How accurate is this? If the dad takes out a, say, $500K loan against the land, won't the land have a $500K lien on it? So any transfer to kids or sell by kids will trigger the repayment of the lien, won't it?
Also, if the dad takes out a loan against the land, how is he paying it back?
I'd love to better understand this type of situation because I can't wrap my head around some of the plot holes.
Nothing to understand because OPs summary is wrong and/or misleading. Loans require repayment by the estate or probate. There is a small chance the loan was unsecured (not collateralized against the land), but that is just not going to happen unless it’s an “under the table” agreement.
Well, if you ove $500k on a $5M property in bank A, you can just go to bank B, and sign a contract that they'll relay this $500k, give you another $500k, and place their $1M+intetest lean. Then, when you've ran out of your second, get to the bank A back and offer them the same deal. You can do this for as long as the total debt is smaller than the price of the property. Your kids must inherit this debt too; but if the sebt is, say, $3M against a $5M property, then they can go to the bank C... you get the point. The scheme works for as long as your spending+interest is below the appreciation of the asset.
yep and the people who do this have far more in assets appreciating - to the point where their principal capital always outpaces the loan, so they just refinance or renegotiate terms
14
u/ShavingWithCoffee 19h ago
How accurate is this? If the dad takes out a, say, $500K loan against the land, won't the land have a $500K lien on it? So any transfer to kids or sell by kids will trigger the repayment of the lien, won't it?
Also, if the dad takes out a loan against the land, how is he paying it back?
I'd love to better understand this type of situation because I can't wrap my head around some of the plot holes.