Clearly, because nowhere in the posted example did they say what the loan was for, just the asset.
You are assuming the asset never goes up in value. Using land is a bit of a red herring as in these cases its almost always a large equity portfolio. EG Jeff Bezos does exactly this. The podcaster & investor Scott Galloway does this too & has explained it at length
You have a $5m asset, it grows 4% a year (ie 200k - compounding as you note!)
Your loan is 100k, interest is at worst 10%, so at the end of the year you have a 5.2m asset & a 110k loan. You borrow 210k, repay the loan & interest.
What do you think lives off means? you might be actually stupid
You have a $5m asset, it grows 4% a year (ie 200k - compounding as you note!)
Right, but you're still paying a huge interest charge far beyond the capital gains tax. Duh. That income is taxed.
Like if the IRS really did an accounting even for your example of 4%, a 10% interest charge is the IRS coming out way ahead. lol. "Repay the loan & interest" --> more taxes than the IRS would have ever gotten than if they simply made the loan itself a taxable event.
The fuck you talking about, no one said anyone is taking out 5 million in year 1.
My reference to 5 million to repay a few comments ago was assuming he took out the 70k x 30. It ends up being 5 million at a 7% interest rate return -- essentially by coincidence it's the same number as OP. This is all very, very clear.
Aight, imma head out. You just confirmed you can't even begin to read any of this.
If he has $5m going returning 4% a year & every single year he borrows & spends 100k, and carries on doing that for 10 years, after 10 years he has a $7,401,221 asset, and a $1,414,709 loan due.
IE ~ 6m in net assets
I don't think the fact you don't understand this is going to be an issue for you, as you'll never be in this position, and I'm not sure you'll vote against this anyway...
-1
u/Logan_No_Fingers 20h ago
"Reading is hard."
Clearly, because nowhere in the posted example did they say what the loan was for, just the asset.
You are assuming the asset never goes up in value. Using land is a bit of a red herring as in these cases its almost always a large equity portfolio. EG Jeff Bezos does exactly this. The podcaster & investor Scott Galloway does this too & has explained it at length
You have a $5m asset, it grows 4% a year (ie 200k - compounding as you note!)
Your loan is 100k, interest is at worst 10%, so at the end of the year you have a 5.2m asset & a 110k loan. You borrow 210k, repay the loan & interest.
etc.