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Taxes are 1 time, mortgage interest is annual. You still have to pay off the principal + interest... at some point you will have to sell shares and pay capital
by naveen99 6y ago
Taxes are 1 time, mortgage interest is annual. You still have to pay off the principal + interest... at some point you will have to sell shares and pay capital gains anyway... leverage comes with its own risk. That’s why you don’t gamble with borrowed money.
- RestlessMind 6y agoBut you can invest those one-time taxes and generate far more returns than the interest costs. Historical S&P500 returns are 6% per year, where as we are looking at only 1% mortgage rates for a billionaire.
- naveen99 6y agoSuppose there were no taxes. When would you stop taking on additional leverage with a 1% loan given historical returns of 6% ? I guess kelly criteria puts it around 2.5x. Now suppose you are already there, but now you add back taxes. Do you pay taxes or lever up ?