Often by selling the asset they bought with the loan - aka cashing out. They borrow to buy a property/business, make the loan payments with the rent/revenue, and then sell it for a profit without spending a dime of their own money. NOTE: They will pay taxes on the capital gains of the sale of that asset. But they won’t have paid income tax on the money they used to purchase the asset in the first place.
They eventually need some sort of cash of their own right?
They’ll open a line of credit against their portfolio… which is a loan where the minimum payment is just the interest. They can use that like cash for their daily expenses and they can pay it off whenever and it will be there when they need it like a credit card.
Do they literally borrow to pay off a loan and do that infinitely?
Yes. It’s called Return on Investment (ROI). You just need to borrow at a lower interest rate than the expected return plus expenses.
Billionares don’t own things directly. They own stakes in corporations/trusts/etc that own things. They often have a salary that they pay income tax on, but that salary is only a fraction of their true income.
Often by selling the asset they bought with the loan - aka cashing out. They borrow to buy a property/business, make the loan payments with the rent/revenue, and then sell it for a profit without spending a dime of their own money. NOTE: They will pay taxes on the capital gains of the sale of that asset. But they won’t have paid income tax on the money they used to purchase the asset in the first place.
They’ll open a line of credit against their portfolio… which is a loan where the minimum payment is just the interest. They can use that like cash for their daily expenses and they can pay it off whenever and it will be there when they need it like a credit card.
Yes. It’s called Return on Investment (ROI). You just need to borrow at a lower interest rate than the expected return plus expenses.
Billionares don’t own things directly. They own stakes in corporations/trusts/etc that own things. They often have a salary that they pay income tax on, but that salary is only a fraction of their true income.