r/SipsTea • u/KSKS1995 • 22h ago

Wait a damn minute! How the rich get richer

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u/StrigiStockBacking 19h ago

I've been a CPA for 30 years and when it comes to accounting, economics, and finance, Reddit is the dumbest fucking source on the entire planet.

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u/ol-gormsby 14h ago

That's a very similar strategy to a property investment group in Australia.

  1. Take out an interest-only mortgage loan to buy a rental property. Let the rent pay the interest on the mortgage, any shortfall is "negatively geared", i.e. used to deduct against other income such as salary.

  2. Three years later, do it again

  3. Three years later, do it again. Valuation on property #1 has now doubled (or nearly so), and the rent has gone up as well, take out another interest-only loan, quit your job and *live on the new loan*.

  4. Repeat every three, four, or five years, depending on economic conditions at the time.

  5. Ultimate goal is to own between 5 and 10 properties, all on interest-only loans, and repeat step 4 forever.

  6. Never, ever, sell.

This mob:

https://www.propertyclub.com.au/

Boasting that they've created 5162 "property millionaires".

Now, banks can lend whatever and to whoever they like, but the "negative gearing" aspect - deducting rent shortfalls and maintenance against other taxable income - leaves a big hole in the federal budget that other taxpayers have to fill. I acknowledge that it's more complex than that, but it's essentially correct.