Ever feel frustrated when you think achieving your financial goals is taking too long?

Yes, you understand that good things take time. Promises of fast wealth are empty at best and a scheme at worst.

But surely you can do something to move the needle, even with a passive investment strategy.

Here’s the truth: you may be sitting on untapped equity in your rental properties without even realizing it. This “hidden value” can be a powerful tool for growing your portfolio, improving cash flow, or funding property improvements, all without dipping into your savings.

Sounds pretty good, right? Well, here’s how to find—and utilize—that sweet, sweet equity.

What Is Untapped Equity?

Untapped equity is the difference between your property's current market value and what you still owe on the mortgage. How much cash you’d have in hand if you were to sell and pay off the remaining debt. As markets appreciate or rent payments whittle down the loan balance, your equity grows.

For passive investors, this built-in wealth can be leveraged to finance future investments or boost ROI.

How to Find Untapped Equity

Step #1 – Get a Property Appraisal

A professional appraisal gives you an accurate, lender-recognized valuation of your property. No one can go by what they think the property should be worth. Here’s an important note, too: a professional appraisal isn’t shared with tax assessors and thus shouldn’t impact your property taxes.

Step #2 – Run a Comparative Market Analysis (CMA)

Use recent sales data from similar homes in your market (comps) to estimate your property’s current value. (Many turnkey investment platforms and property managers can help with this!)

Step #3 – Track Mortgage Paydown

Review your mortgage amortization schedule or contact your lender to see how much principal you've paid off. Knowing where you are means an accurate picture of your equity.

Step #4 – Monitor Local Market Trends

If home values in your area have increased over the last 6–12 months, your property’s value likely has too—sometimes significantly! This is especially true if you purchased before the pandemic or even in the last few years.

5 Smart Ways to Use Newfound Equity

Once you’ve identified your available equity, it’s time to put it to work! Here are a few paths investors may take:

Option #1 – Cash-Out Refinance

Refinance your mortgage for more than you owe and cash out the difference. Use those funds to:

• Acquire another rental property
• Renovate to force appreciation (and higher rents)
• Pay off higher-interest debt

Option #2 – Home Equity Line of Credit

A HELOC offers flexible access to your equity, like a credit card backed by your
property.

Best used for:

• Short-term improvements or repairs
• Emergency funds for vacancies or maintenance
• Quick capital for a time-sensitive opportunity

If you choose a HELOC, proceed carefully. They often have adjustable interest rates and can present a too-easy temptation to overleverage.

Option #3 – 1031 Exchange (Equity Recycling)

If your property has appreciated, you can sell it and roll the proceeds into a more
profitable investment while deferring capital gains taxes.

Great for:

• Upgrading to a higher-yield property
• Diversifying into stronger cash flow markets

1031 Exchanges are complex and must be planned well in advance. As soon as you consider it, talk to your advisors!

Option #4 – Rebalance Your Portfolio

If one property has a high equity position but low returns, consider refinancing or selling it and redeploying that capital elsewhere.

Example: Sell a $300K property with $200K in equity and use the proceeds to buy two $150K homes in higher-yield rental markets.

Option #5 – Fund Value-Add Improvements

Use your equity to upgrade the property! The right improvements can increase rental rates and reduce ongoing expenses.

ROI-boosting upgrades include:

• Cosmetic renovations
• Smart thermostats and energy-saving appliances
• Improved landscaping or curb appeal

Further Reading: 6 Ways to Reinvest in Your Rental Properties

WARNING! Smart Investors…

• Avoid overleveraging: Ensure your rental income can comfortably cover any
  new debt you incur through refinancing or credit.
• Work with investor-friendly lenders: They understand the unique needs of
  passive investors and may offer more flexible, favorable terms.
• Calculate ROI before acting: Only tap into equity if you have a solid plan for
  generating returns. You don’t want to use it willy-nilly!
• Consult the pros: Speak with your CPA, turnkey provider, and lender before
  executing any strategy. Another set of eyes can help determine the right moves
  to make.

Whether you want to buy more rental properties, improve existing ones, or restructure your portfolio, tapping into hidden equity can help you scale smarter and faster.

Want help identifying equity in your portfolio or putting it to work? Reach out to your REI Nation advisor to explore your options.

Start investing with REI Nation, where you invest and we handle the rest!