How We Used Home Equity to Buy Our Next Rental

May 24

In early 2025, my wife and I used a Home Equity Line of Credit (HELOC) on our first property to cover the down payment on our second rental. No new savings required. No refinancing. Just equity we had already built—and a structure that made financial sense.

This isn’t a loophole or a trick. It’s just one example of how homeowners can use the value of a property they already own to move toward long-term goals. Whether you're looking to grow a rental portfolio, fund a renovation, or simply prepare for the future, equity is something worth understanding.

The Timeline

2016: We bought our first home with a standard owner-occupant mortgage. The rate was competitive, the down payment was manageable, and we settled in.
2020: After several years, we made the decision to move and converted that first home into a rental. We didn’t refinance or change loan terms. We kept the original mortgage and simply began collecting rent.
2025: When we identified a new property we wanted to buy as a rental, we looked at the equity we had built in our first property and decided to put it to work.

What Is Equity and Why It Matters

Equity is the difference between what your home is worth and what you still owe on your mortgage. In our case, consistent mortgage payments over nearly nine years, combined with steady appreciation in the area, gave us a solid equity position. We didn’t track it closely year over year—but when we needed it, it was there.

If you own your home, you’re likely building equity whether you realize it or not. And that equity can be a flexible resource to:

Fund a down payment
Cover renovation costs
Handle unexpected expenses
Improve your overall financial position

You don’t need to act on it right away, but having a general idea of what’s available to you can help you plan more effectively.

How We Used the HELOC

A HELOC is a revolving line of credit secured by your home’s equity. We didn’t open one years in advance—we applied for it shortly before we needed the funds. Our lender evaluated the equity in our rental, reviewed our income and credit, and approved a line sized to what we had available.

We drew exactly what we needed for the down payment on the new property. That was it.

Because HELOCs typically offer interest-only payments during the draw period, our monthly obligation stayed low—making it easier to maintain positive cash flow across both properties.

The Cash Flow Breakdown

One key reason this worked: the numbers made sense.

Property #1 was already cash flowing. Rent covered the mortgage, taxes, insurance, and a small reserve.
Property #2 was selected with those same fundamentals in mind.
Even with the added HELOC payment, rent from both properties more than covered all expenses.

We didn’t stretch to make it work. We ran the numbers ahead of time, accounted for potential vacancies and repairs, and made sure we’d still be in a good spot even if things didn’t go perfectly.

What You Should Know

This strategy isn’t about rushing into more debt—it’s about making thoughtful use of what you already have.

We didn’t need to refinance. We kept our original mortgage in place.
We didn’t need to draw more than you need. We pulled only what was necessary for the down payment.
We didn’t have to act right away. Equity can sit there quietly until you’re ready. The key is knowing it’s available.

Want to Know What Your Equity Looks Like?

We’ve put together a simple tool to help you estimate your home’s value and calculate your potential equity.

👉 Check out the Home Value & Equity Tool
(Free to use—signup required to get your report.)

You just need your property address and your current loan balance.

Final Thoughts

Every situation is different. What worked for us might not be the right fit for you, and it’s always worth running the numbers and talking with a lender or advisor.

But if you own a home—even if you have no immediate plans to move or invest—equity is something you should understand. It's a resource that can help you make smart, forward-looking decisions for yourself and your family.

If you’re interested in learning more or want to talk through how this might apply to your situation, I’m happy to share more details.