How do you retrieve equity if owned free and clear

Question

Can anyone tell me how this works?

I'm thinking of either:

A. Attacking the principal and having a property paid off free and clear possibly within the next 4 or 5 years to help scale and increase cashflow as there wouldnt be any debt service. This would bring greater equity since it's further down the road.

Or

B. Doing a REFI beforehand, taking the small amount of equity and going from there...also to scale.

But I wonder, how do I obtain future equity once it's paid free and clear?

Any help is appreciated, thanks

Ned Carey · Answer

@Allen Watson Your question is not clear. Are you trying to build equity or are you trying to figure out how to leverage the equity?

Equity comes from appreciation, mortgage pay down or improving the property.

If you want to turn that equity into cash to buy more, you can refinance, get a second mortgage. Or get a credit line. A second mortgage or equity credit line in in second place is much harder to find for investment properties than, your personal residence.

You can get credit lines on free and clear investment properties. The best choice will depend on the specifics of the deals you are looking at.

Jason Wray · Answer

Allen,

Even when a mortgage is paid off free and clear you can still do a cash out refinance.  The other option would be to do a HELOC home equity line of credit - which is just like a credit card.  Cash out in most cases provides more opportunities with less risks.  It lso offer you cash in hand as reserves (PITI reserves) where a HELOC cannot be used for reserves or as an Asset like liquid reserves -cash.