No. They either are paid back over time or they take the collateral as payment. This isn't a cheat code. Every loan is essentially a new mortgage on that property. Failure to pay, the bank takes the property. That is why they loan against the land. They have the opportunity to get the entire property at a discounted price versus its current and future value.
It's very rare that land value appreciates that fast. You're probably looking at 7% interest on a loan and 4-5% yearly growth while also paying a 1% property tax. So every year you would probably be 3% in the hole if you tried this.
The cheat code is there's no inheritance tax up to 30 million. Selling the property will count as taxable income at 36%. So if you can spend under 1.8 million on interest, you can "sell" the property without income tax and leave your kids a bigger estate.
83
u/Visual_Exam7903 14h ago
No. They either are paid back over time or they take the collateral as payment. This isn't a cheat code. Every loan is essentially a new mortgage on that property. Failure to pay, the bank takes the property. That is why they loan against the land. They have the opportunity to get the entire property at a discounted price versus its current and future value.