Using Home Equity for Fix/Flip or rental property

[Shayan Sameer]

Hello everyone,

Happy New Year! I hope you all had a great start to 2025.

I have a question and would appreciate your input. I’ve done a couple of fix-and-flip projects in the past, both of which were financed through hard money lenders. While these deals were successful, I realized that the cost of using hard money significantly ate into my profits. In some cases, after crunching the numbers, the profit margin was so slim—or even negative—that I had to pass on some promising opportunities.

Here’s my situation: I currently own two properties—a primary residence and a rental property—both of which have substantial equity. I’m considering tapping into this equity to fund future fix-and-flip projects or even purchase another rental property.

My questions are:

1. Do you think leveraging the equity in my properties is a smart move for real estate investments?
2. Are there any potential risks or downsides I should keep in mind before proceeding?

I’d love to hear your thoughts, experiences, or advice on this approach.

Thank you in advance for your insights!

[Zachary Deal]

As several folks have mentioned leveraging equity in current property you owned is a great tool but still comes with the some of risks as you had before using hard money debt as there is never a guarantee your new project will be a success (there will always be risks with real estate investing).

Leveraging your investment property would probably be the first step I would take. If you use a DSCR loan you could maximize the equity you could take out while still breaking even on the mortgage + taxes + insurance. In this case even if the project went south and you broke even or even lost money, the equity (debt) you used would still be covered by the income you are earning on the rental property.