As a real estate investor, you know how important it is to constantly be on the lookout for your next deal. You never really know when your next project will present itself, either by accident or through careful researchinvesting in real estate. At the same time, you should regularly monitor the current appraised values of your holdings.

The difference between any obligations you have on your real estate and the appraised value is your equity. Sometimes that equity can be used to acquire additional real estate without selling the property. In fact, there may be times when you tap into the equity of multiple properties. This is called cross collateralization.

Cross collateralization occurs when one or more properties’ collateral is used as collateral for yet another loan for another property. Tapping into the equity of multiple properties can provide a larger down payment for an investment property by taking a little equity out of each individual piece of real estate.

For example, say you want to buy a section of raw land. There’s a development on the horizon and you want to own some peripheral real estate, knowing the value will increase. Yet your bank is not making any loans on raw land right now so you seek out additional lending sources. You find out that there are loans for raw land but the down payment requirements are a bit more than you’re used to. Especially so if the land is relatively far away from other developed areas.

The raw land lender asks for 30 percent down on a $500,000 purchase, or $150,000. Instead of opening up your checking account, you can cross collateralize multiple properties for the $150,000 down payment. Given sufficient equity, you might collateralize three properties with an equity loan at $50,000 each.

“Crossing” can provide you with needed funds when one single property doesn’t have enough equity for the money you need. Crossing can also convince a lender to make a loan when they’re just not sure they’re ready. If a lender is questioning a loan application, you can offer to collateralize additional property you own, providing the lender with additional security.

There aren’t as many sources for lenders who cross collateralize and you may discover that such funds are only available from a private lender. They’re a bit expensive and they reduce the equity in your properties, but they do have a place in the financial arena.