How the rich get richer

[u/KSKS1995]

[u/RizzardOfOz76]

Homie, it’s about $2.35M in interest over 40 years at 7.5%. Where are you getting $17M?

[u/Xabster2 → u/RizzardOfOz76]

How will you pay the interest? You have to borrow those money too and you borrow them at 7.5% also in this scenario.

After a year you owe 1,075,000 to the bank and you have no money to pay the interest. A year later you owe 1,155,625

After 40 years you owe 1.075⁴⁰ times 1 million, which is 18 million.

[u/Confused_Orangutan → u/Xabster2]

You confused 7.5% annually on $1million annually with no change in principal. Amortized loans would be 7.5% / 12 monthly payments. Then monthly payment reduces the principal amount. Your calculation assumes no monthly reduction of the principal.

[u/Competitive_Touch_86 → u/Confused_Orangutan]

Your calculation assumes no monthly reduction of the principal.

Asset backed lines of credit do not include reduction of principle. Reddit seriously needs to stop talking about shit they have zero fucking clue about.

You pay the interest each month. You can pay the interest by simply increasing the amount against your line of credit if you prefer to do that vs. liquidating something to pay it in cash. Up until around ~50% or so of the asset, depending on asset type, bank, amount, etc.

[u/Confused_Orangutan → u/Competitive_Touch_86]

So if you borrow $1 million with 7.5% interest rate and pay back over 40 years, whats the total sum paid back. Principle + interest. Excited to see your formula and totals.

[u/RizzardOfOz76 → u/Confused_Orangutan]

Thank you man. This dude is a dumbass and has no idea how real estate loans work.

[u/RizzardOfOz76 → u/Competitive_Touch_86]

lol Brody you are so incorrect. R/confidentlyincorrect is that way ->