How Are Investors Accessing Trapped Equity?
Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes
How Are Investors Accessing Trapped Equity?
Most Popular Reply
Arman AhmedPro Member
Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 958 votesQuote from @Alison Robinson:
Garrett Brown recently asked a compelling question here on BiggerPockets: What has built more investor wealth, cash flow or equity?
Most of the responses I saw pointed to equity. That raised a different question for me:
If acquiring more properties is no longer the objective, how are experienced investors accessing or putting that equity to work?
This question is particularly relevant to me. I’m retired and own a 10-property rental portfolio with substantial equity and relatively low leverage. I’m no longer trying to acquire more properties. My objective now is to improve sustainable income and retirement flexibility without taking on unnecessary risk or creating an avoidable tax burden.
That leaves me wondering: How are investors converting their equity into usable value?
Great question. If you're no longer focused on acquiring more properties, I'd look at equity as a tool rather than something that has to sit idle. Many investors use HELOCs or cash-out refinances selectively to improve cash flow, fund passive investments, or create a liquidity reserve while keeping taxes in mind. At this stage, preserving flexibility and managing risk is often more important than maximizing leverage.
45 Replies
- Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes2mo
Doing a refinance or selling. Having lines of credit is expensive if it's not paid back within a year, they are also hard to get for investment property. If you have equity you can explore a 1031 to use that equity to (maybe) increase cashflow.
- Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2mo
Thanks, Caleb. I agree that a line of credit can be an expensive long-term solution.
A selective refinance or sale may be more practical. The 1031 option is interesting, although acquiring more properties is not my objective.
Great question. I think a lot of investors spend years focused on building equity, but eventually the conversation shifts from accumulation to preservation and income generation.
I've seen investors take a few different approaches once they have significant equity:
- Continue holding properties and let tenants pay down debt over time.
- Use strategic refinances or lines of credit to redeploy capital into opportunities with better returns.
- Sell select assets and rebalance their portfolio.
- Move some capital into more passive real estate investments.
One area that doesn't get discussed as much is becoming the lender instead of always being the borrower. Some experienced investors choose to put capital into private lending or mortgage notes, where they can earn income backed by real estate without taking on the responsibilities of ownership, tenants, maintenance, and management.
The tradeoff is that you're exchanging potential upside from appreciation for more predictable income and a position secured by the property. Like any investment, the underwriting, borrower quality, collateral, and structure are critical.
I think the answer depends on the investor's stage of life. Early on, equity growth is often the priority. Later, many investors start valuing cash flow, simplicity, and preservation of capital just as much as appreciation.
Blink Lending & Investments5407 Reviews- Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2mo
Quote from @Ravi Kaku:
Great question. I think a lot of investors spend years focused on building equity, but eventually the conversation shifts from accumulation to preservation and income generation.
I've seen investors take a few different approaches once they have significant equity:
- Continue holding properties and let tenants pay down debt over time.
- Use strategic refinances or lines of credit to redeploy capital into opportunities with better returns.
- Sell select assets and rebalance their portfolio.
- Move some capital into more passive real estate investments.
One area that doesn't get discussed as much is becoming the lender instead of always being the borrower. Some experienced investors choose to put capital into private lending or mortgage notes, where they can earn income backed by real estate without taking on the responsibilities of ownership, tenants, maintenance, and management.
The tradeoff is that you're exchanging potential upside from appreciation for more predictable income and a position secured by the property. Like any investment, the underwriting, borrower quality, collateral, and structure are critical.
I think the answer depends on the investor's stage of life. Early on, equity growth is often the priority. Later, many investors start valuing cash flow, simplicity, and preservation of capital just as much as appreciation.
Ravi, becoming the lender is exactly the type of alternative I hoped this question might surface. It could provide income without the operational burden of owning additional properties.The transition is the interesting part. For an investor whose capital is concentrated in low-debt rentals, have you seen people fund private lending by selling selected properties, borrowing against their existing portfolio, or gradually redirecting available cash flow?
- 2moG. Brian DavisPro MemberInvestor · Hatboro, PA · Member since 2016 · 3k+ posts · 872 votes
@Alison Robinson, this is exactly the question I hit once I stopped wanting to manage more doors. A cash out refi keeps the properties working but adds debt service, which cuts into the sustainable income goal your after. A 1031 into something passive, like a DST or a syndication, moves the equity without a tax hit and takes the phone calls off your plate. That's actually why I moved from owning 15+ rentals into the co investing club, I wanted the equity working without being the one fixing the furnace.
- Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2moBrian, you’ve captured the tradeoff well. A cash-out refinance puts the equity to work, but the added debt service can work against the income objective. I enjoy direct ownership, and although I’m open to all options, I’m most interested in finding ways to improve how the equity works while retaining the properties. Thank you for sharing your experience.
Quote from @G. Brian Davis:
@Alison Robinson, this is exactly the question I hit once I stopped wanting to manage more doors. A cash out refi keeps the properties working but adds debt service, which cuts into the sustainable income goal your after. A 1031 into something passive, like a DST or a syndication, moves the equity without a tax hit and takes the phone calls off your plate. That's actually why I moved from owning 15+ rentals into the co investing club, I anted the equity working without being the one fixing the furnace.
Great question. I've seen clients approach it a few different ways depending on their goals and risk tolerance.
Some investors are comfortable selling a property that has reached maturity and redeploying that equity into other investments, including private lending. Others prefer not to trigger a taxable event and instead use available equity through a refinance or line of credit, although that obviously adds leverage and needs to be carefully evaluated.
The interesting thing about private lending is that it changes the role of the investor. Instead of managing tenants, repairs, vacancies, and operating expenses, you're focused on underwriting the borrower and the collateral. The return profile is different, but many investors who have already built wealth through ownership appreciate the simplicity and more predictable income stream.
I've also seen some investors diversify by doing a combination: keep their best-performing rentals for long-term appreciation and tax benefits, while allocating a portion of capital into secured notes or private lending for income.
I think the biggest factor is understanding what you are trying to optimize for at this stage—maximum growth, monthly income, simplicity, or preservation of capital.
Blink Lending & Investments5407 Reviews- 2moArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 958 votes
Quote from @Alison Robinson:
Garrett Brown recently asked a compelling question here on BiggerPockets: What has built more investor wealth, cash flow or equity?
Most of the responses I saw pointed to equity. That raised a different question for me:
If acquiring more properties is no longer the objective, how are experienced investors accessing or putting that equity to work?
This question is particularly relevant to me. I’m retired and own a 10-property rental portfolio with substantial equity and relatively low leverage. I’m no longer trying to acquire more properties. My objective now is to improve sustainable income and retirement flexibility without taking on unnecessary risk or creating an avoidable tax burden.
That leaves me wondering: How are investors converting their equity into usable value?
Great question. If you're no longer focused on acquiring more properties, I'd look at equity as a tool rather than something that has to sit idle. Many investors use HELOCs or cash-out refinances selectively to improve cash flow, fund passive investments, or create a liquidity reserve while keeping taxes in mind. At this stage, preserving flexibility and managing risk is often more important than maximizing leverage.- Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2mo
Quote from @Arman Ahmed:
Quote from @Alison Robinson:
Garrett Brown recently asked a compelling question here on BiggerPockets: What has built more investor wealth, cash flow or equity?
Most of the responses I saw pointed to equity. That raised a different question for me:
If acquiring more properties is no longer the objective, how are experienced investors accessing or putting that equity to work?
This question is particularly relevant to me. I’m retired and own a 10-property rental portfolio with substantial equity and relatively low leverage. I’m no longer trying to acquire more properties. My objective now is to improve sustainable income and retirement flexibility without taking on unnecessary risk or creating an avoidable tax burden.
That leaves me wondering: How are investors converting their equity into usable value?
Great question. If you're no longer focused on acquiring more properties, I'd look at equity as a tool rather than something that has to sit idle. Many investors use HELOCs or cash-out refinances selectively to improve cash flow, fund passive investments, or create a liquidity reserve while keeping taxes in mind. At this stage, preserving flexibility and managing risk is often more important than maximizing leverage.Thanks, Arman. I agree that flexibility is important. My hesitation with a HELOC is the economics at current rates. I'd want the capital deployed at a return at least 3 percentage points above the borrowing cost to justify the added leverage and risk. That starts to narrow the opportunities considerably, particularly if the goal is reliable retirement cash flow rather than growth.
- 2moMatt HaddockBusiness MemberFinancial Advisor · Hartford County, CT · Member since 2020 · 13 posts · 9 votes
@Alison Robinson This is the biggest challenge I see with most real estate investors is that they don't know how to diversify because of this exact problem, trapped equity. LOC's, HELOC, 1031's, Private Lending. It's all still real estate. My wealthiest clients are selling off their portfolios, taking their chips off the table and deploying cash elsewhere. There are many other tax reduction strategies to use to offset capital gains if that's your concern. Most people lose sleep over cap gains when they truly don't understand their entire financial picture. It doesn't mean they are leaving real estate completely, but when your entire net worth is 75%+ real estate and you do not have enough assets or liquidity elsewhere, it can become a real issue.
You mentioned retirement cash flow, which is great to be thinking about, but unfortunately the average RE investor can't predictably create enough consistent retirement income through only real estate exposure (nor should they). - Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2mo
Quote from @Matt Haddock:
@Alison Robinson This is the biggest challenge I see with most real estate investors is that they don't know how to diversify because of this exact problem, trapped equity. LOC's, HELOC, 1031's, Private Lending. It's all still real estate. My wealthiest clients are selling off their portfolios, taking their chips off the table and deploying cash elsewhere. There are many other tax reduction strategies to use to offset capital gains if that's your concern. Most people lose sleep over cap gains when they truly don't understand their entire financial picture. It doesn't mean they are leaving real estate completely, but when your entire net worth is 75%+ real estate and you do not have enough assets or liquidity elsewhere, it can become a real issue.
You mentioned retirement cash flow, which is great to be thinking about, but unfortunately the average RE investor can't predictably create enough consistent retirement income through only real estate exposure (nor should they).Matt, I agree with your broader point about concentration risk, but I’d push back a little on the idea that real estate can’t reliably contribute meaningful retirement income.
I’m from a generation that was encouraged to build multiple streams of income going into retirement rather than depend on one source. My rental portfolio has absolutely fulfilled its intended role as one of those income streams.
For me, the question isn’t whether real estate can support retirement by itself. It’s how much of the portfolio I want to keep, how much equity should remain tied up in it, and whether some of that equity can be redeployed elsewhere without giving up too much cash flow or tax efficiency.
Hi Alison, that's a really interesting question, especially since your goals have shifted from growth to income and flexibility. It seems like the answer depends a lot on each investor's risk tolerance and long-term plans. Some investors choose to leave the equity untouched for stability, while others look at options such as refinancing, strategic sales, or repositioning assets to improve cash flow.
Managing a portfolio with significant equity while balancing income, taxes, and risk is definitely a unique challenge. I'm curious to hear how other experienced investors are approaching this stage of their investing journey. Thanks for bringing up such a thoughtful discussion.- Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2mo
Quote from @Min Zhang:
Hi Alison, that's a really interesting question, especially since your goals have shifted from growth to income and flexibility. It seems like the answer depends a lot on each investor's risk tolerance and long-term plans. Some investors choose to leave the equity untouched for stability, while others look at options such as refinancing, strategic sales, or repositioning assets to improve cash flow.
Managing a portfolio with significant equity while balancing income, taxes, and risk is definitely a unique challenge. I'm curious to hear how other experienced investors are approaching this stage of their investing journey. Thanks for bringing up such a thoughtful discussion.
Thanks, Min. I think you captured the tradeoff well. Leaving the equity untouched provides stability, but it also raises the question of whether that capital is working hard enough once the objective shifts from growth to income. For me, the challenge is finding ways to improve cash flow or flexibility without taking on enough additional debt or tax exposure to undermine the benefit.
- 2moHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
OP. No need to answer, but to broaden the discussion.
1. Do you have kids who will inherit? Or relatives.
2. Do you have troublesome properties now or coming up due to their age? Product prune. Level load your cash flow.
3. Beside your existing retirement revenue streams, 401k, SS, annuities, pensions, etc, how much monthly or annual cash do you want from these units?
4. What does your upcoming Capex needs look like for repair or maintenance? Reduce pulling from your Personal retirement revenue streams for Capex by selling or taking out loan.
5. How retired do you want to be? Do these impact your retirement activities?
6. Do you plan to move somewhere else?
7. etc, etc.
Potential options based on the above situations:
A. Do owner financing. With cash payment streams. All or individually. Will reduce lump sum taxes and possibly at lower tax rates.
B. 1031 several properties into easier REI type. Or into a warmer climate home.
C. Do owner financing with your kids NNN, interest only or whatever level of revenue stream you want. Put the loan in a will to them, so it zeroes out upon death.
D. Depending on your lifestyle and those properties. Try living in each 2 out of 5 years as primary residence and take the $250,000 capital gain exclusion. $500,000 if married. Talk with your tax person. Although lump sums, this provides tax free cash flows. You can live in 3 houses using the 2/5 with the 3rd available to sale in year 6.
E. Now that you are retired. Can you get REP status? Talk with your Tax person, depending on your property types, is it worth it to do Cost Segregation to reduce taxes on your non REI revenue to increase your income streams. Assume you want more cash flow now and the fact you have to pay more taxes in the coming years doesn't matter since less depreciation.
F. Ask an RE attorney/Tax CPA if you can set up another legal entity. Sell to them and lease back to capture land and long-term depreciable asset value costs in your lease amount against your other non-REI revenue streams if you have REP status.
G. Talk with your CPA. Look at all of your Personal cash outflows. Do you have children or other relatives you give money to? Electric. Water. Internet. House maintenance. Car. etc etc. Structure to where you don't personally pay these anymore and they become business expenses. This increases your cash flow by reducing your taxes. It all depends on your living arrangements and personal relationships. Let's say you're helping someone out with college or to buy a car. Stop that. 1099 them, don't pay payroll taxes. Pay them for using them for advertising on your website, management fee, etc.
H. Do you have CD/MM/Cash you can transfer or invest at your Bank or lending institution. Ask them if you transfer there, how does that compare to the rate you're getting now? Then ask for 1%-point reduction to your Interest rate on your loan. Depends on your loan amount and the amount you have with them in these assets. This will help reduce your interest expense, increasing your cash flow.
Key is to look beyond just your REI revenue streams, but also your Personal situation to either reduce your personal cash flows or other Personal situations.
Don't have the above discussion on the internet forums. Find someone who can look at your entire portfolio and make suggestions. This will not be a normal Financial Planner or CPA.
I would get a Fixed Line of Credit but not use. If you have a great bank relationship, they will do this and it won't cost anything.
- Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2mo
Quote from @Henry Clark:
OP. No need to answer, but to broaden the discussion.
1. Do you have kids who will inherit? Or relatives.
2. Do you have troublesome properties now or coming up due to their age? Product prune. Level load your cash flow.
3. Beside your existing retirement revenue streams, 401k, SS, annuities, pensions, etc, how much monthly or annual cash do you want from these units?
4. What does your upcoming Capex needs look like for repair or maintenance? Reduce pulling from your Personal retirement revenue streams for Capex by selling or taking out loan.
5. How retired do you want to be? Do these impact your retirement activities?
6. Do you plan to move somewhere else?
7. etc, etc.
Potential options based on the above situations:
A. Do owner financing. With cash payment streams. All or individually. Will reduce lump sum taxes and possibly at lower tax rates.
B. 1031 several properties into easier REI type. Or into a warmer climate home.
C. Do owner financing with your kids NNN, interest only or whatever level of revenue stream you want. Put the loan in a will to them, so it zeroes out upon death.
D. Depending on your lifestyle and those properties. Try living in each 2 out of 5 years as primary residence and take the $250,000 capital gain exclusion. $500,000 if married. Talk with your tax person. Although lump sums, this provides tax free cash flows. You can live in 3 houses using the 2/5 with the 3rd available to sale in year 6.
E. Now that you are retired. Can you get REP status? Talk with your Tax person, depending on your property types, is it worth it to do Cost Segregation to reduce taxes on your non REI revenue to increase your income streams. Assume you want more cash flow now and the fact you have to pay more taxes in the coming years doesn't matter since less depreciation.
F. Ask an RE attorney/Tax CPA if you can set up another legal entity. Sell to them and lease back to capture land and long-term depreciable asset value costs in your lease amount against your other non-REI revenue streams if you have REP status.
G. Talk with your CPA. Look at all of your Personal cash outflows. Do you have children or other relatives you give money to? Electric. Water. Internet. House maintenance. Car. etc etc. Structure to where you don't personally pay these anymore and they become business expenses. This increases your cash flow by reducing your taxes. It all depends on your living arrangements and personal relationships. Let's say you're helping someone out with college or to buy a car. Stop that. 1099 them, don't pay payroll taxes. Pay them for using them for advertising on your website, management fee, etc.
H. Do you have CD/MM/Cash you can transfer or invest at your Bank or lending institution. Ask them if you transfer there, how does that compare to the rate you're getting now? Then ask for 1%-point reduction to your Interest rate on your loan. Depends on your loan amount and the amount you have with them in these assets. This will help reduce your interest expense, increasing your cash flow.
Key is to look beyond just your REI revenue streams, but also your Personal situation to either reduce your personal cash flows or other Personal situations.
Don't have the above discussion on the internet forums. Find someone who can look at your entire portfolio and make suggestions. This will not be a normal Financial Planner or CPA.
I would get a Fixed Line of Credit but not use. If you have a great bank relationship, they will do this and it won't cost anything.
This is an exceptionally thoughtful response. You’ve given me several things to think about that I had not considered, and this is exactly the kind of perspective I was hoping the question would generate.
A little additional context: I am pursuing Real Estate Professional qualification for tax purposes this year, and I agree that the inheritance implications of holding appreciated real estate are significant. That topic could probably support a separate discussion by itself.
A few of your ideas particularly caught my attention.
The first is property pruning. I've been thinking primarily about the portfolio as a whole rather than asking what cash flow, CapEx requirements and management burden would look like if I selectively sold one or two of the least attractive properties.
Owner financing is another. I’ve had tenants ask about buying properties before, and I hadn’t really considered using a future sale as a way of converting the property into an income stream rather than simply taking the sale proceeds.
And your sale/leaseback entity idea is one I have never explored. I’d want a real estate tax attorney/CPA to walk me through the mechanics and limitations, but it is exactly the kind of alternative structure I was hoping this discussion might surface.
I really appreciate the time you put into this.
- 2moHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Quote from @Alison Robinson:
Quote from @Henry Clark:
OP. No need to answer, but to broaden the discussion.
1. Do you have kids who will inherit? Or relatives.
2. Do you have troublesome properties now or coming up due to their age? Product prune. Level load your cash flow.
3. Beside your existing retirement revenue streams, 401k, SS, annuities, pensions, etc, how much monthly or annual cash do you want from these units?
4. What does your upcoming Capex needs look like for repair or maintenance? Reduce pulling from your Personal retirement revenue streams for Capex by selling or taking out loan.
5. How retired do you want to be? Do these impact your retirement activities?
6. Do you plan to move somewhere else?
7. etc, etc.
Potential options based on the above situations:
A. Do owner financing. With cash payment streams. All or individually. Will reduce lump sum taxes and possibly at lower tax rates.
B. 1031 several properties into easier REI type. Or into a warmer climate home.
C. Do owner financing with your kids NNN, interest only or whatever level of revenue stream you want. Put the loan in a will to them, so it zeroes out upon death.
D. Depending on your lifestyle and those properties. Try living in each 2 out of 5 years as primary residence and take the $250,000 capital gain exclusion. $500,000 if married. Talk with your tax person. Although lump sums, this provides tax free cash flows. You can live in 3 houses using the 2/5 with the 3rd available to sale in year 6.
E. Now that you are retired. Can you get REP status? Talk with your Tax person, depending on your property types, is it worth it to do Cost Segregation to reduce taxes on your non REI revenue to increase your income streams. Assume you want more cash flow now and the fact you have to pay more taxes in the coming years doesn't matter since less depreciation.
F. Ask an RE attorney/Tax CPA if you can set up another legal entity. Sell to them and lease back to capture land and long-term depreciable asset value costs in your lease amount against your other non-REI revenue streams if you have REP status.
G. Talk with your CPA. Look at all of your Personal cash outflows. Do you have children or other relatives you give money to? Electric. Water. Internet. House maintenance. Car. etc etc. Structure to where you don't personally pay these anymore and they become business expenses. This increases your cash flow by reducing your taxes. It all depends on your living arrangements and personal relationships. Let's say you're helping someone out with college or to buy a car. Stop that. 1099 them, don't pay payroll taxes. Pay them for using them for advertising on your website, management fee, etc.
H. Do you have CD/MM/Cash you can transfer or invest at your Bank or lending institution. Ask them if you transfer there, how does that compare to the rate you're getting now? Then ask for 1%-point reduction to your Interest rate on your loan. Depends on your loan amount and the amount you have with them in these assets. This will help reduce your interest expense, increasing your cash flow.
Key is to look beyond just your REI revenue streams, but also your Personal situation to either reduce your personal cash flows or other Personal situations.
Don't have the above discussion on the internet forums. Find someone who can look at your entire portfolio and make suggestions. This will not be a normal Financial Planner or CPA.
I would get a Fixed Line of Credit but not use. If you have a great bank relationship, they will do this and it won't cost anything.
This is an exceptionally thoughtful response. You’ve given me several things to think about that I had not considered, and this is exactly the kind of perspective I was hoping the question would generate.
A little additional context: I am pursuing Real Estate Professional qualification for tax purposes this year, and I agree that the inheritance implications of holding appreciated real estate are significant. That topic could probably support a separate discussion by itself.
A few of your ideas particularly caught my attention.
The first is property pruning. I've been thinking primarily about the portfolio as a whole rather than asking what cash flow, CapEx requirements and management burden would look like if I selectively sold one or two of the least attractive properties.
Owner financing is another. I’ve had tenants ask about buying properties before, and I hadn’t really considered using a future sale as a way of converting the property into an income stream rather than simply taking the sale proceeds.
And your sale/leaseback entity idea is one I have never explored. I’d want a real estate tax attorney/CPA to walk me through the mechanics and limitations, but it is exactly the kind of alternative structure I was hoping this discussion might surface.
I really appreciate the time you put into this.
OP my wife and I are retired and have over the last 5 years been going through this thought process. Considering our “timeline”, our 25 yo son E5 in the Navy who we are bringing along for the ride in our investments, and future wealth dispersion.
1. The best exercise we did was to pull all of our investments together into a system. We used a high end wealth management service, not just a broker. Almost zero wealth advisors since they focus on stock market and monetary assets will be able to help you with REI. These folks don't add a lot as far as non financial investments, but we use as a sounding board.
2. Next we address short term which we defined up to 5 years out, midterm, then Longterm.
Shortterm 5 years out was a period we picked so we are not concerned about the stock markets.Midterm 5 to 15 years less risk less reward but stable. Cover assisted living, retirement home, possible overseas or retirement second home, etc.
Longterm aggressive growth. With inflation if your money sits it’s losing value. My world view is extreme inflation in the next 5 to 10 years so you can’t keep things in cash or liquid assets except for short term.
3. Now with the thoughts above in 2 think about your REI. Depending on your REI type you may have to much or high risk exposure. If interest rates which usually go up with inflation go up then your assets value goes down and their liquidity goes down, and harder to refi. So do you have to much REI?
4. I may have missed it, but what type of REI? All residential? Part commercial? What type of commercial? NNN? Lease terms? Quality of leases? Etc etc.
By going thru the above process we reach a point where we are comfortable and can enjoy retirement, enjoy our REI, not worry about our Longterm financial investments.
Then your hardest decision is fish or lobster for lunch? Belize, Italy or Japan for your next trip? Get your asset allocation, risk/reward, time investment in place. Then get out there. Although we are retired, still can't stop doing REI. To much fun, once you have the "Secret Sauce".
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes2mo
You can harvest equity on a portfolio, especially if your LTV is falling to a low range (below 50%), you can cash out refi select properties.
The nice thing is that a cash out refi is not a taxable event, so the cash is tax free.
You need a few conditions for this to work. You want to keep your cash out rate at or below the rate of appreciation to at least maintain LTV. You need your annual rent growth to support the additional debt to at least maintain DSCR. And you need a portfolio with enough individual properties to keep the refi increments small enough.
- Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2mo
Quote from @Marcus Auerbach:
You can harvest equity on a portfolio, especially if your LTV is falling to a low range (below 50%), you can cash out refi select properties.
The nice thing is that a cash out refi is not a taxable event, so the cash is tax free.
You need a few conditions for this to work. You want to keep your cash out rate at or below the rate of appreciation to at least maintain LTV. You need your annual rent growth to support the additional debt to at least maintain DSCR. And you need a portfolio with enough individual properties to keep the refi increments small enough.
Marcus, this is very close to how I’ve been thinking about it.
One complication I’ve run into is that while the cash-out itself isn’t taxable, the interest deduction follows the use of the loan proceeds. So if the equity is pulled out for personal retirement spending rather than reinvested in qualifying real estate, I don’t believe I can simply continue treating all of the interest as a rental business expense.
I’ve also seen a lending constraint firsthand. I’m completing a refinance on one property now, and the bank required the proceeds to go back into the property. That may be specific to this lender or loan product rather than a universal restriction.
- 2moLaurence J.Pro MemberRental Property Investor · Chicago IL · Member since 2013 · 28 posts · 46 votes
@Alison Robinson - don't let the trap of good advice to the wrong situation become your bad advice. The idea of building wealth through equity only applies if your goal is building up that concept of ephemeral wealth. If thats not your goal, then thats bad advice for you.Your stated goal was sustainable income and flexibility. So let the equity sit and compound and forget it exists. It's not going anywhere. It'll still grow and then be available if you do one day need it, or otherwise for your kids and grandkids.
In the meantime, enjoy the rental income and cash flow the property is generating. If you take out equity for some other purposes, its only going to reduce your cash flow.
- 2moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Quote from @Alison Robinson:
Garrett Brown recently asked a compelling question here on BiggerPockets: What has built more investor wealth, cash flow or equity?
Most of the responses I saw pointed to equity. That raised a different question for me:
If acquiring more properties is no longer the objective, how are experienced investors accessing or putting that equity to work?
This question is particularly relevant to me. I’m retired and own a 10-property rental portfolio with substantial equity and relatively low leverage. I’m no longer trying to acquire more properties. My objective now is to improve sustainable income and retirement flexibility without taking on unnecessary risk or creating an avoidable tax burden.
That leaves me wondering: How are investors converting their equity into usable value?
Let's start with a simple question - what do YOU want to do with the equity?
Logical Property Management4.9460 Reviews- Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2mo
Quote from @Drew Sygit:
I initially wasn't going to respond to the question, "What do you want to do with the equity?" I thought the answer was already in my original post.
The more I thought about it, the more I realized I had explained what I was doing, but not why.
Here's the story.
I spent most of my adult life doing what we're all told to do: save consistently, invest carefully, avoid unnecessary debt, and build assets for retirement.
Then one day I retired.
The paycheck stopped.
Nothing was wrong financially. The retirement plan said everything was fine. But something unexpected happened.
Every time I transferred money from savings into my checking account, it felt like I was moving backward.
Logically, I knew I wasn't. That's exactly what retirement savings are for.
Emotionally, it didn't feel that way.
That feeling led me to ask a different question.
Instead of asking, "How much have I saved?"
I started asking, "How can the assets I've already built produce more of the income I'll need for the rest of my retirement?"
At the beginning of this year, I gave myself a simple theme:
Equity to Income.
We originally invested about $220,000 in our rental portfolio. Today it's worth more than eight times that amount and carries less than 20% loan-to-value.
Many investors would call that trapped equity.
Maybe it is.
But before borrowing against it, selling properties I enjoy owning, or taking on additional investment risk, I wanted to answer a simpler question:
Can I make the portfolio I already own generate significantly more income?
That led me to a five-part strategy.
1. Optimize the portfolio.
When I measured every property against current market rent, I found the portfolio was operating at only about 80% of market rent. We had always used a structured renewal process, but it was heavily weighted toward tenant retention and avoiding vacancy rather than being grounded in current market rent and turnover economics. The opportunity was significant.
That gap represented roughly $30,000 per year in rental income opportunity.
Using a more disciplined renewal process that considers market rent, tenant history, turnover costs, and long-term retention, we've already improved to about 84% of market rent as of August 1.
The goal isn't to maximize rent.
The goal is to maximize long-term cash flow while keeping good tenants.
2. Control expenses.
Every dollar saved has the same impact on cash flow as an additional dollar of rent.
This year we competitively bid our landlord insurance and reduced our annual premium by approximately 26% while improving our understanding of the coverage.
I also completed a portfolio-wide review of our property tax assessments and identified three properties with strong appeal positions for 2026.
3. Reinvest selectively.
Sometimes the best investment isn't another property.
I'm refinancing one property by extending the loan term, which lowers the monthly mortgage payment, while using approximately $30,000 of the available equity to modernize the property.
The improvements should increase rent, reduce future maintenance, and improve that property's annual cash flow by approximately 20%.
I may have one or two additional properties where that same approach makes sense.
4. Improve the tax structure.
I'm working toward qualifying as a Real Estate Professional because taxes are part of the cash-flow equation. Generating more income is only part of the objective. Keeping more of it matters just as much.
5. Maximize depreciation opportunities.
Cost segregation gets a lot of attention, but there are other depreciation opportunities that are easier to miss. For example, if you replace a roof, the remaining basis of the old roof may be eligible for a write-off rather than continuing to depreciate for years after it is gone. Properly identifying shorter life assets and disposed components won't increase rent, but it can materially improve after-tax cash flow
When I put those five pieces together, I realized something.My goal isn't to extract equity.
My goal is to make the equity I've already built work harder.
Every additional dollar of cash flow the portfolio generates is one less dollar I need to withdraw from retirement savings.
I still don't enjoy drawing down savings.
Maybe I never will.
But if I can improve the income generated by the assets I've spent decades building, then those assets continue doing exactly what I built them to do.
For me, that's what Equity to Income really means.
- 2moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Quote from @Alison Robinson:
Quote from @Drew Sygit:
I initially wasn't going to respond to the question, "What do you want to do with the equity?" I thought the answer was already in my original post.
The more I thought about it, the more I realized I had explained what I was doing, but not why.
Here's the story.
I spent most of my adult life doing what we're all told to do: save consistently, invest carefully, avoid unnecessary debt, and build assets for retirement.
Then one day I retired.
The paycheck stopped.
Nothing was wrong financially. The retirement plan said everything was fine. But something unexpected happened.
Every time I transferred money from savings into my checking account, it felt like I was moving backward.
Logically, I knew I wasn't. That's exactly what retirement savings are for.
Emotionally, it didn't feel that way.
That feeling led me to ask a different question.
Instead of asking, "How much have I saved?"
I started asking, "How can the assets I've already built produce more of the income I'll need for the rest of my retirement?"
At the beginning of this year, I gave myself a simple theme:
Equity to Income.
We originally invested about $220,000 in our rental portfolio. Today it's worth more than eight times that amount and carries less than 20% loan-to-value.
Many investors would call that trapped equity.
Maybe it is.
But before borrowing against it, selling properties I enjoy owning, or taking on additional investment risk, I wanted to answer a simpler question:
Can I make the portfolio I already own generate significantly more income?
That led me to a five-part strategy.
1. Optimize the portfolio.
When I measured every property against current market rent, I found the portfolio was operating at only about 80% of market rent. We had always used a structured renewal process, but it was heavily weighted toward tenant retention and avoiding vacancy rather than being grounded in current market rent and turnover economics. The opportunity was significant.
That gap represented roughly $30,000 per year in rental income opportunity.
Using a more disciplined renewal process that considers market rent, tenant history, turnover costs, and long-term retention, we've already improved to about 84% of market rent as of August 1.
The goal isn't to maximize rent.
The goal is to maximize long-term cash flow while keeping good tenants.
2. Control expenses.
Every dollar saved has the same impact on cash flow as an additional dollar of rent.
This year we competitively bid our landlord insurance and reduced our annual premium by approximately 26% while improving our understanding of the coverage.
I also completed a portfolio-wide review of our property tax assessments and identified three properties with strong appeal positions for 2026.
3. Reinvest selectively.
Sometimes the best investment isn't another property.
I'm refinancing one property by extending the loan term, which lowers the monthly mortgage payment, while using approximately $30,000 of the available equity to modernize the property.
The improvements should increase rent, reduce future maintenance, and improve that property's annual cash flow by approximately 20%.
I may have one or two additional properties where that same approach makes sense.
4. Improve the tax structure.
I'm working toward qualifying as a Real Estate Professional because taxes are part of the cash-flow equation. Generating more income is only part of the objective. Keeping more of it matters just as much.
5. Maximize depreciation opportunities.
Cost segregation gets a lot of attention, but there are other depreciation opportunities that are easier to miss. For example, if you replace a roof, the remaining basis of the old roof may be eligible for a write-off rather than continuing to depreciate for years after it is gone. Properly identifying shorter life assets and disposed components won't increase rent, but it can materially improve after-tax cash flow
When I put those five pieces together, I realized something.My goal isn't to extract equity.
My goal is to make the equity I've already built work harder.
Every additional dollar of cash flow the portfolio generates is one less dollar I need to withdraw from retirement savings.
I still don't enjoy drawing down savings.
Maybe I never will.
But if I can improve the income generated by the assets I've spent decades building, then those assets continue doing exactly what I built them to do.
For me, that's what Equity to Income really means.
Great answer!
You covered what I couldn't figure out from your original post - if you took equity out of your properties what would you do with it?
FYI: My wife & I have a similar plan to yours. We plan to use the cashflow from the portfolio we've built to supplement our retirement income.
- Retirement for me will be working only 20-25 hours/week from wherever in the world we're visiting. I'd get too bored otherwise!Logical Property Management4.9460 Reviews
- Homeowner · 74 FAIRMOUNT AVE CHATHAM NJ 07928 · Member since 2026 · 9 posts · 2 votes2mo
I think the biggest issue is that a lot of homeowners are asset-rich but liquidity-poor.
I've looked at home equity differently over the years. If a property has appreciated substantially, sitting on 100% of that equity isn't necessarily the only option. The question is whether you can access a portion of it responsibly and put the capital to work in something that has a reasonable chance of producing a better return than the cost of accessing the equity.
I've seen investors use HELOCs, cash-out refinancing, home-equity loans, or even selling/downshifting from an existing property to unlock capital. But I don't think accessing equity should automatically mean buying another property.
There are opportunities across real estate, private businesses, marketable securities, and other investments. The key is matching the financing structure to the investment horizon and making sure the new investment can withstand periods where cash flow doesn't go according to plan.
Personally, I look at three things before deploying equity:
What's the actual cost of accessing the capital?
What's the realistic return or cash flow of the new investment?
What happens if the investment underperforms for 12–24 months?
Equity can be incredibly powerful, but leverage magnifies mistakes just as quickly as it magnifies returns.
Curious how other investors here are approaching this. Are you primarily using your equity to acquire more real estate, diversify into other markets, or simply improve liquidity?
- 2moDenise SuppleeBusiness MemberRealtor · Willow Grove, PA · Member since 2017 · 1k+ posts · 650 votes
I think many investors reach a point where they're no longer focused on buying more properties. Instead, they're looking for the properties they already own to provide dependable income and support their retirement goals. Since everyone's situation is different, I'd be careful about making any major changes without first understanding the tax implications and how they fit into my long-term plans. It's definitely a conversation I'd have with my CPA before deciding the best way to put that equity to work.
Spark Rental Co-Investing Club582 Reviews- Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2mo
Quote from @Denise Supplee:
I think many investors reach a point where they're no longer focused on buying more properties. Instead, they're looking for the properties they already own to provide dependable income and support their retirement goals. Since everyone's situation is different, I'd be careful about making any major changes without first understanding the tax implications and how they fit into my long-term plans. It's definitely a conversation I'd have with my CPA before deciding the best way to put that equity to work.
Denise, I agree. My part-time work in retirement is preparing taxes, so I’m particularly aware that there can be both pitfalls and opportunities in how these decisions are structured. The tax implications definitely need to be considered along with the long-term financial goals.
- Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes2mo
@Alison Robinson We've done 5 different thing:
1. we refied some properties that we wanted to keep long term and possible multi-generational.
2. we sold some properties that we did not want to keep, we sold all or most of the vacant land, scatterred lots, semi-detached, townhouses, condos, apartments, mixed use, and anything built before year 2000.
3. we did some 1031s, not all increased the total units owned as some were where relinquished multiple properties and acquire a single property. But we also relinquished 1 property where we acquired 4 properties, 3 of which were brand new with below market financing for 30 years.
4. we sold some properties where we didn't refi or sell and 1031. There were some that just didn't meet the new Buy Box criteria so we just sold them and paid the tax. I'm tax adverse, but I still pay taxes.
5. there were some properties that did not fall into any of the 4 above catagories. Those we didn't touch some have existing mortgages and some do not, but are running well we didn't fix something that wasn't broken.
- Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2mo
Quote from @David Krulac:
@Alison Robinson We've done 5 different thing:
1. we refied some properties that we wanted to keep long term and possible multi-generational.
2. we sold some properties that we did not want to keep, we sold all or most of the vacant land, scatterred lots, semi-detached, townhouses, condos, apartments, mixed use, and anything built before year 2000.
3. we did some 1031s, not all increased the total units owned as some were where relinquished multiple properties and acquire a single property. But we also relinquished 1 property where we acquired 4 properties, 3 of which were brand new with below market financing for 30 years.
4. we sold some properties where we didn't refi or sell and 1031. There were some that just didn't meet the new Buy Box criteria so we just sold them and paid the tax. I'm tax adverse, but I still pay taxes.
5. there were some properties that did not fall into any of the 4 above catagories. Those we didn't touch some have existing mortgages and some do not, but are running well we didn't fix something that wasn't broken.
David, I really like this approach. Evaluating each property individually rather than trying to apply one strategy across the entire portfolio. That makes a lot of sense to me. Thanks for sharing how you’ve handled it.
- 2moStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
If you don't want to sell and you can't access the equity through conventional financing routes, I wouldn't necessarily view that equity as "trapped." In many cases, market forces and lender underwriting are telling you that extracting additional equity while continuing to own the real estate introduces more risk than the property can reasonably support.
If you have to go to extraordinary lengths to access that equity through alternative lenders, expensive debt, or creative financing, there should be a very compelling reason why those funds are needed. Otherwise, the equity should rightfully remain "trapped."
I was fortunate to have some very good mentors at one of my earliest employment stops, and one of the best pieces of advice I received was that conservative leverage makes real estate, which is inherently illiquid, liquid. Maintaining sufficient equity and debt capacity gives you relatively easy avenues to liquidity when you actually need it.
It's also important to understand that leverage does not treat all real estate equally. 70% LTV on a C/D residential or multifamily property carries a very different risk profile than 70% LTV on an A-quality residential asset. Likewise, 70% leverage on a well-located multi-family property is very different from 70% leverage on a single-tenant commercial building in the same neighborhood. LTV by itself doesn't tell you whether leverage is conservative. The quality of the asset, durability of the income, strength of the borrower, and availability of financing all matter.
So I wouldn't start with the question, "How do I put this equity to work?" I'd start with, "Does accessing this equity place unnecessary pressure or risk on the remaining real estate?" If the answer is yes, there is nothing inherently wrong with leaving the equity where it is. In fact, it's where it belongs.
Alison,
I too am retired with a bunch of equity in multiple properties. My goal is to trim the fat. Which means get rid of the ones that are problems. Problems can mean the following: There is too much equity, the area is stagnate or going in the wrong direction, the tenants are problematic, the association is a pain, lack of diversification, or the financial performance is lack luster. I sell these and reinvest in more passive investments that earn 10-15% stable returns. These stable returns are offered through large institutional funds managed by large private equity groups and also a few smaller mortgage note companies with decades of experience. In the past it used to be only the super wealthy had access to these, but now the common folk like us have access. I don't mind paying the tax since I will make up for it with the higher returns. No more headaches with 1031's, rising taxes and insurance, crappy tenants, and overall management.
- Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2mo
Quote from @John M.:
Alison,
I too am retired with a bunch of equity in multiple properties. My goal is to trim the fat. Which means get rid of the ones that are problems. Problems can mean the following: There is too much equity, the area is stagnate or going in the wrong direction, the tenants are problematic, the association is a pain, lack of diversification, or the financial performance is lack luster. I sell these and reinvest in more passive investments that earn 10-15% stable returns. These stable returns are offered through large institutional funds managed by large private equity groups and also a few smaller mortgage note companies with decades of experience. In the past it used to be only the super wealthy had access to these, but now the common folk like us have access. I don't mind paying the tax since I will make up for it with the higher returns. No more headaches with 1031's, rising taxes and insurance, crappy tenants, and overall management.
John,
I really like the way you frame this as “trimming the fat” rather than making an all-or-nothing decision about real estate.
I’m not ready to exit my portfolio. I still genuinely enjoy owning and managing the properties, and I like the diversification and cash flow they provide. But I have started looking more critically at whether every property still deserves its place in the portfolio.
The 10–15% stable returns you mentioned definitely caught my attention. I haven’t found an investment vehicle offering that combination of return and stability that I’m comfortable with yet. If you’re willing to share the institutional funds or mortgage note companies you’ve had good experience with, I’d appreciate it. I’d like to learn more about that side of the equation.
- 2moHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
OP.
Your next step in this analysis is to recognize your specific assets versus a general conversation. Again I would sit down with a financial advisor even though they won't help you much in REI.Do the bucket exercise I noted above.
A couple exercises.1. Near term needs. For us we chose 5 years. That figure we want cash equivalent investments which are liquid. Lower return, low risk. Looking at your entire portfolio, not just REI do you have enough liquid assets for your near term period? Factor your financial assets you are or will get. Social security, annuities, 401k withdrawals.
2. Manage your loan risk. Somewhere you said 20% LTV. Not knowing your specifics. Most commercial loans have a 3/5/7 year balloon period at which time interest rates can be adjusted. To me that is risky if I'm in retirement. Pick your most stable investment. Do an SBA loan on it. Go for 10% downpayment. 45% SBA, 45% local sponsoring bank.
A. The SBA loan is fixed for 20 years. The local bank is fixed for 10 years then 5 year balloons. Pay your other loans off. This takes refinance risk off the table.B. If you ever do a cost segregation it would be on this property since you plan to hold it longest. Probably too late to do cost seg.
3. Like most people you are probably tied to your house and community. I would look forward to a time where you would sell your house and take advantage of the 2/5 year $250,000/$500,000 capital gain. Even if you turned right around and bought another house in the same neighborhood. Get the stepped up basis tax free. Versus dying.
4. Can't remember if this was addressed already. Move any commercial property to NNN. Start clearing your table for retirement. Don't do make work. It's about how you define retirement.
5. Again analyze your personal expenses. Believe you said you do tax work part time. Now that you are retired. Look at every expense an ask why your not deducting it.
When you buy a water hose. Car, internet, insurance, electric, etc, etc. Why didn’t you deduct it?
Is there a place you like to vacation every year? Why don’t you deduct it? We do Belize 5 to 6 times a year. We deduct it.
Roof is on the next house. We need to fly down and check on it. Deduct it.
Do you have family you go to see regularly? Why don’t you deduct it?
6. Mid term assets would be your REI. Unless my son gets out of the Navy which I hope he doesn't. We will probably sell our REI by the time we hit 75. So I don't view them as Longterm assets 20 years out. Believe your in Chicago. Look at each of your assets and view them 20 years from now. How does that market look like in 20 years for your asset? Do you need to move markets and assets to remove any valuation risks? A bad neighborhood now may be a good investment area over the next 10 to 20 years so this is not about good or bad. It's about future risk.
- 2moAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
Alison, with a 10-property portfolio and a lot of equity already built up, I think the question shifts from “how do I grow?” to “how do I turn what I’ve built into flexibility without creating a tax problem?”
There are a few ways investors usually approach it. A cash-out refinance or line of credit can unlock equity without selling, and the borrowed proceeds themselves generally aren’t taxable income. The tradeoff is that you’re adding debt, interest expense, and potentially more risk to a portfolio you’ve intentionally kept low-leverage. Also, how you use the borrowed money matters for the tax treatment of the interest.
The other route is selectively selling properties. That gives you true liquidity and simplifies the portfolio, but now you have to model capital gains, depreciation recapture, and any suspended passive losses that may become available when you dispose of an entire activity.
If you still want real estate exposure but less management, a 1031 exchange can also be worth looking at. You don’t necessarily have to exchange into another property you personally manage. Certain properly structured Delaware Statutory Trust interests can qualify for Section 1031 treatment, which can be useful for investors trying to move from active ownership toward something more passive.
Since you’re retired and not focused on acquiring more doors, I’d probably compare these options based on after-tax cash available, new debt created, monthly income, and how much management you want going forward. At this stage, the best answer may not be the one with the highest return. It may be the one that gives you the most flexibility with the least unnecessary complexity.
Happy to connect!
INVESTOR FRIENDLY CPA®5240 Reviews - 2moJoseph ScoreseBusiness MemberBanker · Philadelphia · Member since 2009 · 2k+ posts · 639 votes
Alison, this is an excellent question, and I think the distinction between building wealth and accessing that wealth is often overlooked.
In my experience working with real estate investors, once someone reaches the stage you’re describing, the conversation changes. It becomes less about maximizing leverage to acquire the next property and more about determining what role the equity should play in supporting income, liquidity, and long-term flexibility.
With a 10-property portfolio, substantial equity, and relatively low leverage, I wouldn’t necessarily look at this as “trapped” equity. I’d look at it as a financial resource that gives you options.
Depending on the properties and your objectives, investors I work with may consider selectively refinancing one or more properties rather than leveraging the entire portfolio. Others consolidate financing across several properties, restructure existing debt to improve cash flow, or access a portion of their equity while deliberately maintaining conservative leverage.
The important part, especially in retirement, is that accessing equity and improving income are not automatically the same thing. New debt creates a new obligation, so I believe the additional liquidity has to serve a clear purpose and justify the effect on monthly cash flow.
I’d also want a CPA or tax advisor involved before making the decision, particularly when comparing refinancing with selling appreciated properties or considering other strategies that could create taxable events.
At this stage, I think the question becomes less “How much equity can I access?” and more “How much, if any, should I access—and what will that capital accomplish for me?”
You’ve built something valuable over time. The next strategy should be about making that portfolio work for the lifestyle and financial flexibility you want now, without taking unnecessary risk.
- Rental Property Investor · Philadelphia, PA · Member since 2021 · 778 posts · 504 votes2mo
@Alison Robinson - I know some experienced investors who took out a HELOC on some investment properties and then lend the money out as hard money loans to "fix and flippers" - there are a few of them and then vett people together and then invest together as well. Just an idea to share!
It's true that most investors forget about their home equity. I have one now where I owe 6.0 % on my heloc, but the money I invested in earns 12%. So in essence my home is making me money!! My only mistake was not taking cash out at 2.5% during those Covid years!
- OH · Member since 2026 · 60 posts · 18 votes2mo
For a retired owner prioritizing flexibility, I’d compare several paths side by side: a conservative refinance, a partial sale or 1031 exchange, a portfolio line, and simply keeping the equity. The right answer depends on after-tax income, liquidity needs, rate risk, and how much operational complexity you still want—not just the gross amount you can unlock.
- Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes2mo
Hey There @Alison Robinson - I've went through this struggle myself and have found several banks that can help loan on a non-owner occupied investment property. Some that lend here in Chicago and others that lend outside of my market.
Feel free to message me and I can share who I found.
Quality Builders4.967 Reviews - 2moRyan ThomsonBusiness MemberReal Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
I do this full-time in Colorado Springs. The cleanest access point I've found is assumable mortgages.
Here's why it works: sellers with 2-3% rates won't sell because moving to a new mortgage at 7% costs them $800-1,000/mo more. That's rate lock, and it's real. But when a buyer can assume the existing loan, the seller actually has a reason to transact. Their equity gets unlocked.
On a real deal from last quarter: $450K home, $310K remaining at 2.875%. Buyer assumed the loan at that rate. Payment comes out to ~$1,300/mo vs $2,100/mo on a new 6.8% loan. We structured the offer to handle the equity gap (cash plus secondary financing), and the seller got access to $140K they'd been sitting on for two years.
For investors running IRR: you're getting a below-market rate on the majority of the debt. Even with a second mortgage at 9% to cover the equity gap, the blended rate on a deal like that comes out around 3.8-4%. That changes the returns completely compared to a conventional loan at 6.8%.
The 45-90 day assumption timeline is the main friction. But inventory is there if you know what you're looking at.
DM me if you want to run numbers on a specific deal.
The Assumable Guy544 Reviews- Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2mo
Quote from @Ryan Thomson:
I do this full-time in Colorado Springs. The cleanest access point I've found is assumable mortgages.
Here's why it works: sellers with 2-3% rates won't sell because moving to a new mortgage at 7% costs them $800-1,000/mo more. That's rate lock, and it's real. But when a buyer can assume the existing loan, the seller actually has a reason to transact. Their equity gets unlocked.
On a real deal from last quarter: $450K home, $310K remaining at 2.875%. Buyer assumed the loan at that rate. Payment comes out to ~$1,300/mo vs $2,100/mo on a new 6.8% loan. We structured the offer to handle the equity gap (cash plus secondary financing), and the seller got access to $140K they'd been sitting on for two years.
For investors running IRR: you're getting a below-market rate on the majority of the debt. Even with a second mortgage at 9% to cover the equity gap, the blended rate on a deal like that comes out around 3.8-4%. That changes the returns completely compared to a conventional loan at 6.8%.
The 45-90 day assumption timeline is the main friction. But inventory is there if you know what you're looking at.
DM me if you want to run numbers on a specific deal.
Hi Ryan,
I can see this working particularly well when the assumable loan is still a high percentage of the property value. My trapped-equity situation is almost the opposite, very low LTV. In that case the buyer still has to fund most of the purchase price through cash or secondary financing, so there isn't enough low-cost assumable debt to materially change the economics.
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes2mo
Quote from @Alison Robinson:
Garrett Brown recently asked a compelling question here on BiggerPockets: What has built more investor wealth, cash flow or equity?
Most of the responses I saw pointed to equity. That raised a different question for me:
If acquiring more properties is no longer the objective, how are experienced investors accessing or putting that equity to work?
This question is particularly relevant to me. I’m retired and own a 10-property rental portfolio with substantial equity and relatively low leverage. I’m no longer trying to acquire more properties. My objective now is to improve sustainable income and retirement flexibility without taking on unnecessary risk or creating an avoidable tax burden.
That leaves me wondering: How are investors converting their equity into usable value?
We constantly look for opportunities to increase cash flow in our business. That means periodically looking at our assets to see how much more cash we can squeeze out of the asset by trimming expenses, increasing rent.... If there's a lot of equity in an asset then we establish a plan to use that equity to acquire/invest in other assets/business. that will throw off more cash.
I guess we come from the Tony Robbins &* William Burroughs school of "If you don't grow you die". Lots of ways to interpret that quote- Using your words we look at it as a way to "improve sustainable income". Sometimes the investment may be by purchasing another property or investing in someone else's deal, or nothing to do with real estate at all.
- Rental Property Investor · Joliet, IL · Member since 2013 · 102 posts · 48 votes2mo
Quote from @Crystal Smith:
Quote from @Alison Robinson:
Garrett Brown recently asked a compelling question here on BiggerPockets: What has built more investor wealth, cash flow or equity?
Most of the responses I saw pointed to equity. That raised a different question for me:
If acquiring more properties is no longer the objective, how are experienced investors accessing or putting that equity to work?
This question is particularly relevant to me. I’m retired and own a 10-property rental portfolio with substantial equity and relatively low leverage. I’m no longer trying to acquire more properties. My objective now is to improve sustainable income and retirement flexibility without taking on unnecessary risk or creating an avoidable tax burden.
That leaves me wondering: How are investors converting their equity into usable value?
We constantly look for opportunities to increase cash flow in our business. That means periodically looking at our assets to see how much more cash we can squeeze out of the asset by trimming expenses, increasing rent.... If there's a lot of equity in an asset then we establish a plan to use that equity to acquire/invest in other assets/business. that will throw off more cash.
I guess we come from the Tony Robbins &* William Burroughs school of "If you don't grow you die". Lots of ways to interpret that quote- Using your words we look at it as a way to "improve sustainable income". Sometimes the investment may be by purchasing another property or investing in someone else's deal, or nothing to do with real estate at all.
Crystal, I like the way you framed it as improving sustainable income. That is really the objective I’m trying to solve for rather than simply “accessing equity.”
I’d be interested in hearing more about the approaches you’ve actually used when you found substantial equity sitting in an asset. Have you refinanced and redeployed into additional properties, invested as an LP in someone else’s deal, moved capital outside of real estate, or used some other approach?
What I keep coming back to is the hurdle rate. If I pull equity out of a low-leverage property, the new investment has to generate enough incremental cash flow to cover the cost of accessing that equity and compensate me for the additional risk.
I’d love to hear about one or two opportunities where you felt the redeployment clearly improved sustainable income. That’s the part of this discussion I’m most interested in learning from.
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes2mo
Quote from @Alison Robinson:
Quote from @Crystal Smith:
Quote from @Alison Robinson:
Garrett Brown recently asked a compelling question here on BiggerPockets: What has built more investor wealth, cash flow or equity?
Most of the responses I saw pointed to equity. That raised a different question for me:
If acquiring more properties is no longer the objective, how are experienced investors accessing or putting that equity to work?
This question is particularly relevant to me. I’m retired and own a 10-property rental portfolio with substantial equity and relatively low leverage. I’m no longer trying to acquire more properties. My objective now is to improve sustainable income and retirement flexibility without taking on unnecessary risk or creating an avoidable tax burden.
That leaves me wondering: How are investors converting their equity into usable value?
We constantly look for opportunities to increase cash flow in our business. That means periodically looking at our assets to see how much more cash we can squeeze out of the asset by trimming expenses, increasing rent.... If there's a lot of equity in an asset then we establish a plan to use that equity to acquire/invest in other assets/business. that will throw off more cash.
I guess we come from the Tony Robbins &* William Burroughs school of "If you don't grow you die". Lots of ways to interpret that quote- Using your words we look at it as a way to "improve sustainable income". Sometimes the investment may be by purchasing another property or investing in someone else's deal, or nothing to do with real estate at all.
Crystal, I like the way you framed it as improving sustainable income. That is really the objective I’m trying to solve for rather than simply “accessing equity.”
I’d be interested in hearing more about the approaches you’ve actually used when you found substantial equity sitting in an asset. Have you refinanced and redeployed into additional properties, invested as an LP in someone else’s deal, moved capital outside of real estate, or used some other approach?
What I keep coming back to is the hurdle rate. If I pull equity out of a low-leverage property, the new investment has to generate enough incremental cash flow to cover the cost of accessing that equity and compensate me for the additional risk.
I’d love to hear about one or two opportunities where you felt the redeployment clearly improved sustainable income. That’s the part of this discussion I’m most interested in learning from.
Allison- Often time when we find the right opportunity we do not have have enough time to access the equity to take advantage of the new opportunity, so we set a goal to remain at least 25% liquid, cash, bonds, stocks.... When we find the opportunity we usually use the liquid asset for the opportunity and then take equity out of a non-liquid asset or property, if we have gone below our 25% liquid target.
With respect to examples of opportunites that we have used this approach- We invested in a Built To Rent opportunity in Kansas City Area- We funded a new LLC with cash- The LLC then invested in the BTR opportunity & we put back the cash by pulling equity out of one of our properties.
We have been private lenders in the past- Sometimes on our own, sometimes in a group. Same process as above- We either use on our existing LLCs or establish a new one. We'll fund the LLC with cash from a liquid asset; fund the deal, then if we aren't comfortable with our remaining liquid position we'll access the equity in a non-liquid asset to replace the liquid asset.
In both cases above we moved $ from a stable but low yielding liquid asset returning 3 to 5% annually. And moved the low yielding cash into opportunities that were on average between 9 to 12% return. If we were below our liquid asset target then we replaced it by access the equity in our non-liquid assets
Now I have to say- My explanation above makes it seem easy, but we run cashflow analysis prior to pulling the trigger. The cashflow analysis considers all the moving parts- the negative impact on cashflow from accessing equity and the costs associated with establishing new entities, the projected positive impact on cashflow from investing in something new along with any the tax implications We use to put it all in spreadsheet, not we run the cashflow analysis in AI.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.