You see folks having a significant wealth in stocks, real estate, or other means-not paper money.. how do they leverage that into something they can enjoy, like a boat, luxury car, or a mansion. Are they pulling loans against that? Can someone explain how that makes sense with the interest rates, the high payments, etc.. example, someone has a couple million in real estate, but they are only bringing in so much via rentals against their principle- assuming they are holding onto it vs cashing out.
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There are a number of ways…
– Sell small portion of assets as needed or on a regular basis. Maybe a company founder has 10m shares of stock in his company, and they sell 10k shares each quarter.
– Dividends, rents, interest, etc. kick off enough cash flow to cover spending.
– Pull money out of deals. Buy a building for $1m down and sell for $10m a decade later, pocket $5m and plow other $5m into new investment.
– Lines of credit or loans with assets as collateral. With large amounts of assets, loans are super low and growth in asset valuation can be greater than interest paid. Plus, it defers capital gains taxes that would be paid if assets were sold.
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