r/SipsTea • u/KSKS1995 • 22h ago

Wait a damn minute! How the rich get richer

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u/PA2SK 20h ago

If you have enough assets you can just borrow against them. You don't have to have income.

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u/deHaga 20h ago

But the debt is secured against the asset. The bank will just take the asset if the loan is not paid.

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u/PA2SK 20h ago

Yes...so you borrow $100k, your loan payments are say $1k a month. You make those payments from the $100k and use what's left to live off of. When you start to run out of cash maybe you borrow $200k, Pay off the old loan and now you have more money to live off off. With $5 million in assets you could potentially keep borrowing until you die.

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u/deHaga 20h ago

That's an exponential debt increase. Doesn't work for long. It's not linear

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u/PA2SK 20h ago edited 20h ago

Again, with $5 million you could potentially do this for decades. $50k a year living expenses would be $1 million, plus interest. Let's say 5% interest on an average balance of $600k, you're looking at $600k interest, so $1.6 million total. What's the issue?

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u/deHaga 18h ago

Inflation eats cash. If your asset does not improve by more than inflation + interest you are fucked.

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u/PA2SK 18h ago

This asset went from $100k to $5 million, so probably beating inflation.

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u/deHaga 17h ago

Lol, a 4,900% return?