Leveraging Rental Property Equity: Sell, Upgrade, or Hold for Growth?

[Bharath K Raju]

Hi BiggerPockets Community,

I could use some advice on a decision I’m grappling with regarding my rental property located South Charlotte area (Ballantyne area, in NC 28277). Here are the key details of my situation:

1. Rental Property Details (Note: This was our primary home till 2017):
   • Current Value: $970,000 to $1M
   • Primary Mortgage Loan Balance: $505,000 (@ 2.6%)
   • Took Home Equity Loan on this house to make down payment for my current primary residence.
   • Home Equity Loan Balance: $123,000
   • Total Loan Balance: $628K (Primary Mortgage + Home Equity Loan)
   • Rental Status: Occupied
2. Primary Residence:
   • Purchased in 2022
   • Mortgage Rate: 7.3%
   • Current Loan Balance: $650K
3. My goal for 2025 is 2 fold: 
   • #1. I am interested in paying off my loan balance on my Primary house ASAP as I pay a pretty heavy Mortgage every month. What hurts me most is that most of my payment portion is going towards Interest. I paid almost 40K in interest last year. 
   • #2. My wife and I are very interested in investing in another property as we are eager to expand our portfolio. We are considering a fix and flip or a BRRR.

Options I'm Considering:

• Option 1: Upgrade my rental house at 28277 and sell the rental property at a premium. If I upgrade my house, I can sell it for ~$1.2M. I could use the proceeds to to pay down a good portion of my mortgage on my Primary residence (that is currently at 7.3%). And I could use additional 200K or so to fund my next investment property. 
• Option 2: Make minor upgrades to the rental property to increase the rent (the current lease is almost ending) and hold onto it. The South Charlotte Ballantyne area is one of the most sought after neighborhoods in Charlotte and there is significant growth potential in the next 4 to 5 years. If I hold this property, then I will have to figure out a way to leverage the equity in this property. I think I could get a HELOC for $150 to 200K.

Key Questions:

1. Would it be more financially prudent to sell the rental property and pay off a chunk of my high-interest primary mortgage (7.375%), and use the remainder for a fix and flip?
2. Alternatively, should I focus on making minor upgrades to the rental property to increase the rent and continue holding it, considering the neighborhood’s growth potential?
3. Given my inclination to keep the rental property, what are the potential benefits or drawbacks of using a HELOC on this property to finance another investment property?
4. Would banks typically provide a HELOC on an investment property, and if so, what terms should I expect?

I would greatly appreciate any guidance or experiences you can share to help me make an informed decision. Thank you!

[Maranda Tucker]

Hi Bharath!

Your situation presents a classic trade-off between long-term appreciation potential and short-term debt reduction. Here are my thoughts:

First, your 2.6% mortgage on the rental is an absolute goldmine—it’s a rate we’re unlikely to see again in our investing lifetimes. Selling means giving up an incredibly cheap cost of capital, especially in an appreciating area like 28277.

I direct my investors to 28277 all the time for appreciation-focused plays. Ballantyne and South Charlotte are experiencing continuous growth, and the demand fundamentals remain strong. If appreciation is part of your long-term wealth-building strategy, holding onto this asset could be wise.

That said, if your main goal is to aggressively pay down your primary residence mortgage, selling could make sense. Paying off a chunk of that 7.3% mortgage is essentially a guaranteed return at that interest rate. However, this also means walking away from future appreciation gains and potential rent increases.

As for a HELOC on an investment property, yes, it's possible, but terms are typically less favorable than primary residence HELOCs. Expect lower LTV limits (often 70-75%) and higher interest rates. But if you can secure one with solid terms, it could be a great way to access capital while keeping the rental.

If you believe in 28277's continued appreciation (and I do), I'd lean towards holding the rental, increasing rents through strategic upgrades, and leveraging equity via a HELOC or cash-out refinance if the terms make sense. This allows you to benefit from appreciation, continue building equity, and still access capital for new deals without sacrificing an ultra-low fixed-rate loan.

Would love to hear what direction you’re leaning—lots of ways to approach this depending on your risk tolerance and goals!