Best Approach for Utilizing Investment Property Equity

[So Da]

I am looking for advise on how to use the equity I have in my rental properties to grow my portfolio. I have two LTRs with conventional loans with $90k in equity each. I would like to use the money for a down payment on my next property without touching the existing loans. However, whenever I run the numbers it seems that my cashflow gets wiped out because of the interest on the down payment and the conventional loan I would take on the next property. What strategy do people have to use existing equity? What am I missing? Is the only way to effectively utilize equity to buy the property outright so I would only be paying the interest on the loan leveraged on the equity?

[Dave Foster]

@So Da

I'm right there with @Caleb Brown. These could all be good options if they make sense for you and align with your goals.

It is so important to consider the impact on both the property you are buying and the property you are refinancing. Adding debt to a property will always decrease its NOI. Sometimes that is worth it if the property you are buying has some advantages to you or if it will be making enough more to provide a solid NOI on it. And if it throws off enough cash to offset the loss in NOI from the current property.

If you decide to do a 1031 exchange, you would be able to defer all of the tax and appreciation to reinvest into other investment property/properties. This lets you take advantage of all equity while also avoiding tax. But it requires that you sell your current property.