As it turns out, the interest-rate environment has produced two connected opportunities. For individuals , interest rates are exceptionally low. At the same time, many businesses are finding that rates for them have not come down at all. In fact, their borrowing costs in some cases have gone up. How can this be with such low interest rates?
What is important is that these aren’t particularly risky businesses, and those that are lending to them have exceptional security on the loans. As a result, the historical loan losses on these business loans have been extremely low. Fortunately, there are now many options to invest with companies that have very strong risk and operational procedures to lend to businesses. These investments have generally had returns for investors in the 6.5 per cent to 8.5 per cent range on a steady basis. We have been using this as part of our investments for clients for about seven years. Even in 2020, the returns stayed very much in line with their historical returns.
Using a home equity line of credit at prime, you borrow $500,000 at 2.45 per cent interest. This means that every month you will pay $1,021 in tax deductible interest.
Home Equity? The fuck is that.