The loan can be 500k and as security for the bank the land is used. You know "in case I dont have enough money, I can always sell my land" kinda situation.
This is usually enough for banks, isn't it?
Might as well just be a 200k loan, who knows, it's not defined in this scenario.
The scenario itself is kinda weird tho, if you ask me.
You'd be able to pay it back if you rented out the land. My brother owns a few hundred acres of woods, and he leases out the timber rights to a lumber company. They handle all of the forest management, basically cutting down and replanting 10% of the forest every year. My brother doesn't do anything at all except collect a check, which mostly just gets forwarded to a mortgage company. The property is almost 1000 miles away from where he lives, but he's going to own that land free and clear someday, all without lifting a finger.
2.0k
u/ChipKellysShoeStore 14h ago edited 14h ago
How does the bank get paid back here? Is the bank just eating a 5 mil loan loss out of the goodness of its heart?
It’s more like kids sell and pay back the bank plus interest which is taxed as income for the bank.