08/24/2025
🏠One way to build wealth through Real Estate.
Earlier today, I was talking with my brother, and as I sit here at this open house I’m hosting, I figured I would put a few of my thoughts out there. He wants to pull some equity out of his house so he can buy another property and rent out his current one. Honestly, that’s one of the smartest ways to start building wealth in real estate. And honestly most homeowners don’t even realize they’re sitting on this opportunity.
So let’s break it down.
What Exactly Is Home Equity?
Equity is just the difference between what your house is worth and what you still owe on it.
For example:
If your home is worth $400,000
And you still owe $100,000
That means you’ve got $300,000 in equity.
That’s not just a number on paper. That’s real value you can tap into — and put to work.
How Do You Access Equity?
There are a couple of main ways:
Cash-Out Refinance – You refinance your mortgage, take some of the equity out in cash, and start with a new loan.
HELOC (Home Equity Line of Credit) – Works like a credit line you can borrow from.
If the goal is to buy another property, most investors go with the cash-out refinance, because it gives you a lump sum you can put down on your next place.
How Much Should You Pull Out?
Here’s where most people make a mistake: they take too much.
When you drain all the equity, your mortgage payment jumps and your cash flow gets tight. That’s risky.
A smarter approach? Leave at least 20-25% equity in your home.
So, if you’ve got $300,000 in equity, I wouldn’t recommend pulling more than $180,000. In fact, a safer move might be around $120,000.
That way, you’re still in a strong position with your first property. Disclaimer: I am not a financial advisor and this is not intended to be financial advice.
Turning Equity Into Wealth
Let’s say you pull out $120,000.
That’s enough for a 20% down payment on a $550,000 house.
Why 20%? Because it keeps you under 80% leverage, which means you avoid PMI (Private Mortgage Insurance). No PMI = lower monthly payments and better cash flow.
Now you’ve got two properties working for you:
Your first home, rented out and bringing in income.
Your new property, which is appreciating and building even more equity.
This is how you start multiplying.
Why This Works
Leveraging equity is how a lot of people quietly build wealth through real estate.
Instead of sitting on one property, you’re creating multiple streams of income and multiple properties appreciating over time. Plus, you still get tax benefits and rental income helping to cover your mortgages.
The best part? You’re not starting from scratch. You’re using what you already have to level up.
If you own a home, don’t overlook the equity sitting in it. That equity could be your ticket to buying another property and taking your first real step into building a real estate portfolio.
This isn’t about “get rich quick.” It’s about making smart, strategic moves that build freedom and wealth over time.
So the question is: what’s your equity doing right now? Sitting there — or working for you?
