RusSubmitted by AK on May 17, 2007 – 10:17am.
“Liquidity is nice, but I doubt the average person can earn a consistent after-tax return exceeding the interest on an IO mortgage.”
You are 100% correct. One can be average in every other way but for a certain set of econmic factors , not be average in the ability to make a large capital gain fairly risk free in a period of time short enough not to sweat the interest only loans. Basic business acumen has to be applied.
I will give you an example. Average guy has home long term, doesn’t borrow against it …Bubble comes along and because this person pays attention to pigginton say year 2018( who cares about the year). Guy says wow I can get an “interest only” (favorable to cashflow),shop for a property build a house on it sell one of them off to pay some or all loans and have made equity gain . Just a very simplistic example. Could have bought rentals in other markets, opened a business pretty much anything that aligns with the investor,s strengths. I personally think the plan should have an exit strategy but that might not always be neccesary. It is not much of a gamble.
People that are not average(wealth) probably don’t need to raise capital this way so it is designed for the right kind of average person. IMHO
