He's staying locked into the market with his investments since his property taxes are so low, but if I invested, the ROI is so low. 

As a local investor in San Diego myself who used to invest in the Midwest...the low prices can be very enticing but make sure you really know the market first and what you are getting into before pulling the trigger...when you are out of state you are at a disadvantage as properties can differ quite heavily from block to block. 

If you are locked in at a three-handle, I would HELOC the equity and use it as a down payment on a new deal.

Rising interest rates have hurt everyone’s buying power (except cash buyers obviously), and inventory is locked up because nobody wants to move and give up their historically-low interest rate.

New investor here and I’m looking to pull the trigger on a flip however I’m having a hard time picking the right amount to spend on a purchase and rehab because I don’t have an idea of what a full gut should cost. 

So, in September (yes 1 year later), the Marshall will oversee the locks being changed and direct (8) people to Set Out the tenants belongings into the front yard.

Lol on the "loophole" trigger 

You do have a ton of equity so it stinks to keep it locked in. 

With that type of experience, I might target a fix/flip or HML that has experience triggers keeping your costs low and maybe even something like deferred interest payments or bundled fees.

Are your losses locked up against your passive income?