Why is Elon Musk Taking Out $61 Million Worth of Mortgages? The Reason Will Shock You
Tesla CEO Elon Musk has done a lot of questionable things within the last few years. There’s his often puzzling Twitter rants and announcements. Remember when he got in trouble with the Security and Exchange Commission (SEC) last year?
And now, the 47-year-old innovator is making headlines again after reportedly taking out $61 million in mortgages.
Five Massive Mortgages
According to reports from Bloomberg, Musk took out four new loans and one loan to refinance a previous mortgage from the investment bank Morgan Stanley. It looks like he’s planning to purchase four mansions in Bel Air, Los Angeles and one in the Hillsborough neighborhood near San Francisco. As per Bloomberg calculations, his $61 million loan means that he’ll be paying a monthly payment of $180,000.
While that amount might sound quite big to regular Americans, it surely isn’t too hard to pay off for Musk considering his $18.1 billion fortune. So, why is he taking out loans when he’s a billionaire, you ask? Finance experts say that it’s all for the sake of liquidity and to finance his lifestyle.
Since Musk doesn’t really have a regular salary for being CEO of Tesla, he’s currently ‘cash-poor’ despite being asset-rich. This technique of using mortgages for liquidity isn’t actually an unusual thing to billionaires like the CEO. In fact, even Facebook founder Mark Zuckerberg and hedge fund magnate Ken Griffin have all taken out massive loans as well.
But the same cannot be said outside billionaire circles. According to bank manager Michael Blum, Musk’s $61 million loan falls into the ‘superjumbo’ category of loans exceeding the limit of $484,350 in millions of excess. For context, only 230 single family mortgages worth a range of $10 million to $20 million have been recorded during the previous fiscal year.
And Musk’s loan isn’t even the largest one seen in recent years. In 2016, Citadel’s founder took out two massive mortgages worth $114 million when combined. The Tesla CEO hasn’t made any public comments yet about his much-talked-about move.
Elon’s Income Sources
As previously mentioned, most billionaires are cash-poor and asset-rich. Musk is currently in an ‘all or nothing’ compensation scheme with Tesla. Instead of having a fixed salary for his CEO duties, the billionaire will get paid depending on the milestones that the company reaches annually.
Currently valued at $59 billion, one of the car manufacturer’s goal is to grow to become a $650 billion corporation. If this aggressive expansion plan proves to be successful, Musk is set to receive billions in compensation but will get nothing should it fail. Prior to this payment scheme, he was earning a measly but steady $37,000 a year.
With Tesla’s not turning in profit the previous year and with its stock taking a nosedive, Musk seems to be up for a risky year ahead.
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