225k in equity... What should I do ?

[Isiah Ferguson]

What's going on people? I need help with my business strategy. I have 2 rental properties which are free and clear. I'm sitting on at lease 225k in equity. Having properties free & clear for 2 years now has been so great and comfortable for me. Honestly, I haven't been putting the money back into the business. I sorta created a lifestyle relying on the funds from my rental. I'm in the process now as far as scaling back monthly payments in a way I don't have to spend my rental income. It's like I'm a spoil investor. I swear I want too leverage but I think it's a mental thing. I'm sorta scare because I came too far in life to lose my equity. I come from the projects and I can't afford to take any losses lol. I will like to leverage to scale up my business & purchase more doors. Also, to be in position to buy in case of a down turn in the market. ANY advice ???

[Clayton Mobley]

@Isiah Ferguson While I am usually strongly in favor of leverage, I agree with those here saying that if you're not mentally prepped for taking on that risk, I'd wait. As @Randy Bloch pointed out, you don't have to go all or nothing. You don't need to pull all your equity out of both properties right now. While it's true that equity doesn't bring in any money, it does provide peace of mind, and it sounds like that is one of your priorities, and that's ok. 

You can refi just one, and let the other sit free and clear. You can take out a HELOC and only use a portion of the equity for a downpayment on a new leveraged property, so you'd still have 1 full free and clear prop, one mostly paid off, and one leveraged. You can put a bigger downpayment on new props to minimize your loan payments so that if you have vacancy it's not as big of a hit - there are a lot of ways to arrange your debt and equity so that you're putting that capital to work using 'OPM' (other people's money - in the case the bank and the tenants who pay the loan for you) while still having enough of a safety net to feel confident moving forward.

Once you get the snowball going (your portfolio will get bigger, faster, the more doors you have) you may feel more confident in having all your props leveraged, and you can make that decision then. Don't feel like you have to do what 'everyone else' is doing or go fully leveraged right now to avoid FOMO (fear of missing out, I am allll acronyms today). Everyone's REI path is unique and it's important, first and foremost, to understand both your goals and your NEEDS (not an acronym). If you have a strong need for peace of mind and a safety net, that's fine, create a strategy that incorporates that.

Congrats on your success so far, and best of luck!