The idea of leveraging trapped equity or why you should do it may not make sense to you at first. That’s okay because most people don’t get it either. 

However, learning how to leverage trapped equity can elevate your ability to make the most of your real estate investments.

This is a broad overview of it and what it could do for you. 

Trapped equity — sometimes numbers lie

I am known to say that numbers numbers don’t lie, people do.

Trapped equity doesn’t actually make figures false when evaluating your assets, but they do give a skewed view of what’s happening. 

How does this happen? The simple answer is appreciation. 

When you buy a multifamily asset, you put a certain amount of money for it — its market value at the time — and you put a certain amount of money down. Once all the ink dries on the paperwork, you got a good percentage of cash flow from there. 

Then something happens over time. You increase the rent per unit on this asset and the value of the property goes up. Now, it appears that the percentage of cash flow has gone up as well.

That is NOT the case. 

You still have the same amount of debt on this asset. Therefore, you have trapped equity that seems to sitting there doing nothing. Take that from the appreciation and you’ll find your cash flow is the same.

So, what can you do with the dead money in this deal? 

Use it or lose it

Now, this is how you can leverage trapped equity and change how you invest in real estate. There are actual organizations that will buy your trapped equity from you at a very low rate.

Suddenly, this cash is no longer trapped in your deal and you can use it. When I make this move, I use it to buy more real estate.

Because even with the cost of releasing the equity and the cost of new debt, the type of deals I do still cash flow. 

To learn more about how I find, buy, and fund great real estate deals, register now for my free Real Estate Training.

Be Great,

Grant Cardone

Disclosure: This content is intended to be used for educational and informational purposes only. Before investing, you should always do your own analysis based on your own financial and personal circumstances before making any investment. Grant Cardone is an industry expert who has been investing for over 30 years and his opinion is based solely on his own personal experience and circumstances. Individual results may vary. You should perform your own due diligence and seek the advice from a professional to verify any information on our website or materials that you are relying upon if you choose to make an investment. Investment involves great risk and there is no guarantee of performance or results.

We are not attorneys, investment advisers, accountants, tax professionals or financial advisers and any of the content presented should not be taken as professional advice.  We recommend seeking the advice of a financial professional before you invest, and we accept no liability whatsoever for any loss or damage you may incur.

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Star of Discovery Channel’s “Undercover Billionaire,” Grant Cardone owns and operates seven privately held companies and a private equity real estate firm, Cardone Capital, with a multifamily portfolio of assets under management valued at over $4 billion. He is the Top Crowdfunder in the world, raising over $900 million in equity via social media. Known internationally as the leading expert on sales, marketing, and scaling businesses, Cardone is a New York Times bestselling author of 11 business books, including “The 10X Rule,” which led to Cardone establishing the 10X Global Movement and the 10X Growth Conference, now the largest business and entrepreneur conference in the world. The online business and sales educational platform he created, Cardone University, serves over 411,000 individuals and Forbes 100 corporate clients throughout the world. Voted the top Marketing Influencer to watch by Forbes, Cardone uses his massive 15 million plus following to give back via his Grant Cardone Foundation, a non-profit organization dedicated to mentoring underserved, at-risk adolescents in financial literacy, especially those without father figures.

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