Devoted to understanding the basics and fundamentals of investing

Monica and her husband are both 32.  They have, drum roll please,

• Savings Accounts,
• Stock Accounts,
• Roth IRAs
• Real Estate
• They save $10-$15k per year and target a 6.0% return. 
• Mr. and Mrs. Monica are meticulous record keepers.  They have a budget and use Quicken and Quickbooks to track every single expense. 
• They are out of debt after 7 years of hard work. 
• They use automatic deposit for all their savings

Monica wonders about using home equity to multiply her earnings.

Monica, I'm a fan!  Word!  Would you like to be poster children for my Blog?  Will you adopt me?

Saving $10k at 6% for 33 years gives you $973,431.65.  Saving 15k at 6% for the same period gives you $1,460,147.47 on top of what you have already saved.  Most excellent!  If you continue to target a 6.0% return the $1.46 million would throw off income of $87.6K per year.

Some observations and then I will answer your question.  You are still young and have many business cycles to ride through before you retire.  You can take more risk.  I would think about increasing your target return to 8.0%.  That is still pretty conservative. 

Because of your relative youth, you can buy long-term care insurance at relatively low rates.  The average stay in a long-term care facility is 30 months, so you don't need to plan for much more than that.  You can supplement the policy proceeds with your retirement income if needed.

Now, about your query.  Real Estate traditionally has been illiquid.  The only way to realize your property's appreciation was to sell the property.  Home equity lines of credit have unlocked the property appreciation and put it within easy reach of home owners.  Also, as the cost of refinancing a mortgage has come down, it is much easier to do a mortgage refinancing with an equity take out.  Both of these techniques have helped fuel the economic growth for the last four years.

Real Estate gurus have long advocated leveraging your home to purchase more property.  The assumption was that property appreciation was a high probability and therefore the risk of losing your home was low.  The biggest risk was losing your income during a periodic property value recession.  This was rare so most people could be successful. 

Putting the money into the markets can work.  But the volatility of the stock market is much higher than the volatility of the real estate market.  If you can hold out long enough you will usually make money, but you might have to wait 5 to 10 years.  Most financial advisors would counsel against this tactic because losing your home is one of the consequences of failure.  That's a big risk to take.

Given the conservative nature of your existing portfolio, this seems like more risk than you might be comfortable with.  In theory, it is very similar to using margin loans in your portfolio, except you add the risk of losing your home, not just your investment.  If you want to try leverage, you might start with setting up margin accounts for your stock accounts.

So Monica, tell me more about what you envisioned.  Have I answered your question?  Do you need more details?

All you readers do as Monica has done and go out there and save some money!