- What do you get when you multiply one negative
by another negative?
In this educational episode, I'm gonna talk about
how to take two perceived negatives
and turn them into a huge positive.
And I'm talking about dollars in this case.
Get ready, you're gonna be blown away.
(gentle music)
So I'm Doug Andrew
and I've been helping people optimize assets,
minimize taxes, empower their authentic wealth now
for nearly five decades
and I've been primarily viewed as a financial strategist
and retirement planning specialist, and I've been honored
to have authored thus far 12 bestselling books.
One of my very first books was titled "Missed Fortune."
It became a bestseller and I titled it that
because of the fortunes people miss out on
when they simply don't know what they don't know.
And so in that book, I actually introduced this concept
which made it a bestseller
and then Time Warner became my publisher
and commissioned me to write several more books.
So let's talk about two perceived negatives
but just so that you understand
what do you get when you multiply, you know,
negative two by negative two, you, get a positive four.
Now I've always sort of been amused at a lot
of people who do not understand in a sentence
in the English language that if you use two negatives
in the same sentence, it actually means a positive.
But I think there's other languages.
Maybe it is Russian
that two negatives still means a negative.
But regardless in English, if you say,
I ain't gonna do that no more,
I'm not gonna do that no more.
That means you're gonna keep doing it.
Does that make sense?
If you're not gonna do it no more
that means you're gonna keep doing it.
One time I was invited to be on the row
behind the opposing team at a Utah Jazz game
and they were playing, I think Sacramento.
And one of the star players got a technical foul
and he is yelling back at his coach who was upset
and I happened to be right sort of in the eye view
and he yells at the coach,
coach, I didn't do nothing.
I couldn't help it, I said,
"that means you did something."
And he goes, I didn't do nothing.
I go, "that means you did something."
He didn't understand it.
And I think I could have almost caused a second technical.
So in the English language,
I, you cannot use two negatives.
Now we sort of just let it roll and we accept
when people say that
'cause we know what they meant to say okay,
but let's talk about two perceived negatives
that a lot of times people do not understand
that they could be a huge positive.
Now, before I do this
I wanna frame from the story of the three little pigs
how I keep my serious cash.
Now money has to have a home and a lot of times
people will choose to own real estate
which is great, that's moderate risk.
But sometimes the real estate market causes home values
to go down sometimes 20, 15%.
I like to benefit in real estate.
I'm not a huge real estate investor,
I don't like being a landlord.
So if I do own real estate
it's usually to pick it up, fix it up
and flip it or something like that, or for my own purposes.
But I would call that a moderate risk investment.
But you're gonna see
that I don't keep my money tied up in this property.
Don't send extra principal payments
against the mortgages here okay?
Now the house of straw is
I would say like the stock market mutual funds.
And it gets blown over even more volatile here
than the real estate market.
The stock market can drop 15, 20, 30, 40 points.
Like when COVID-19 happened in March of 2020
the market in March dropped 30%.
That can happen in 30 days.
Real estate also is affected
but it sometimes takes more than 30 days.
So those are volatile.
I wanna participate when the stock market is doing well
when the economy's doing well
I wanna participate when my real estate is doing well
but I don't wanna lose when these are going down in value.
And so how do I do that?
I've never lost money for the last 40 years
when my house or my real estate's gone down in value
or when the stock market goes down, why?
Because I keep my serious cash safely tucked over here
in a house of bricks.
Now I don't put it in low yielding money market accounts
and CDs, even though they might pass the safety test.
A lot of people think,
well that's where I keep my serious cash
'cause the bank's down there on the corner.
They don't know what they don't know.
But nonetheless, annuities,
I've never used an annuity for liquidity
but you could use an annuity or bonds.
Bar none, my favorite vehicles
is a max funded insurance contract.
And this is where now since 1980
I have earned 11.17% average by diversifying
my indexed universal life insurance contracts
and then rebalancing them every year reallocated.
So I've averaged 11.17 tax free.
The costs that are associated with it
usually use about one of those percentage points.
So I'm netting at the end of the day cash on cash, 10.07.
So we'll just say I'm earning 11 netting 10
that means I'm getting 10% net compounded interest
which your money will double every 7.2 years, okay?
So why do I do this?
Because the big bad wolf.
The big bad wolf, the, oh golly
it could be natural disasters, hurricanes, earthquakes,
political things, pandemics.
When the big bad wolf blows down the stock market,
I don't wanna lose my money
but I wanna participate when the market goes well
that's why I use indexing
because indexing, my money's safe over
in the insurance company.
But if the market goes up
the insurance company pays me whatever the S&P does
or the Dow Jones up to a cap.
But if the market crashes 40%, I don't lose a dime.
I may not make anything that year, but I don't lose
and I'm gonna gift you a book at the end of this episode
if you wanna learn about indexing.
Real estate.
When my real estate is doing well and it goes up in value,
I benefit, about when it goes down in value,
I don't wanna lose one dime.
So I don't keep my money
in the real estate, I keep it separated.
I don't even put it in there
in a down payment in the first place.
I usually get an 80% loan to value on a first mortgage.
The second mortgage is taken out
and so I usually finance 100%.
If you have good credit, you can do that.
And I keep my money safely tucked over here.
I don't send extra principal payments
or positive cashflow over here.
So people say, well that's a negative,
you're paying a bunch of interest.
That's not a negative, that's a positive.
See, paying interest is viewed as a negative by many people.
Many people view insurance as a necessary evil.
Like it's a negative, oh my heaven.
You take these two negatives
paying interest and insurance and you combine them together.
It's a huge positive.
You wanna see why?
Well, as I mentioned, when I own assets such as real estate,
I don't tie up my money
into a big down payment or any down payment
if I can get away with it.
I keep it separated and I put it over
into a tax-free compounding laser fund
where it's liquid safe,
I can access the money when I need it
because if I sit there and send extra principal payments
against the mortgages, it's like saying
here Mr. mortgage banker,
here's an extra thousand bucks this month.
Don't pay me any interest on this.
I'll borrow it back when I need it
and prove there's a need why I should have it.
When you need it the worst is the hardest to get, okay?
I've learned that lesson.
When these go down in value
and your real estate and your home
or whatever goes down in value, I don't wanna lose.
I've never lost a dime when my property went down in value
because my money wasn't in there.
It was over here earning rates of return
usually triple the net cost of the mortgage.
You go what?
Let me just show you something here.
This is a simple interest declining balance
on an amortized loan tax deductible, okay?
Over here is compounding interest tax free.
This interest is usually three times
or 300% more than this net cost.
So let me give you an example here.
If I have a rental property, for example
and I have $1,000,000 mortgage on it
and I take that equity out
and I put it into a laser fund.
Many of our clients who have done this
on their rental properties, for example,
they borrow $1,000,000 at let's say 4 1/2%, maybe 6%
but in a 33% tax bracket,
they write that off on their taxes.
And so 4 1/2% on a million is 45 grand.
That's not out of their pocket
because they write off the 45,000 in a 33% bracket,
they're getting back a $15,000 refund or lower tax bill.
And so the net cost of a 4 1/2% deductible mortgage
is 3% or 30,000.
So they're paying really net 30,000
for $1,000,000 mortgage.
Does that make sense?
If you borrowed it 6% and it was tax deductible
the net cost is four.
Well, I have earned on my laser funds
like slam dunk over 8%.
How much more is 8% or 80,000 on a million tax free
versus borrowing at a net cost of four on a mortgage?
It's double.
It's 100% more.
It's 100% rate of return.
I'll pay 40,000 to make 80,000.
Would you hire an employee for 40 grand?
That means you're next to 80 grand.
But many times I've been able to pay, you know,
30,000, 3% and earn 9% in my laser funds.
How much more is nine than three?
Don't say 60,000.
I'm making three times as much as the cost of the funds.
Why wouldn't I do that?
If you're sitting there with your money tied up over here
if you're only gonna experience positive cashflow
if you're renting it out
and maybe when it appreciates,
well, that's still gonna happen if you leverage
with liquidity and have your money over here.
But if this becomes vacant, I can go access this money.
If you've tried it up in the mortgage
there's only one way to get it and that's to borrow it back
or sell the property and usually the value has gone down
or you can't qualify for the mortgage
'cause they only loan you money based on your ability
to repay.
Is this making sense?
So what does the math say?
Do you know every hundred thousand
of equity that I keep separated
from my real estate properties?
If I went through a 30 year period
and I never repeated the process, let's say I'm borrowing
at 6 1/2%, but it's tax deductible, okay?
And usually I've borrowed at lower rates than that.
But let's say I borrow at 6 1/2% tax deductible
and instead of earning 9 or 10 on my laser fund,
I only am earning 8 1/2.
This has been a slam dunk, a no-brainer.
Now some critics out there will go, you borrow a 6 1/2
and you put that money to work and earn 8 1/2, that's 2%.
You'll do all that for 2%?
And I go,
yeah.
Why?
Here's why.
If I only did it one time
the first year I'm making 4,100 after 15 years, okay,
it's 174,000 I made, but after 30 years I've made 925 grand
because now the net growth is over a million bucks,
a million dollars, that's a one-off.
What does this mean?
If you know how to extrapolate
if you did this with 200,000 of real estate equity,
that turns into 2 million.
If you did this on 400,000, that turns into 4 million, okay?
Now that's again doing it once and never changing.
Well, your property's gonna go up in value.
Like mine has, it doubles every 10 years.
Do I wait 10 years to to separate lazy idle equity?
No, I refinanced mine probably every five years
on the average.
And so if you repeat the process every five years
and separate lazy idle equity that's occurring
because the property is appreciating,
that number ends up being over 10 million
on just the first hundred thousand
and then refinancing every five years.
And that's the property only appreciating
at 5% a year, 10 million.
Other than that,
I don't have any strong feelings on this subject, okay?
So that's what I wanted to share with you.
So many times people view paying interest
and insurance is a negative.
I just showed you a huge positive
like a $10,000,000 positive.
So folks, if you wanna learn more about this,
I want to gift you a copy
of my most recent bestselling book.
It's been flying off of our warehouse shelves.
It's called The LASER Fund.
It's actually two books in one.
This side is about 200 pages, 14 chapters with all kinds
of charts and graphs and explanations of how to diversify
and create the foundation for a tax-free retirement.
This is what I was talking about
where I use my working capital for my real estate okay?
Now, if you learn more by stories
you flip it over to this one.
And this has 12 chapters,
about 100 pages with 62 actual client stories.
And there's about five in there.
In fact, one chapter dedicated
to the concept I just talked about, okay?
If you wanna use your whole brain, right brain, left brain,
I would read both of these books.
But you can go on Amazon
and they're $20 plus shipping and handling.
But I'll tell you what, and if you do that, thank you.
But if you want to claim a free copy of this,
you simply go to laser fund, L A S E R fund.com
or click on the link below
and you contribute a nominal amount
towards the shipping and handling.
I require some skin in the game.
I'll pay for the book and then I'll fire out a hard copy
to you via priority mail.
And while you're in there claiming your free copy
if you'd like to listen and learn or watch and learn,
there's audio and video formats available.
Also, check out some
of the educational webinars we do on a regular basis.
They're free.
You can even schedule an appointment
to talk to an IUL specialist to see how any
of these strategies may apply
in your particular set of circumstances.
Because if you're gonna set up a laser fund,
you wanna make sure it's done right
so that you can average at the end of the day,
you know, 11 in that 10.
Most agents that sell IUL do not know how to do that.
So this is not about me,
this is about you and your brighter future.
(gentle music)