Trapped Equity in 3 rentals

[Melissa S Vrobel]

Hi all BPs...

I have several SFH rentals that have quite a bit of equity built-up but I don't want to refinance based on higher interest rates. Does anyone know a way to access it without refinance. I know that there is HELOC but I would rather have a pool of funds to buy new properties with cash. Any advice? I have over 400k in equity so I would love to use that but in no way do I want to sell the homes.

[Joe Villeneuve]

Quote from @Melissa S Vrobel:

@Joe Villeneuve   I understand the option of getting the money out but my goal is to pay them off and pass them down after my passing with step up in basis for my heirs.  I would however like to access short term cash rather than going to a hard money lender for other projects.  That is my situation.  

You're stuck between taking advantage of what you have, and not really realizing what it can be.  The potential that rests in paid off houses is just the CF.  The true cost of those houses is the equity that sits dead in them.  If you truly want to leave behind something truly valuable to your heirs, I would strongly suggest tapping into that equity the only way you can...by selling the properties and converting that equity back to what they could/should be worth.  If you have $400k in equity right now, that's $2M in property value, and the the added CF that comes with it.
When you are passing fully paid off properties to your heirs, you are actually passing 100% risk on each of those properties to them.
I was/am in a similar situation, as are many of my students.  In my opinion, the better way to treat this would be to teach them how to handle these investments, instead of handing them off with all that risk...but that's just me (and many, many others).