- Manage real estate and maintain liquidity,
safety, and rates of return that are 100% greater
than the debt service on the real estate.
In this episode, I'm going to address the question
How Smart Real Estate Investors Use Max-Funded IUL
to Keep Their Money Liquid.
Get ready.
You're gonna gain insights
into some opportunities you probably never existed before.
(upbeat music)
So my name's Doug Andrew,
I've been a Financial Strategist
and a Retirement Planning Specialist now
for north of 48 years.
I have absolutely loved helping people
optimize their assets, minimize taxes,
and empower what I call their authentic wealth.
One of my favorite financial instruments
is called a max-funded indexed
universal life insurance contract,
I call it a laser fund
if it's structured correctly and funded properly.
And I often compare it to a Swiss Army Knife
so it's like a financial Swiss Army Knife
with all kinds of uses,
it can be the dream solution for many things.
In this episode,
I'm gonna talk about how many real estate investors,
as they manage their real estate,
use it as their working capital account
and help themselves get out of debt quicker
and smarter and faster and so forth.
So let me give you a few insights on how you do this.
If you're not aware,
a max funded indexed universal life policy,
when it's structured correctly,
you're taking the least amount of insurance
the IRS will let you get away with under three sections
of the Internal Revenue Code and three tax Citations.
You can search other episodes on this channel,
3 Dimensional Wealth, to learn about this.
In fact, I would recommend you subscribe, it's free,
and click the little bell when you do so
you'll be notified every time I release a new video,
these are educational and you don't wanna miss out
'cause I release about five every single week.
Now IUL,
when you structure it correctly,
you're doing it so that your money will accumulate tax-free,
you can access your money tax-free,
and when you ultimately die,
it blossoms, it increases in value
and transfers income tax-free.
That is provided under three sections
of the Internal Revenue Code
that in one form or another have been there
to protect insurance for over 108 years.
Now, those are sections 72(e) 7702 and 101(a),
I explained them in other episodes.
Now the tax citations are Tefra, defra, Tamra,
which are acronyms.
So when you structure one correctly
to put in the most money,
and take the least amount of insurance,
and put in the money as fast as the IRS allows,
it turns into a tax-free cash cow.
Many real estate investors use this
as a working capital account.
And this is where if you were like my history has been,
when indexed universal life came out in 1997,
I've averaged 9.62% rates of return,
let's just go down to 9.6.
Rule of 72,
you divide 9.6 into 72,
your money doubles every 7 1/2 years.
So I've had many real estate investors
as they manage that,
they will take their rental income
and instead of sending it to the mortgage company
to pay off their mortgage,
they are savvy, they're smart.
The mortgage may be at 4 1/2% interest tax deductible,
in a 33% tax bracket, it's a net cost of three.
So on a million dollar mortgage,
they're paying 30,000 in interest
and on their IUL policy,
they're earning 10, let's say netting nine,
which I've done many, many years,
how much more is 9% than 3%?
Okay.
It's three times as much.
They're making 90,000 on that million
and they're only paying 30,000 on the mortgage.
See, this is how banks operate.
They pay interest
when you put money in a bank or a credit union,
are they just a benevolent institution?
No.
They don't just stick your money in some vault.
They're paying you 1%
and they're turning around
and putting a lot of that into insurance companies,
earning 4 or 5%.
What real estate investors do
is they realize if I'm using money,
OPM, like banks do,
and I have a mortgage on my real estate portfolio,
or mortgages, and I'm paying a net of 3%,
then I keep my money over here, liquid and safe at 9%.
So I'm making three times as much interest
on my working capital account.
And instead of paying down the mortgage
and then they get into trouble,
we have a recession, they have vacancies,
they have to then refinance or borrow or sell the property,
and it's a soft market.
I've heard horror stories.
So let's say you're a real estate investor
and you do want to get out of debt.
You just want to, you know,
sleep at night because they're paid off.
I can prove to you mathematically,
and stay with me to the end of this episode
'cause I wanna gift you a copy
of one of my best selling books that'll explain this.
If you wanna get out of debt,
and your definition of out of debt
is not owning a dime to anybody,
if you send extra principle payments against your mortgages
to the mortgage company, you're giving up liquidity,
I think you're giving up some safety of your principle
because real estate can drop in value,
and you're giving up the rate of return I just mentioned.
And so rather than do that,
you put it over into an IUL contract
and that money compounding
will generate enough
so that you can actually take a lump sum
out of your IUL policy and pay off your mortgages
about 2 1/2 years faster, sooner
than giving the money to the mortgage company.
A lot of people go, "What?"
Yeah, simply put,
a lot of times people take out a 15 year mortgage,
I'm just gonna bite the bullet
and pay higher principle and interest payments,
I'll be outta debt in 15 years. (scoffs)
If you took that differential
between a 15 year mortgage payment
and a 30 year amortized mortgage payment,
you took that difference
plus the tax savings you will achieve
during the first 15 years of a 30 year mortgage,
and you put that away systematically into an IUL policy,
there will be enough money in the IUL policy
to pay off the 15 year mortgage in 12 1/2 years.
2 1/2 years faster
using uncle Sam's money to a degree
instead of your own money.
People go, "Whoa!"
But see, if it took the same amount of time, I would do it
'cause I like the liquid money in the IUL policy,
I like liquidity in case I need the money,
it's a lot easier to get it out of an insurance policy
than to try to borrow it back
from a mortgage company or a bank,
'cause then I have to prove that I need it
and when I need it the worst,
it's the hardest to get.
Does that make sense?
But let me tell you another use
for IUL with real estate investors.
Many times I have real estate investors that make millions
and they will use their IUL policy
as a working capital account,
and so they take the positive cash flow
and they will put it into their IUL policy,
and then they see opportunities,
and they see another apartment complex.
And this happened in 2017.
One of my clients needed $1 million
within 72 hours to use as an earnest money
to tie up a multi-unit apartment complex
that was gonna cost millions.
He called and said,
"I need $1 million outta my IUL policy."
And I could have arranged for an electronic transfer
or a phone call, but he only, you know,
he said, "I got a couple of days."
So I sent him over the form, it's one page,
and he put his name and his policy number,
and he borrowed a million,
he could have withdrawn a million,
but he borrowed it
because of this principle, arbitrage.
He borrowed a million at 5% interest
out of his policy and they kept crediting him
the indexed rate that year,
which ended up being 25% in 2017.
Did you hear what I just said?
He borrowed a million and they charged him 5%.
He could have borrowed it out of his policy at 2%
and they would've just credited him two,
that's called a zero wash loan,
but he understands how money works.
He said, "I'll let you charge me higher interest, 5%,
but you keep crediting me whatever the indexed rate is
on that million that I'm leaving in the policy."
See, the insurance company is simply loaning him money
using his million as collateral that stays in the policy
that year, that million
that he left there as collateral earned 25%,
250 grand minus the 50,000 of interest,
he netted 20% or 200,000 tax-free
on the million while he was using it
as an earnest money to fix up and flip an apartment complex.
People do this all the time.
One other example,
I had an elderly gentleman that had his entire career.
He had paid off two big apartment complexes,
and this was his kids' retirement.
And then he had a stroke
and he ended up having to let some money manager,
real estate manager take over,
and they embezzled some of the money,
there's horror stories about this.
I said, "Sell."
He didn't wanna pay the capital gain.
I said, "Sell.
Pay the capital gain tax
and put the net into a portfolio of insurance contracts,
IUL."
He goes, "Okay."
And when I showed him, he was flabbergasted,
"Wow! This generates more tax-free cash flow
than my rental income ever did after tax.
And I don't have to be a landlord anymore.
Taking out the trash, fixing toilets, and evicting tenants."
I go, "No."
He goes, "What am I gonna do?"
He was moving into his 70s, and I said, "Relax."
Well, he had some buyers lined up
and then he got cold feet
and said, "Well, this is my kids' inheritance."
We brought his three children into the office and I said,
"I want you to shoot straight with your father.
What are you gonna do with these two big apartment complexes
when he's six feet under?"
And they went, "Dad, we don't wanna hurt your feelings
but we hate these apartment complexes!
Probably on the way home from your funeral,
the for sale sign's going up."
I said, "Why are you leaving it to them?
They don't want the apartments.
They would rather have the cash,
and if you put it into an IUL policy,
it blossoms when you pass away."
I said, "Children, do you want to get, you know,
6 million from the apartment complexes
and then have to pay tax on that possibly?
Or would you rather have 9 million
within three weeks after he dies,
totally tax-free from life insurance?"
What do you think they said?
"Oh, we'll take the 9 million with no hassle."
Hello?
There's so many opportunities
whether you're trying to get out of debt
or whether you wanna keep the property
and you wanna leverage,
you wanna use it for working capital,
or you just wanna sell,
where do you put the money?
After you sell, you put it into IUL
and you'll end up with as much or more
in tax-free cash flow,
and at the end of the day
when you die, it blossoms
and transfers much greater amounts of money
to those that you're leaving it to.
So if this is beginning to arouse curiosity,
subscribe to this channel.
But let me tell ya,
I want you to study this book,
I'm gonna gift you a copy,
it's called "The Laser Fund"
L-A-S-E-R fund.com.
Now, 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 max-funded IUL works.
If you learn by stories, like I've just told you a few,
you flip it over to this one.
This is 100 pages, 12 chapters
with 62 like chicken soup for the financial soul stories.
One chapter on this side talks about how IUL is used
for real estate management.
You contribute a nominal amount
toward the shipping and handling,
I'll cover the rest of that cost
and I will pay for the book.
Go to laserfund.com or click on the link below.
And I'll fire out a hard copy to you,
but there's options there if you like to listen and learn,
watch and learn,
there's even an 18 hour masterclass,
but check out the educational webinars that we conduct
because I want to empower you for a brighter future
so that not only just making money on real estate,
you could also make money on the working capital
as you manage your real estate.
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