- I've never paid a down payment for any piece
of real estate that I've acquired.
I've satisfied down payments but never tying up any
of my own money.
And so in this educational episode I'm going
to talk about how to safely leverage with full liquidity
to make infinite rates of return like banks do.
(gentle music)
So I'm Doug Andrew.
I've been a financial strategist
and retirement planning specialist now
for nearly five decades.
Helping people optimize assets and minimize taxes,
and I've been helping thousands
of people learn how money works.
I've been very blessed in my career
to have authored 12 bestselling books thus far
in my career.
In all of my books and
in fact, ever since the mid 1970s when I started
in 1974, I've been personally using the banking concept
with my own money.
And I've been teaching it to my clients.
And when I started to write books
and release them at the turn
of the century, I have talked about this banking concept
in all of the books.
Now, I'm not trying to take credit
for being the original thinker on this.
In fact, the banking concept has been around for centuries.
I teach on this very channel that the parable
of the talents in the New Testament in Matthew chapter 25.
And in Luke 19, the parable of the pounds is really a take
on the banking concept, how money works.
And so I understand there are many financial advisors
that have picked up on this banking concept
and they label it with their own twist.
And I'm not trying to take away from any of theirs.
Nelson Nash, who I have met, he called it Infinite Banking.
And after my third New York Times bestselling book came out
in 2007, of which the concept was taught in
that book, my third book, chapter seven,
was actually titled learn to Become Your Own Banker.
And so in 2008, a year later he came out
with a book called, "Becoming Your Own Banker."
Pamela Yellen has a book called,
"Bank on Yourself' is what she calls it.
And I think that was published in 2009.
Now, Pamela has asked me to make it absolutely clear
that we are not affiliated with, "Bank on Yourself."
We are not sponsored by them.
In fact, I don't even endorse, "Bank on yourself."
Is their concept legitimate? Yeah.
That's not how I apply the concepts
but I call mine the laser bank concept or the family bank.
However you talk about it, it is simply how money works.
So in this episode, I want
to address how you can apply these concepts,
become your own banker, set up your own family bank
or your own laser bank.
And you're gonna understand why I prefer
to use indexed universal life
because I think this is the banking concept on steroids.
Okay?
And so let's make sure you understand where I'm coming
from because I've learned some
of these lessons years ago, the hard way.
So many times when I would speak
to audiences I would act
like, "Okay, what if I took a hundred dollar bill
and I buried it in a tin can in your backyard?
Okay?
And I ask, is that a hundred dollar bill buried
in a tin can in your backyard liquid?
And most people say, "Well, yeah I can.
As long as I remember where I buried it."
Is it safe?
And some people would say, "Well, yeah, as long
as my my spouse doesn't find out where I buried it."
And then I would ask, "Is it earning a rate of return?"
And without question, people would go, "No.
In fact, it's probably doing what, it's losing value
because of inflation."
So it's very easy to understand
that a hundred dollar bill buried in a tin can
in your backyard is not earning a rate of return.
And then I ask, so what's the difference
between a hundred dollar bill buried in a tin can
in your backyard?
And the hundreds and thousands of dollars that we tie up
in the bricks mortar wood foundation of our homes?"
I would submit that this a hundred dollar bill
in the tin can is more liquid and safe
than the money we tie up in equity in our homes.
Okay? And I learned that lesson the hard way.
When you need money out of your real estate
and you really need it, the worst is the hardest to get
because you're probably unemployed.
You're probably disabled, and you try
to borrow it back when you don't have the ability to repay.
And so a lot of times people don't realize
that money inside of
that real estate is not liquid when you really need it.
Because lending institutions are only gonna loan you money
based on your ability to repay.
They don't care how much equity you have.
It's not safe.
We've seen real estate values drop 10, 20, 30%.
You will lose money if you have all of your money tied up
in the property, I guarantee you.
If you have it separated you will not lose.
And many times when my house has gone down in value
through the years, I never lost a dime
because my money was not trapped in the house.
It was over in a portfolio
of universal life insurance contracts.
And even in 2008 when my house dropped in value
from a million five down to a million one.
I had critics go, "Oh, neener, neener, neener Mr. Andrew.
You're underwater. You owe more than your house is worth."
Did I care?
No, I had a million and a half separated
from my property compounding tax free when it dropped
down 400,000.
If I would've left that
in the property, I would have lost 400,000 for several years
before the house came back up to a million and a half.
But I was earning on that 400,000 that was no longer
in the house.
I was earning twice as much as I was paying in interest.
I was making a hundred percent rates of return.
And so I was in control, not the mortgage company.
I could peel off half of what I was earning
and make my mortgage payments.
The mortgage company was happy with me.
I was making twice as much as the mortgage costs.
I was making money hand over fist
by keeping my equity separated because the house
with equity in it, okay, does not earn a rate of return.
And so often I have illustrated this
by using a working metaphor.
And many times I will take a a picture
and I'll take a goblet and I will have water
in the picture which is equivalent
to how much the goblet holds.
And I say, "Okay, let's say
that this goblet represents your house
and you've not put your first dollar of cash into it.
And this picture represents your cash in a bank
or better yet in an insurance contract where it's liquid
and safe."
So I pour the money
out of the picture into the goblet, but before doing
so I ask the audience, so I have a house.
Let's say it's worth the a hundred thousand
and I have a hundred thousand of cash.
These are both classified as assets, right?
Yeah, I have a hundred thousand dollars house
and I have a hundred thousand of cash.
I have 200,000 of assets.
Now, I may have 200,000
of assets minus a hundred thousand dollar
mortgage liability for a net worth
of a hundred thousand day one.
But day two forward it's much greater
if you keep them separated.
Because what happens if I pour all of my cash
into the property, I pay cash for it
I pay a down payment, I pay it off.
What did I just do to my assets?
I just took one $100,000 asset, the property
and another $100,000 asset my cash
and I just cut them in half.
I just combined them into one, $100,000 asset.
I just cut them in half.
So what happens if I keep them separated or I separate this?
Okay? And I put it back over here into the picture.
Now what did I just do to my assets? I just doubled them.
So that's why I keep my real estate equity separated
'cause I have twice the assets.
And this money here is compounding tax free
in my portfolio
of laser funds earning an average return of 9%.
And the cost of the mortgage to separate it is four
and a half percent tax deductible interest.
Which is a net cost of three.
I'm making on every million dollars
that I've separated, I'm making 90,000
in interest the first year and it only cost me 30,000.
I'm making three times as much as it cost me.
So pretty soon this picture compounds and is overflowing
with money.
And people say, 'Well, how does that work in real life?"
Well, let me show you.
But before doing so, let me just ask you a question.
If you're not quite connecting the dots.
Many times I would ask my audiences,
okay I have an investment for your consideration, you ready?
How much would you invest in this investment?
You determine the amount and length of time
for your monthly contributions to continue
into this investment.
Is that okay? Most people go, "Yeah, that's okay."
You can pay more than the minimum monthly contribution
but you can't pay less.
"Ooh, really?" No, no.
You're committed. You can't pay less.
In fact, if you attempt
to pay less, the financial institution keeps all
of your previous contributions.
"What? What kind of an investment is this?"
Oh, I'm not through yet.
The money deposited in this account is not safe
from loss of principle.
You can lose the original amount you put in there.
"Oh, I don't know if I like this."
Do you know that each contribution made
to this account results in less safety?
The more you put into it, the less safe it becomes.
"What is this?"
Well, the money in the account is not liquid,
if you really need it in a pinch, you can't get it.
The money in the account actually earns a 0% rate of return.
"Whoa, who would ever put money in this?"
Your income tax liability increases.
Every time you make a contribution,
you're killing your tax benefits.
And when the plan is fully funded there's no income paid out
to you.
How much would you invest in that?
And people go, "What is that?" Now some get it.
I go, what is that investment?
And they go, "Ah", blood drains out
of their face, "It's a house."
It's your house. Yeah.
And that's what you're doing.
So that's why I tell people, you know what?
I've always kept my money separated.
I don't pay a down payment. I keep it separated.
I satisfy down payments, but I do it with OPM.
Other people's money.
Every hundred thousand of equity, I keep separated.
If I'm borrowing at 9% interest.
And if that money is only earning seven
and a half percent interest, people go,
"Wow, you're going backwards.
You're not getting ahead."
Oh really? Whoa, wait a minute here.
If 9% interest that I'm paying is tax deductible
in a 33% bracket, it's a net cost of six.
I'm paying six and I'm earning seven and a half.
"You'll do all that for just one and a half percent?"
Well, yeah, the first year I'm only making $1,500
on a hundred thousand of equity that I kept separated.
But pretty soon you're earning okay,
and seven and a half compound interest on a bigger
and bigger and bigger balance
than you're paying simple interest on over a 30 year period.
You'll come out ahead, three quarters of a million bucks.
Borrowing at nine and only earning seven and a half.
And people go, "I would've never dreamed."
Well, what if you separated 150,000
or you kept separated 150,000 that you would've been tempted
to pay against your mortgage or paying a down payment
and you borrow at seven and a half and you only earn six?
Well over a 30 year period, that's 761,000.
Another three quarters of a million. Hello?
Well, what if you borrowed at six and a half
and earned eight and a half?
And people go, "You'll do all that for 2%?"
Absolutely.
Especially if six and a half percent is tax deductible
on a hundred thousand at the end of 30 years,
that's a million, fifty five thousand.
A million bucks. Yeah, I'll do all that for 2%.
That's what banks do.
They borrow your money at 3%
and sometimes they only earn five.
They'll do all that for 2% and they make millions.
You can make a million that's on a hundred thousand.
Well, what if you did that with 500,000? It's five million.
What if you did that with a million dollars?
That's 10 million extra dollars with a two point spread.
Okay? But it's only a two point spread on the surface.
It's greater than that, if this interest is tax deductible
and this interest is compounding tax free.
Are you getting it?
So, the second example is 175,000 of equity separated
at seven, what if you only earned eight?
Here we go. You can stack up a million and a half bucks.
What's the third example?
What if you separated or kept separated 260,000
at seven and a half and you only earn seven and a half?
Most people would go, "You're not getting anywhere.
You're borrowing at seven and a half.
You're only earning seven and a half."
If you're borrowing
at seven and a half tax deductible interest
and a 33% bracket, it's only five.
If you're earning seven and a half,
that's a two and a half point spread
and it's compounding tax free.
Guess what? $2 million.
You'll make $2 million on just 260,000
over a 30 year period.
Are you understanding this concept? Math doesn't lie.
So this is the concept that I've been using for 50 years.
I've been teaching it. It's not new.
I'm not the originator.
And if anybody claims to be the originator
of the banking concept, (chuckles) you know, just snicker
at them because this is as old as the Bible.
Okay?
If you wanna learn more about
where I keep my real estate equity separated right
off the bat, it's in a maximum funded,
indexed universal life insurance contract
but it has to be structured correctly
and funded properly then it qualifies
to be deemed a laser fund.
That's why I call it the laser bank concept. Okay?
Not only that but when you have money
in your IUL policy, you borrow money out
of your IUL policy, you could withdraw it,
but it's the same concept, I borrow money.
I can borrow at 2% and they'll credit me 2%
because it's tax free if I do it that way.
But I can borrow a million out of my IUL policy
like many clients do, and they'll charge you 5%
and they'll keep crediting you 10, 15, 25% or more.
You can learn how to become your own banker
by using your IUL policy with the same concept
that I've been talking about.
So, if you wanna claim your free copy of this book simply go
to laserfund.com or click on the link below.
You contribute a nominal amount
towards the shipping and handling.
I'll cover the rest of that cost and I'll pay for the book.
I'll fire out a hard copy to you priority mail.
Also, there's options there
to listen and learn, watch and learn.
There's 200 pages of charts and graphs
if you're a left brain learner.
But there's also a hundred pages of 62 actual client stories
that teach you how it works through actual stories
of how real people have applied these concepts
using max funded, indexed universal life.
This is about you and your brighter future.
When you're in there claiming your free copy.
If you would rather listen and learn or watch
and learn there's options there for those.
Check out some of our educational webinars
that we teach on a regular basis.
They are free and you can even put your name
in an appointment slot to talk to an IUL specialist
at no cost or obligation to see how these concepts may apply
in your particular set of circumstances.
But I want you to learn how to safely leverage
with full liquidity
and earn infinite rates of return like the banks do.
(gentle music)