. Any advice regarding on how to access equity in our rentals would be really helpful.
With only around 20% equity in each rental, there may not be much room to access equity from those properties unless the values have increased or the current loan balances are lower than expected. Most lenders will also be more conservative on investment property HELOCs or cash-out options compared with a primary residence.
I'd be careful using rental equity just to invest in stocks, since you'd be adding debt against real estate to invest in a more volatile asset. If the goal is to buy another property or improve cash flow, then comparing HELOC, cash-out refinance, and current mortgage payoff scenarios may make more sense.
Before deciding, I’d run the numbers on property values, current loan balances, rates, rents, credit score, and your actual goal.
- Real Estate Broker · Nashville, TN · Member since 2022 · 163 posts · 87 votes4mo
Neha a couple thoughts from someone who manages about 20 rental doors in Nashville and also invests personally.
First, I would pump the brakes on pulling equity out of your rentals to invest in stocks. You already have real estate that is appreciating and building equity. Taking on HELOC debt at 8 or 9 percent interest to put into the stock market is adding risk on top of risk. The stock market might return 10 percent on average but that is not guaranteed in any given year and you are paying guaranteed interest on the HELOC every single month.
Using the HELOC to pay down your primary mortgage is a more interesting play but it depends on the math. If your primary mortgage rate is higher than the HELOC rate it could make sense short term. But most HELOCs are variable rate so if rates move against you that strategy can backfire.
Here is what I would actually consider in your situation. With 20 percent equity in two rentals and presumably decent cash flow, you are in a solid position. The equity is not really stuck, it is working for you by keeping your loan to value low which means better insurance rates, no PMI, and a cushion if values dip.
If you want to grow the portfolio, a HELOC on one of the rentals to fund a down payment on a third property is a legitimate move. That way you are using real estate equity to buy more real estate instead of crossing into a completely different asset class with borrowed money.
The other option nobody talks about is just being patient and letting the cash flow accumulate. If both properties are cash flowing well, stack that money for 12 to 18 months and you will have a down payment for property number three without taking on any additional debt.
Sometimes the best move with equity is just letting it sit there and do its job.
- 3moGarrett CrosbyPro MemberReal Estate Agent · Los Angeles, United States · Member since 2021 · 392 posts · 162 votes
Good advice throughout this thread, especially Stephen's point about just letting equity sit and do its job. The feeling that equity is "stuck" is very common, but equity in a performing rental isn't idle — it's working by keeping your debt service manageable, giving you downside protection, and compounding as rents and values increase over time. The urge to deploy it can sometimes lead to taking action that actually reduces your overall position.
On the HELOC question — Kevin is right that investment property HELOCs are hard to get and most lenders won't let you take your equity below 25-30%. At 30% equity, there's very little to pull unless your properties have appreciated significantly since purchase. Before going down that path I'd get updated appraisals on both properties and then ask a portfolio lender specifically what they'll do on investment property HELOCs. Don't assume retail banks — local credit unions and smaller portfolio lenders are where you're more likely to find flexibility.
On using the equity to buy stocks — I'd avoid this. You're essentially taking on variable-rate debt secured by real estate to invest in equities, which is a leveraged bet with asymmetric risk. The real estate works; don't add unnecessary complexity to a portfolio that's already performing. Feel free to DM if you want to talk through options.
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