- I made 100% more
(cash register dinging)
than the cost of my mortgage
even when my house went down
in value by nearly 40% during a recession.
(papers crinkling)
In this educational episode, I am going to talk
about how to make 100% to 300% returns
on OPM, other people's money, just like banks do.
(upbeat music)
So I'm Doug Andrew.
I've been a financial strategist
and a retirement planning specialist now
for nearly five decades.
And clear back at the turn of the century
I finally released my first book
which frankly took me 10 years to write
'cause I was a perfectionist back then.
And then it got the attention of Time Warner.
They commissioned me to write several additional books
and every one has been a bestseller.
I've now authored 12 books,
and I think I'll keep authoring books the rest of my life.
Now, my first books were titled "Missed Fortune"
and "Missed Fortune 101"
because of the fortunes people miss out on
when they simply don't know what they don't know.
They don't understand how money works
or how to become maybe their own banker.
So let me share with you an actual example
of how I was able to make 100% more
than the net cost of my funds
on real estate equity that disappeared outta my house
during a recession.
You ready?
Okay.
So, how to make 100, 200, 300%.
Does it sound too good to be true?
No banks do this all the time.
They borrow OPM and they pay a lower interest rate.
So let's talk about this.
Banks from after the 9-11 terrorist attacks
when interest rates started to come down
clear until you know, 2015, 16 to 17,
banks were getting away
with borrowing OPM, other people's money, at 1% or less.
So every million dollars
that we lend banks by putting it into their institutions,
they're gonna pay us 10,000 a year in interest.
Okay?
Now they turn around and they loan that money back
and sometimes they put actually 30 to 40%
of their tier one assets
are invested into insurance companies.
Why?
Because the legal reserve insurance industry
is the backbone of America, the backbone of the world.
They've weathered the depression with flying colors.
And when 400 banks went under in 2008
and 900 more were on the brink of going under,
the federal government asked the five major banks
in America to disclose where they had their tier one assets
for liquidity and safety.
Guess where it was at?
Insurance companies, because they're safer
they're usually rated, you know, double A
or triple A where a lot of banks maybe only have
a triple B rating,
which is six notches higher in safety.
So they're borrowing OPM at 1%,
increasing the safety by six notches higher,
and they're earning in the insurance company
4% or 5% even without linking to an index.
How much more is four than one?
Don't, don't say three.
They're making 40,000.
Okay?
That's four times, 400%.
Would you hire an employee
for 10 grand that made you an extra 40 grand?
I'll do that all day long.
That's called a 400% return on employment cost.
So people say, "Well Doug, how do you do this?
How, how do you become your own banker?"
Well, you know,
if I borrow money on real estate or equipment
or whatever at three and three quarters percent
that's 37,500 on a million dollar loan.
But if it's tax deductible,
which I make sure it is,
in a 33% tax bracket
it's only costing me two and a half.
Do the math.
So it's only costing me really 25,000
because I get to write this off in a 33% bracket.
It saves me that much money, 12,500 bucks.
So my net out of pocket is only 25 grand.
And I turn around and on that million
in my LASER funds over in this pocket compounding tax free.
This is the debt
in this pocket liabilities here, assets in this pocket.
I'm making 10%.
I have averaged 10.07% on my LASER funds
by diversifying and rebalancing every year
since 1980.
I've earned 11 and 11.17 netted 10 since 1997.
Ever since 1980 I've averaged 9.62 even back
when we only had universal life and index universal life.
And so I'm making the 400%.
The banks are making 400%.
We're both happy.
But you can't believe how many people are unhappy
'cause they don't take the time to get it.
Okay?
Now, when you become your own banker
let me show you on my home
back in 2007 I could see the writing on the wall.
And so I had my million and a half dollar home,
a mortgage to the hilt, first mortgage,
and a second mortgage up to the full value.
Okay?
And so at the time I was paying an average
of four and a half percent deductible interest,
67,000 a year
a net cost of three and in the 33% bracket.
So my mortgage was costing me 45,000.
Now on that million
and a half dollars I was earning eight plus.
Okay?
I'm just gonna be super conservative here.
How much more is eight than that?
Okay, that's a $75,000 profit.
(bell dinging)
That is $75,000 of profit becoming my own banker
that I would not have earned had I had my house paid off.
So far so good.
Well what happened in 2008, real estate values plummeted.
My house went down 400 grand to 1,100,00.
Now I had critics go, "Nener, nener, nener
Mr. Andrew, you're underwater.
You owe more than your house is worth."
Did I care?
No.
Didn't my mortgage lender care?
No.
Why?
Because they were too busy foreclosing
on people who had no liquidity.
I had tons of liquidity, okay?
I was able to peel off just a portion
of the interest I'm earning to make my mortgage payment.
They, because I had good credit
they were not worried about it.
If I had left my money in the property
I would've been guaranteed a $400,000 loss.
I didn't lose a dime.
I still had
that 400,000 bucks that I separated.
I didn't lose it.
If I left it in the property, I would've lost it for sure
for several years before the value came back to 1,500,000.
Let's just carve out that 400,000.
That 400,000, if I was borrowing
that at 6% tax deductible interest, that's 24,000.
But it's really a net cost of 16, 4%.
And if I was earning 8% on that 400,000
I'm making 32 grand.
By the way, that's just the first year.
This is gonna keep compounding
to a bigger sum and you're gonna earn more
and more interest than the net cost of the funds.
This is the very first year.
How much more is 32 than 16?
It's a 100% more.
I am making 100% more than the net cost
on $400,000 of equity on my home that was no longer
in my home because the house went down in value.
I was a hero to my mortgage company.
I could peel off half of what I was earning
in my LASER funds and make the mortgage payment.
I was in great shape and the banks were too busy foreclosing
on people who had all
of their equity tied up in the property.
And all of a sudden when they borrowed
at 80% loan to value
on a million and a half dollar property,
they owed 1,100,000.
It was only worth a million.
They owed 1,200,000, and it was only worth 1,100,000.
And they said, "I don't have the money."
'Cause all of it was tied up in the property.
They don't understand.
See the banks, the mortgage lenders are gonna foreclose
on those people the quickest
who have the lower mortgage balances
because they can come out ahead.
If you have a high mortgage balance
and if I did miss any payments
they'll work with me all day long.
"Oh Mr. Andrew, we'll do this, we'll do that."
If you have a whole bunch
of equity in your property, you better watch out.
They'll foreclose on you in 90 days 'cause that's the deal.
Sometimes people don't understand this.
Okay, so let's talk about one
of my clients who has several duplexes
and fourplexes and when he came in, he actually had $600,000
in IRAs and 401ks that he had been deferring for 10 years
during the great recession from 2000 thousand to 2010.
He saw that 600,000 in the market dwindled down
to 360,000 twice because of that market volatility.
At the end of 2010 going to 2012
the 600,000 was finally back to break even at 600 grand.
And then his advisor said
"I told you the market always comes back."
Now I want you to just pull out the
the required minimum distribution RMD.
Let's just pull out the 4% rule.
4% on 600,000 was a horrible 24,000.
He had to pay tax on that in a 33% bracket
netting him 16,000 to buy gas, groceries, prescriptions
and golf green fees.
That's pathetic.
That's unacceptable.
So what I did is I said let's get the money outta those IRAs
of 401k sooner than later.
Get the taxes over and done with.
And so on 600,000 he was able to earn interest.
I think he locked in like around eight and a quarter percent
for five years while he was rolling it out.
And so we pulled out 150 grand a year for five years
and paid tax of 50 grand a year on his tax return.
Now he would've netted 100,000 a year
after paying tax at the end of five years.
500,000 in a LASER fund earning 8%.
That's 40 grand.
How much better is 40,000 tax free than the 16,000
he was netting out of his IRAs
of 401ks based on the financial services industry standard
of 4% retirement payouts.
We two and a half, three times his income.
But the rest of the story is yet to be told right now.
(bell dinging)
I was able to save him a quarter of a million dollars
of tax by resurrecting deductions that he had been killing
by sending extra principal payments
on his rental properties against the mortgage.
He came and got the epiphany and he goes, "Oh my heck yeah."
And so I was able to resurrect deductions
and we got all 750,000 over a five year period
out of his IRAs or 401ks
with no tax because I offset that with new deductions.
What am I talking about?
Every single duplex or fourplex that we borrowed on
he could go pretty fast and borrow a million dollars.
That was sort of his limit for property at the time.
He would borrow
at four and a half percent tax deductible interest.
So he's gonna now pay 45,000 in annual interest payments
but its tax deductible now.
So that offsets 45,000 of income on the front page
of his 1040 tax return when he starts pulling
out 150 grand a year out of his IRAs.
It only took three and a half,
four properties to where this was offsetting the entire tax
on the withdrawals outta the IRAs or 401ks.
The net cost of this was only 3% in a 33% bracket.
Okay?
So the net cost is 30,000 on that mortgage
on each one of those duplexes and fourplexes.
And on this he goes, "Doug, what do I do with this million?"
Well you put it over here
and keep it liquid safe earning a predictable rate
of return of around 9% or higher.
And he's been averaging between nine and 10
tax free in a LASER fund, which he did.
Every million that he separated earning 9%.
This is just the first year.
This is before it starts compounding.
It gets bigger than this.
He's earning 90, it's costing him 30.
He hired an employee for 30 grand
and the employee's making him three times with the employee.
Why would you fire that employee?
He said, "Doug, you're making me so much money
I don't know what to do with all of this."
So he set up a sort of a charitable foundation.
He's making 300% more than the cost of the funds
but the byproduct was he got
out his 750,000 out of his IRAs or 401ks tax free.
We do this all the time.
Okay?
So when you own a LASER fund bank
you do the same thing.
You have a million dollars of cash value in there.
And my savvy clients, if they need money as working capital
for their business or for managing real estate
or to get another piece of real estate,
they could go withdraw a million dollars
outta their LASER fund.
But that's not what I would do.
And they know how money works because they use index loans.
Now they could borrow a million at 2%
and the insurance company will only charge 'em two
and they'll credit them two.
That's called a zero wash loan.
But that's not what most of them do they.
They understand how many works.
They borrow at 5% on an index loan.
So that's 50,000.
They don't have to write out a check for that.
And they turn around
and they make an average of 10% like I have.
How much more is 10 than five?
Don't say five.
It's 100% more.
They're making 100% rates of return
on the million while it's sitting in their policy.
It's earning 10% and it's collateralizing the loan
from the insurance company that's loaning them the money
at half of what they're earning.
Are you getting it?
Well, lemme tell you one last story.
I had a client, it's 500% more.
This client in 2017, he had several million
in his policy and a he says, "Send me that form, Doug."
It's a one page form.
He puts his name
and his policy number on the top and it says
"Do you wanna withdraw a million out of your cash value?"
No.
What's the second box?
"Do you wanna borrow a million from the insurance
company using your cash value as collateral?"
"Absolutely."
"Do you wanna borrow at a zero wash loan
or do you wanna have the potential to make more
than we're charging you?"
Yep, he checks that one.
In 2017 he borrowed a million.
He bought a piece of property
and fixed it up and flipped it and made 3 million.
In the meantime
the million that was collateralizing the loan
was credited that year.
The cap of 25%, that's 250 grand.
So he made 250 grand on his million
in the policy that is collateralizing the loan.
If you subtract the 5%, 50,000, the cost for the loan
he netted 200,000 or 20% tax free on his million
while he was using his million to make two or 3 million.
But he was making 500% more than the cost of the loan.
Why would you fire an employee that that costs you 50 grand
if that employee makes you 250 grand?
That would be dumb.
Okay, so you know I had a CPA that created this metaphor
of a banana split.
See the max funded tax advantage insurance contract,
the LASER fund where I keep my money compounding tax free
is like the banana.
We do this to increase the liquidity, safety
and rate of return on your assets.
If you have have it tied up in your equipment
or your property, then do not pass liquidity
and safety and rate of return test.
The whipped cream on top
with the LASER fund
is you get this death benefit coming along
for the ride being paid for with a minuscule portion
of money that would otherwise go out the window,
an unnecessary tax.
The cherry on top is if you can tax deduct your interest.
Now I'll do this
if I can't even deduct the interest,
but if you can deduct the interest,
that's the cherry on top.
Are you getting it?
So if you wanna learn more, I would recommend
that you understand what a LASER fund can do for you.
And so I would recommend you read and study my most
recent bestselling book called "The LASER Fund."
It's a 300 page book, actually two books in one.
This side is about 200 pages
14 chapters with all the charts and graphs and explanations.
If you're more of a right brain learner,
you learn by stories, you flip it over to this book.
This is about a hundred pages
12 chapters with 62 actual client stories.
Now you can go to Amazon and purchase this book
for 20 bucks plus shipping and handling.
If you do that, thank you.
But I'll gift you the book free.
To claim your free copy,
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
to the shipping and handling.
I require some skin in the game.
And I'll fire out a hard copy to you
via priority mail the next day.
And then if you're in there claiming your free copy
and you're interested in watching and learning
or listening and learning,
there's audio and video formats there.
You can even schedule to attend one
of our free educational webinars.
But you can even put yourself in an appointment to talk
to an IUL specialist who can create some illustrations
on how to set up a LASER fund correctly.
'Cause there's a lot
of agents out there that sell IUL.
In fact, over 99% of them
that don't know how to structure it
to do what I talk about in the book.
So it's very important that you talk to an IUL specialist.
I would recommend looking
at those that belong to our coalition
and network that I train called IUL Insiders.
Okay?
So if you're a professional watching this,
you're missing out if you do not look
at joining that coalition and network called IUL Insiders.
You stay with your company and everything else
but you learn how to do this right
'cause there's too many loose cannons out there
doing it wrong.
(upbeat music)