Honestly I think the toughest part is buying the debt.
I tried to do some research, but I'm even more confused how people do it. Do they just call up a bank and ask for some debt? Is there some online exchange for debt? California doesn't require a license or anything to buy debt, so in theory I should be able to, but I'm not sure exactly how to.
Someone still has to pay the debt. Though many times the (defaulted) debt can be bought for pretty cheap. It's complicated, but in the end somebody pays it.
I've always wondered If I could just go out and buy like 10 mortgages or car loans in my area, and try to recover some of the money. I've heard that debt goes for pennies on the dollar, so I would think it would be possible to make a decent amount if you have the time.
The one exception to this rule is a pretty astounding scam: buying your own delinquent debt. I can't find the citations for a story I read about a guy who did this at the million dollar condo level, but the idea is pretty simple. Bad debt trades at a fraction of the nominal price, so it might be easier to buy the rights to collect on your own debt than pay off the current debt owner.
The hard part, of course, is getting someone to sell it to you without their knowledge.
You must find your debt and you must make them believe that they can't take the full value from you. Plus, if many people start doing it, the market will up its prices.
Or continually roll the debt over, borrowing more money and more money. Then, when you die, your estate can sell the assets to cover the debt, but that avoids taxes.
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