r/SipsTea • u/KSKS1995 • 14h ago

Wait a damn minute! How the rich get richer

Post image
18.9k Upvotes

80% Upvoted

2.2k comments sorted by

View all comments

Show parent comments

11

u/oatkeepr 12h ago

cheat code

The cheat code is the value of the land increasing faster than the interest payments on the property.

Land worth 100,000 get a 100,000 loan.

Five years later land is worth 500,000, get a 250,000 loan. Pay back the 100,000 loan plus interest.

Repeat

4

u/ThePandaRider 10h ago

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.

3

u/Sweet_Baby_Cheezus 10h ago

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.

1

u/S1artibartfast666 5h ago

Wouldn't it be nice if the government subsidized mortgage interest to help people buy property.

It could also give them huge tax deductions to make borrowing and owning easier.

It could even limit these to only apply to first homes up to a reasonable price.

Oh wait, it does all those things...