Captive equity in your portfolio could be stunting the growth of your real estate business. Albert Einstein called compounding “the most brilliant mathematical concept of all time.” By pulling out the equity in your present properties, you are leveraging what is already leveraged.

For an investor, your property is an earning resource. Just as your financial advisor crafts an overall investment strategy but makes adjustments as the market changes, it makes wise business sense for you to constantly be assessing your portfolio to see if there are any underused resources.

Many investors become terrified about even the thought of increasing their liability on their properties. They have a skewed mindset that the property is their investment when in fact it is the properties earning potential that is the true investment. Toss this fear from your mind; your investment property is not your piggy bank. Your true concern should be the cost of debt service and how to make every resource operate as efficiently as possible.

Consider packaging your mortgages in a commercial loan. These loans consider your portfolio as a business focusing on rent rolls, debt/equity ratios, and strong leases. Your properties can be positioned individually under one umbrella for a favorable lower rate. If there are any that you are considering selling off, leave them out of the refi as this will save on appraisal fees and additional closing costs later.

Choose a banker who will be your partner in building your portfolio. Share your vision and business strategy with them so that they will be able to guide you in structuring the loan. Allow your expectations to help you build a healthy set of questions. Speaking of expectations how do you envision things will look when you are completely done with this refinance.

It is your time to “sell yourself and your portfolio.” As you prepare to present your portfolio to the bank review each investment. Consider the purchase price, renovations (which increase
value) and current rent rolls. Did you enclose a carport into a garage? Did you add a second bathroom or another bedroom? These things have changed your investment value since you got your first mortgage. The new banker will have no idea unless you paint a clear vision for him/her.

As with anything you do in life or business it is about learning to ask the right questions. There are two sides to the business partnership…. yours and your bankers so develop a healthy set of questions. Use other resources such as more seasoned investors who have experience in consolidation.

Overall, remember that the final decision is yours. Do your homework, ask questions and then act. Real Estate portfolios grow when you manage expenses and increase earning potential. Successful investors are willing to act.